What happens if I stagnate my business?

I want it fixed, but don’t change anything

When consulting; clients can sometimes be their own worst enemies.  I sometimes receive requests for professional help to revitalise or grow a business — but when it comes down to it, the owner wants it fixed, but doesn’t want to change anything. I strike this ludicrous paradox often enough to regard it as a professional hazard.

Business not performing

There are a number of common situations where I encounter this problem. Imagine a business that is either losing money or only marginally profitable. The owner calls you in, asking for help and you assess the options to sort-out their problem. Their operating standards are OK and their product and environment is OK, but they are not making any money. Is the rent too high? No, it’s OK. Can we put the prices up? No, we can’t, without pricing the business out of its market.

We then move to the next consideration: If the costs are too high, is this because the revenue is too low? Can we perhaps increase the customer average spend, because the business does have plenty of customers? Upon investigation the average spend on both food and beverage is quite low, compared to similar restaurants.

Better selling and merchandising can provide a boost to profits

Ah ha! Here’s a way we can resolve the profitability of the business. Let’s start with their menus and wine lists. Are they effective selling tools? No, they are full of ethnic and culinary terms that are not commonly understood by anyone but the Chef; they are confusingly laid-out and the options are in 8 point type, despite the average customer being over 45 years of age and the ambient lighting being dimmed for ‘mood’. There are also no smaller ‘add on’ items on the menu that the wait staff could use to add a few more dollars to each sale.

Tab

You need to sell more —get with the times

So, there is quite some opportunity here. Working the maths, a 15% increase in customer average spend could add 9% to the bottom line, because there is not a proportional increase in labour and COGS with additional sales of higher margin items.

At this point I sit down with the owner and explain the opportunity and recommend an overhaul of the merchandising materials they use to sell their products. After all, the menus and wine lists are the main way of communicating with customers, it should be blindingly obvious.

Instead of relieved acknowledgement that this could be a beneficial improvement, I get a defensive argument with spurious logic about why they can’t possibly go down this path; it would be offensive to the artistic integrity of the restaurant concept: ‘You are trying to turn us into McDonalds’. At this point I feel like grabbing them by the throat and saying: ‘You are going broke; if you don’t change your direction, you’ll end-up where you are headed’.  I try this argument in more diplomatic terms but to no avail. The subject is shut down firmly.

Next, I move to another potential solution — get the front-of-house staff selling, which takes time and money,  but it is another way to increase the customer average spend, albeit slower and more traumatic than changing the merchandising materials. I suggest this to the owner as an alternative.

Good selling is perceived as service

My customers already know what they want and I think what you are suggesting is pushy’. I explain that good sales techniques are perceived as improved service and only poor sales attempts are perceived negatively. Thousands of customer perception surveys of restaurants over 20 years have proven this. Again, this does not go down well, and I’m starting to believe that this person is deeply afraid of changing anything.

The Law of Diminishing returns

Cost cutting can damage your business

Now I’m in difficult territory. The only other way to achieve an improvement in the bottom line is to cut costs, but going on a campaign to hack into wage and F&B costs is disruptive, traumatic and unless handled skilfully has the capacity to further damage the business.

I explain that reducing wage and food costs will require time, training of the key staff and careful ongoing management. Cost cutting is the least desirable way to proceed. It is usually a lot easier to increase sales to make the costs come back into line than it is to sink into negative management, and go on what the staff will perceive as a witch hunt by an uncaring capitalist bastard.

As this point the owner is displaying negative body language and is obviously not comfortable with any of the proposed ways of dealing with the problem. What they really want is a magic bullet, a solution that does not require change of any kind. Their logic is that what they are doing used to work in the past and it’s their baby we’re dealing with here.

This consultant bloke just doesn’t understand my business . . .