Break it down to build it up

In the first of a new series, the MA's SWOT team leader Ali Carter gives the ailing Cask Inn, in Scarborough, North Yorkshire, a much-needed business check up

With this information I find myself heading up the M1 to find out more. The Cask Inn is a rangy building set away from the town centre of this seaside resort. My welcome is very warm; as a lone female I don't feel at all uncomfortable and soon get chatting to some locals who are very complimentary about their host. When I meet him, I understand why: he's a kind and friendly guy, easy to chat to and with a generous nature.

He's so generous, in fact, that while I'm talking to him he lends a regular a tenner - a good move if the guy stays at the Cask and puts it back behind the bar.

"Thanks", says the regular, who calls to his mate to join him to go down the road to the next bar!

Symptoms

Volume sales are down by 25%; with an annual rent of £65k, rates at £16k and two loans (with a combined value of £30k) to service, money is tight and Malcolm has opted for "cash with order" to help discipline the cash flow. He is not yet setting aside any money for VAT.

Insignia, the recently-refurbished cellar bar - costing £250 extra in weekly rent- stands empty, apart from a jazz session once a week.

Happy hour accounts for 20% of weekly trade, but squeezes margins. There is one

every night of the week between 5pm and 6.30pm with 25% off everything.

With one bankruptcy just behind him - brought about by a falling out between business partners - Malcolm is keen to regroup and look to the future.

The tragic loss of his brother, which came at the same time as the business partnership crumbled, unsurprisingly led to him taking his eye off the ball. The impact of bereavement is made even more acute in this industry by the upbeat role hosts have to play.

Malcolm needs to focus on fundamental matters and regain business control. It is running him, rather than the other way round.

Diagnosis

l Revisit Malcolm's "vision" for the Cask, identify his objectives and define his goals

l Improve financial discipline, focus on gross profit margins and time-management skills

l Analyse food sales, reduce the menu scale and operate a cost-effective kitchen with less waste and staff costs

l Concentrate on adding value rather than cutting price

l Focus on detail

Vision

What is Malcolm's vision for the Cask Inn? After finding out that he and Dean grew up in the community and remember it as a popular place, it's no surprise he wants to recreate it as Scarborough's best-known pub.

Nostalgia is great, but if Malcolm is to re-ignite the memory, he needs to analyse his business further. I ask him to attribute three qualities to this vision: safety, community involvement and not being a typical boozer (by which he means not a place that is likely to attract binge drinkers).

What is the target market?

There is a local college nearby, but Malcolm sees students as rather a fickle market group, and fostering their trade upsets the locals/regulars and the tourist market alike.

Other pubs successfully mix students and regulars and the pub has plenty of space, so I suggest he should try to broaden the net for his target clientele.

What is the brand he is trying to create?

Marketing experts believe you should be able to distil the essence of your brand into a simple image and a few words - for example, with its "Just do it" slogan, Nike has one of the world's most widely recognised and valued logos .

Good branding distinguishes a business from its competition and reinforces the message to customers.

It is just as important for individual pubs to consider the priority they attach to their own brand as it is for the multinationals.

We come up with "safe" "friendly" "fun" and "no frills" for the Cask.

Things become much clearer once these words have been chosen. They are pegs upon which to hang the offer, so it becomes easier to stay focused.

Safe: Look at the type of lighting- particularly the dingy exterior at night, for example. It is wise for Malcolm to consider safety cameras or door staff on busy nights at Insignia, and to operate a zero tolerance policy on drugs that he communicates loudly and clearly throughout the pub.

Friendly: Staff are key to this aspect of the brand; look at staff training, particularly the "hello" and the "goodbye". Malcolm needs to run incentives to encourage staff to make eye contact and smile. Write the word "smile" on the staff side of the bar entrance, generate a fun working environment and pass this on to customers.

Fun: Look at events that can be run to create evenings of fun at the Cask. Aim for a "Cask as it used to be" feel, to create a foundation on which to build.

No frills: I liked this one a lot. Use it to "de-clutter" the offer and consider every aspect. For example, restrict the range of food and drinks to staples and don't get side-tracked into gimmicks. Ditch the frilly salad garnish on the plate and offer simple, good quality, ungarnished food instead. Why lay up the dining area? The Cask is a good, honest, no-nonsense food pub - a far cry from destination dining with its need for table mats and all the trimmings.

Insignia cellar bar

To give the cellar bar Insignia the same branding treatment is more problematic. Various attempts to fill the place with a variety of target markets have failed to make it profitable. This week's take from the jazz night is not enough to cover the £250 rent, let alone the cost of the band.

This bar is draining the profits from the Cask bar upstairs and needs serious attention. I suggest that Malcolm should brainstorm this issue urgently with his partner and locals, as he must find the "pegs" to ensure this white elephant makes some money. It is potentially a means to double turnover.

Goal-setting

Malcolm doesn't believe he will make any money for himself this year - so what's the point of opening the doors?

He eventually comes up with a modest desired figure of £25k. This is very achievable, even on current turnover, so I ask him to write it down and put it on the office wall. It's why he gets out of bed each day. He must never lose sight of this fact. Psychologically, writing down a goal helps keep the mind motivated.

Improving financial discipline and time management

There are two ways to make money - take more or spend less. If you can do both, you are onto a winner. Malcolm needs to do both.

Gross margins

From our chat about turnover and GP (gross profit) percentages, Malcolm will be the first to admit his precise knowledge is a little woolly. With one business already bankrupt it is crucial to be on top of the cash.

It's not simply about reconciling the tills, but ensuring every percentage of GP is accounted for. This is a big area where the sums can go wrong - at the Cask missing the GP margin by just 2% to 3% means that between £8,000 and £12,000 simply vanishes.

Wages

At 23% of turnover the Cask is significantly above the industry norm (for a 75% wet, 25% dry operation). If Malcolm could reduce this figure to even 20%, it would mean a staggering £10,000 added to the bottom line. I suggest he looks at "dead times" and either tries to sell more during these times or spend less on wages.

If he analyses hourly food sales between 3pm and 5.30pm he may find that paying a chef £75 a week to stand around and cook two or three meals from the full menu could be replaced by a simple, no-frills "grazing" offer easily manageable by bar staff; this would save nearly £4,000 from the annual wage bill.

I suggest that Malcolm looks at start and finish times for all staff and tries to stagger them - losing just one hour's wages per day wou