Traditionally, there are two types of people in the pub industry. Those who love driving sales, but glaze over when it comes to costs; and those who love costs, but sometimes become so obsessive about them that they can damage sales.
It is a rare individual that puts equal focus on both (for the record, my tendency is to focus on sales). But those of us who are great at sales need to discipline ourselves to do the cost bit.
And those of us who love costs probably need to force ourselves to do the sales part on a regular basis.
The great businesses are, of course, those where there is some of each in the team. I was in one pub where the manager very proudly told me that he didn’t turn the lights on at lunchtime. Great on costs but pretty poor on atmosphere.
I have been in pubs where the owner has done a profit and loss on every session of the week and has closed the pub when it’s not profitable, and then wondered why the sales have dropped at other times?
Equally, I have been in pubs where the manager has been overstaffing every session just in case they are busy, and pubs where they will always over-portion.
Balancing the books
So how do you find the right balance? What is the right decision? Opening for breakfast is one of the great debates in the industry.
When I worked in the US (too) many years ago I used to eat breakfast out every day. So if we all open will we make money?
In the very long run we might, but we have even seen the mighty JD Wetherspoon trim opening hours in the morning.
So what are my top tips for the balance between taking it and making it? Here goes.
Top 10 tips for success
1. We are in the service industry ahead of our supply of food and drink. So always create atmosphere as the first point.
2. Customers do not know when you are open, they have only a vague idea, so opening longer helps. I never understand pubs that let a queue form outside when there are staff in the building. Also decide what set-up jobs you can do while you are open.
3. Do you price for volume or profit? I recommend pricing for cash profit, not percentage. It is better to make £4 profit on steak than £3 on a burger.
4. Know your theoretical and actual GP for both food and drink.
5. Understand not just how much labour you spend but when you spend it. Labour is probably the biggest waste on your profit and loss statement.
6. Label everything up to show when it should be turned on, and watch out for cleaners lighting up the building.
7. If you don’t like doing something but it is important, make sure you delegate it effectively.
8. Know your profit and loss. Anything less frequent than monthly will cost you money.
9. Do a profit and loss calculation for your kitchen. See if food makes you money and how much.
10. Price in your cash & carry journeys, not just the savings you make.
Finding the right balance is difficult. It is hard at the beginning, when sometimes you have to make short-term decisions because cash is tight. It is hard when are under way, because you need to look at your business with fresh eyes occasionally, and challenge what you do.
It is hard when you’re making money, because it is easy to be complacent. But most of us can find savings if we choose to re-assess what we do and why we do it. And we should never wait until the cash need is the greatest.
The best time to try things is when you are doing well, when the pressure is off, when you can make long-term decisions.
It is quite straightforward to find 5% of margin, and for many pubs that would double their profit. So why wait?
Alastair Scott runs Catton Consulting, a specialist consultancy in retail operations and service improvement, and has recently launched an industry-leading productivity tool. Email alastair@cattonconsulting.com.