10 things to do in a difficult economy

I have noted that recent world events (Covid, Brexit, Trump) and a difficult economy have created turmoil, fear and uncertainty in our industry. It would probably be useful if I give you some important general issues to consider early in the coming year to ensure the survival of your business, rather than getting down to the detail of day to day management as I usually do. I’ve put them in the form of a ten point check list, in order of priority, as I see it:

1. Review all your staffs’ performance.

Review everything

If things are quiet — use the time to review everything

Now is not the time for misplaced loyalty or sentimental tolerance — especially where expensive staff are concerned. In times of reduced sales, efficient (some would say ruthless) wage cost control becomes an imperative. You can’t afford to carry people who are not highly productive — and when I talk about productivity I don’t only mean ‘working hard’ but also being flexible, amenable to change and fully committed to your business. Now more than ever you need their minds as well as their bodies. Get rid of your ‘dead wood’.

2. Review your current menus, wine lists and function packages.

See if you can reduce your prices without sacrificing margin. In difficult economic times the public move down market — accept this fact and react accordingly. Sitting on your hands waiting for the world to return to normal is a recipe for bankruptcy. You’re going to need every little bit of margin you can get in a very competitive market over the next year. It’s time to get very clever; make sure you are delivering a strong perception of value for money while making a decent profit from everything that you sell.

3. Strengthen the selling and merchandising skills of your front of house staff.

You can go a long way to negating the financial effects of a decrease in trade by increasing the customer average spend from your remaining customer base. Easy said, but sometimes difficult to achieve. Now is not the time to tolerate staff who think selling is a form of prostitution, nor is it the time for you to cling to a passive ‘We’re here to serve, not to sell’ attitude. Recognise that the creation of a sales culture requires time and concerted effort on the part of management. Get cracking now.

buffet

Do you really need full table service — or are you putting ego before profitability?

4. Review your concept and your systems.

Do you really need full table service? Do you really need to bake your own desserts? Why are you doing your own payroll? There are probably hundreds of things you can do to reduce costs and increase efficiency. Think outside the square, there is always a better or more efficient way to do things. Get the people around you challenging all your sacred cows. See if you can lose the ‘it’s always been done this way’ mind set. Try to be open-minded, it’s hard to accept fundamental changes when you’ve been successful for a number of years with your existing system. The fear of ‘destroying the magic’ is quite powerful, but it’s worth noting that there’s not much magic around at present.

5. Critically examine all your supply relationships.

Hard times bring opportunity. Your existing suppliers may have served you well, but are you getting the best deal right now? I’m not suggesting you abandon a long standing relationship for the sake of s couple of bucks, but I am of the opinion that it is a good time to do a bit of shopping around, especially if you can stick to negotiated terms of trade — at present you’ll be a rare and valuable customer among all those accounts that have blown out to 120 days.

It’s also worth considering that a number of suppliers will disappear suddenly over the next year or so. Do you have a contingency plan for the continuity of supply of your critical supplies?

6. Ask for a rent reduction.

You may well have an iron clad lease with a number of years to go, but do you really think your landlord wants a vacant premises right now? Don’t be afraid to ask for a renegotiation of existing contracts and leases. As long as both parties agree you can put aside any written legal agreement. I would, however, recommend you gather all the facts and evidence to support your argument before you try this. Don’t rely on hearsay and opinions or you are likely to run into a cynical, hard-nosed attitude instead of a cooperative ‘how can we move forward’ response.

Yes, they are lovely people but their business meeting lasts 60 minutes and they only buy 4 cups of coffee.

7. Get rid of unprofitable customers.

Now is the time to ditch all those regular but financially marginal functions and events you do. The people from the local bowling club may be nice people, but are they worth the trouble? Could you use the resources they tie-up in a more effective manner, or can you cut your costs and increase the costs of a competitor by easing them elsewhere? Think about getting rid of the customers who regularly camp on a table for long periods of time over a cup of coffee.

8. Concentrate on winning customers who can bring you bulk business.

You are probably not going to have much money available to spend on marketing over the next year or so. Give some thought as to how you can identify and reach those people who have the decision making power to bring you bulk business. This will probably yield a much more cost effective result than blindly placing expensive display advertising in newspapers, etc.

Funding

How are you going to finance your business if it is necessary for survival?

9. Investigate sources of financial support before you get desperate.

If things are not going well now, there is a likelihood that they won’t get much better in the near future. See if you can line-up financial support from your bank before the situation becomes critical, while you still have some time up your sleeve. You might as well face reality now rather than assuming that you are a good customer and that they have all the security they need over the borrowing of further funds — they may not agree with you.

10. Know when to get out.

I see people lose their homes and everything they have worked for with depressing regularity. Don’t wait till the bitter end. If your business is spiralling down, get out before your debt becomes a family disaster.

Remember: If you don’t change your direction, you’ll end up where you’re headed . . .