A healthy budget is one of the key ingredients to a successful food and beverage business. Here's a look at how to set a budget and why it's important to keep on track.
A budget is a fundamental tool that can help you monitor the profitability of your business. By tracking the following four items, you can rein in your budget, enabling you to maximise your bottom line while reducing expenditure and waste.
Pay attention to your prime cost
Out of all the numbers you should be tracking, your prime cost should be at the top of your list. Prime cost is your ratio of costs to sales, and provides a good barometer on how well your business is performing.
To calculate your prime cost:
· Divide the total cost of goods sold (cost of labour, food, beverages, etc.) by total sales.
Ideally, this ratio should be no more than 60% to 65%. As a key indicator of profitability, it's important to calculate this number at least once a week, so you can see how your business is performing and take corrective actions as needed.
Keep staffing costs under control
According to statistics from the Australian government, labour accounts for as much as 59.6% of input costs in the food service industry. As one of the biggest components of your budget, it's important to watch for creeping labour costs and minimise over-staffing.
To calculate your labour costs:
· Divide your total payroll by the number of customers over a specific time frame to see how much you are spending on each customer.
· Further divide your figures into departments: for example, bar vs restaurant, to compare each area's costs.
To make tracking these numbers easier, you can deploy a digital scheduler, which can also simplify your work scheduling, employee communication and administrative tasks.
Make the most of your marketing
Revenue in the Australian food services industry is expected to top $34.8 billion by 2021. Are you getting your fair share through marketing? As a general rule of thumb, restaurants should look to spend 3% to 6% of their monthly sales revenue on marketing (double for new locations). Fortunately, the rise of digital marketing automation allows businesses to cut costs while making it easier to track performance.
Carefully consider your equipment
Outfitting a restaurant with equipment can be costly. To keep your budget under control:
· Focus on buying the right equipment by consulting with your chefs and staff.
· Consider renting equipment with a purchase option. This can be a great idea for businesses that are starting out or are planning on expanding in the future.
· Consider investing in a restaurant POS system, which can help collect critical data to assist with your budgeting.
Having a solid budget under your belt can help free up time and energy to focus on what's important: delivering delicious food. By taking the necessary steps to track your budget, you'll greatly reduce the risks in your business, while arming yourself with information that will help maximise success.