MANAGING COSTS IN YOUR BUISNESS

As the price of doing businesses rises, it's essential that you are all over the numbers. James O’Connell, CEO of The Hospitality Company, explains how to get it right.

High inflation means the cost of doing business jumps … and often costs jump again, and then again. More than ever your fingerprints should be all over the numbers. More than ever your beverage pricing remains a set of figures that need special attention. More than ever we need to remind you that the mismanagement of stock costs always stands on the podium of reasons for hospitality business failure.

That’s why we spend so much time working with businesses on stock management. While it often believed to be one of the least enjoyable areas of the business to work on, it’s one of the most rewarding to get right.

Unsuccessful operators take the “guess” approach, or worse the “who cares, it's too hard” approach to costing. The true cost of not managing stock can be the business as a whole but sometimes, what is even more depressing to watch, is the business that limps for decades.

If you want to go places – either personally or with your business – then manage the rise of inflation in your business.

WATCH YOUR COSTS

Of course, wider socio-economic factors can impact your business – but the government won’t do your stock management. If you can’t face the job, delegate to a manager or, even better, a team of people.

1) COST, COST, COST – use industry tools to get an accurate and up-to-date picture of every item you sell.

2) Watch the big ticket items – keep an extra-close eye on the stock that costs you a lot or that you use a lot. Extra monitoring of high ticket items will lead to smart (and on time) price changes when required.

3) Management – make sure your management knows the key role they play in your business bottom line and invest in the financial literacy of your team. In the ’80s and ’90s, making money in the hospitality industry was comparatively simpler – even without the current COVID challenge. Back then, profit margins were high and you could get away with being a bit loose around costing and pricing.

Today, margins are narrow and room for error is low. Twenty-first century hospitality businesses demand an approach that is accurate and disciplined, especially with cost of goods management. Owners and managers must be experts on their systems and the processes and how they lead to healthy margins and most importantly growing profit.

DISCIPLINED COSTING AND BEVERAGE LIST MANAGEMENT IS CRITICAL

Key people in your business must become expert ‘cost of goods’ managers and lead development in the discipline. Anything less than mastery will result in profit loss and stress. You deserve better and so does your team. How can you improve your approach to cost management?

1) Make the decision [as the leader] that your company will always master the numbers of business.

2) Know what best practice cost management looks like – do a course or work with an expert to ensure your framework is the best.

3) Invest in the right systems – cost management can’t be done on paper, clipboards, or poorly designed spreadsheets. Have a look at a proven system. Our clients have had real success with Loaded Reports.

4) Make cost management a team sport in your business - bring your team along with you. Train your team about the importance of disciplined cost management and equip them to succeed. Employees who understand are more engaged employees.

5) Identify the financial whizz-kids in your company - we all have different strengths and weaknesses. The key is to indentify the employees who love numbers and want to lead issues of financial engagement.

Before the COVID pandemic, cost management was an industry disaster and a root cause of failure in the industry – don’t continue to blame COVID for issues that can be fixed. The pandemic continues to challenge everyone, but let’s not confuse those issues with fixable problems. Our industry is already complex and embattled enough without generating our own problems.

James O’Connell