I want a business but don’t have much money

This article looks at the opportunities for new hospitality businesses in our very cluttered markets.

I’ve always been interested in history — at school I studied several histories, and later while studying Law at university I found legal history one of the most fascinating subjects required for that discipline. Legal history is largely a study of the economic development and the rules that accompanied it as we evolved from small villages to complex cities over many centuries.

How economies develop

Way back in history we were self sufficient and did almost everything within our own homes. We made our own clothes, fashioned our own furniture, tanned our own hides, made our own butter and smallgoods, etc. — we did everything and must have been very busy indeed. One day one of the other villagers came and offered us a deal: ‘I will tan hides for you, if you will make butter for me’, and so the development of specialist occupations began.

This process accelerated over the centuries and almost all of our economic development involved taking things away from the home. This continued until the 

Barter system
It all started with the barter system

beginning of the 20th century, when it became more and more difficult to find things to take from the home because most products and services were taken care of. Economic development then switched to providing goods and services in a similar manner, but to other businesses instead of households.

Why jump into a saturated market?

I can't afford a restaurant and they’re risky. What else can I do?

This is the world we now live in, and an understanding of where commercial development is going may lead you to identifying opportunities that you may not have considered within the hospitality industry. The rapid proliferation of cafés, restaurants, catering businesses, serviced apartments and other hospitality businesses is rapidly leading us to the situation where the market is saturated. The words of Lewis Carol spring to mind, when he described the island where the inhabitants earned ‘a precarious existence taking in each other’s washing’.


If you follow the lemmings into these businesses, at least in our major cities, you are highly likely to get burnt. The laws of supply and demand are heavily stacked against you at present. The cost of establishing hospitality businesses is escalating rapidly while the returns are diminishing at an alarming rate. Perhaps it would be wiser to consider other alternatives that are within your skill range and that have a modest start-up cost attached to them?

Desire to reduce costs drives changes

As this plethora of hospitality businesses struggle to make money, their owners and managers are going to be amenable to any product or service that will enable them to reduce their costs without compromising positive customer perceptions. If you look around you it’s already happening — you probably already buy in your bread, your desserts and a range of other finished or semi finished food products. Many businesses use outsourced accounting, payroll, marketing and maintenance services. My own business is a good example; we’re really a subcontract human resources, training and management expertise supplier.

Cost cutting
Outsourcing could reduce high wage costs

The suppliers of these services have only just scratched the surface; there are a raft of other possibilities that remain untouched and are just waiting for some entrepreneurial action. The escalating cost of labour is the driving force that makes business managers open minded to new ways of doing things. Any routine, repetitive activity that consumes appreciable amounts of labour is a likely activity to buy in from elsewhere.

Don't fall for the 'poor quality control' argument

Most chefs reject buying in products, despite the fact that they dont make their own butter or bake their own bread

The usual argument for keeping things in-house is that of quality control, but I find that argument rings hollow most of the time. A supplier who wants to gain and keep your business is usually only too happy to give you what you want, to the standard you want — that’s the basis of long lasting win/win relationships. The argument to retain expensive in-house activities rings even more hollow if you’re going broke slowly but surely.

Anyway, if I was looking to get into business for myself right now, or if I was looking to expand my business activities, I would not be 

operating at the coal face of hospitality — it’s too hard to make a decent living. I’d be assessing my skills and experience and I would ask myself what I could do faster, cheaper or better than all the other hospitality businesses around me — then I’d present the resulting goods or services to them as a cost saving opportunity. Financial desperation creates flexibility.

Recognise where we're heading

This is the way of the future — history teaches us that. It’s not too hard to imagine a time where the bottom and mid levels of our industry only operate assembly kitchens, putting the finishing touches to a range of food that are purchased in a form close to their finished state. Consulting chefs will design and cost menus, then provide specifications to suppliers; consulting front-of-house specialists will design service procedures and train your staff; and wine lists will be designed and sourced by independent specialists. Individual administration offices will almost disappear, or at least carry a minimum of staff. Specialist staff who are currently very expensive overheads will be used more and more on a casual basis — you’ll call them when you need them, and send them away when you don’t.

The top end of our industry will probably always do things the long, hard way — they will preserve the ‘art’ — the old craft traditions. They will continue to do most things in-house, or at least those they can justify economically. The gulf between the top market level businesses and the majority of businesses that cater to the normal, ongoing needs of the majority of society will grow as time goes by, and working within this level will become an industry speciality in itself.

Let’s see if I’m right . . .

To learn more about the topics discussed in this article please consider the following courses,

For documentation to support the management systems discussed in this article, please visit our resources website.

If you are not sure where to start, contact us now to speak with a consultant.

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