THE IMPORTANCE OF FINANCIAL PLANNING FOR NEW RESTAURANT OWNERS

Rudi Badenhorst

Poor financial planning is one of the most common killers of new businesses, more so in the highly competitive hospitality industry.

Your lifelong dream of opening your own restaurant is finally a reality. To ensure the growth and success of your restaurant, it is important to keep your finger on the pulse of your money. Effective financial planning hinges on the management of various processes in your new establishment and can be the difference between a struggling business and a thriving establishment.

Here are a few things new restaurant owners need to include in their financial planning to ensure success:

Cover all your bases and ensure you have cash flow

The management of finances will make or break your business. Financial planning begins with the basics – daily cash flow management. In the hospitality industry there’s a fast and constant turnover of products and services, which means that your cash flow must be monitored more frequently.

You have to see to fluctuating costs such as produce, utilities and suppliers while other expenses like rent, staff salaries and insurance are easier to manage. Also keep in mind that no matter how thorough your market research is, you can’t predict how many customers will actually dine at your restaurant once you open your doors. Planning for this financially will help you avoid operating on your reserves before your business even takes off.

Consider your options before investing in assets

The ideal scenario is to own the building you’re operating from rather than paying off someone else’s bond. But unless you have the money upfront, and depending on where your business is situated, chances are you will have to rent the space. During your financial planning, take into consideration the fact that the monthly fee will escalate by at least 10% every year. The same approach applies when it comes to investing in equipment and other assets for your new restaurant. It might be worthwhile to initially rent costly equipment to free up cash flow for other daily expenses.

Take Care In The Hiring Of Staff

Human capital is an essential part of your business. Employing staff should be approached carefully as it may take a while for your new restaurant to start generating profits, which will add pressure to your available cash flow. In time your restaurant will grow, so too will your staff complement. Ensure that you include this in your financial forecasting.

Factor Your Restaurant Marketing Into Your Financial Planning

There’s no point in starting a new restaurant if no one knows who you are. Marketing is crucial for your business to be seen and for growing your customer base.

Big franchises have access to a centralised marketing team that takes care of strategies and eye-catching campaigns. Luckily, with the rapid evolution of technology you no longer need a massive marketing budget or team to promote your restaurant. Using platforms such as Facebook, Twitter and Instagram can help you to promote your restaurant – free of charge. But if you’re looking at more traditional forms of marketing, ensure that you can afford it.

Get A Comprehensive Point Of Sale System

Starting your own restaurant can be an overwhelming task, more so if it’s your first establishment. While you’re trying to get the hang of it, you need some assistance to keep track of the movement of money through your business. A Point of Sale system is no longer simply a means of managing the payment process – it has evolved into an intuitive tool to help you improve the financial management of your new establishment.