Running your own restaurant can be a dream experience for many individuals. After all, you are your own boss, and you have complete control over the success and profitability of your venture. However, you may be well area of the unfortunately high failure rate for restaurants in areas across the country. You understandably want to take necessary steps to reduce financial risks and to keep up with your restaurant’s finances so that your business does not become a statistic. These thoughtful tips can help you to achieve the specific goals that you have for your restaurant business.
1- Create a Business Budget
It is virtually impossible for most business owners to make smart financial decisions or even to avoid going into debt when paying monthly overhead expenses without a solid, reliable budget. If you do not already have a restaurant budget, now is the appropriate time to create one. Otherwise, you should review your existing budget to ensure that it is current and comprehensive. All expenses that you expect to incur for at least the next quarter should be included on the budget. This includes recurring and non-recurring expenses. It may be helpful to create a rolling monthly budget, such as a budget with separate monthly income and expense columns for January, February, March and so on. This gives you the ability to project outward. You can even project outward by six to 12 months as desired.
2- Monitor Your Budget Regularly
While many business owners take the important step of creating a restaurant budget, they often fail to use the budget as the exceptional financial tool that it can be. Your budget is a reliable resource that you can turn to when making financial decisions as well as when you need to ensure that bills are paid on time each month. More than that, your budget can provide you with critical information regarding how financially feasible growth, expansion, renovations and more may be. Refer to your budget regularly when updating your business plan, paying bills and more.
3- Plan Ahead for Major Expenditures
Most restaurants have numerous major expenditures to plan for over the course of a year or two. This could include a moderate or major renovation, significant repair work, appliance replacements and much more. It is not reasonable to expect money to simply be available in your restaurant budget when these expenses arise. It is also not ideal to take out loans unnecessarily. After all, debt can be burdensome to deal with, and it can negatively affect cash flow for years to come. Through your budgeting and financial planning, you can take steps to have funds available to pay for major expenditures when the time comes to do so.
4- Save Funds for Slow Periods
Many restaurants have busy and slow periods. For example, if you have a large patio seating area, your restaurant’s business may slow down during a wet, hot or cold season. If your restaurant is located close to a college campus, revenue may decline substantially between semesters. The lack of income associated with slow periods caused by these and other events can be difficult to endure if you have not properly planned ahead. Be realistic about projected income when creating a quarterly budget. If necessary, look at last year’s revenue numbers to determine what realistic figures for this year may be. You may be able to save revenue from busy periods to accommodate planned slow periods. You could also pre-pay some of your expenses so that you can better manage your budget during these periods. There are many ways to handle slow periods, but you must usually plan ahead for them in order to be prepared.
Improving how you manage your restaurant’s finances can help you to more easily navigate through different stages of operations and growth. Finances are essential for business stability and even for growth. As you can see, there are many steps that you can take to better prepare your finances for what the future holds. If you are not currently taking each of these important steps related to restaurant budgeting and financial planning, adjust your financial habits now for the best results in the months and years to come.