Knowing your numbers and learning to love them

How’s your relationship with numbers and business finances ? Do you find your financial statements friendly or fearful? Some hospitality operators get totally overwhelmed by their financials and choose to monitor just a few numbers – usually bank balance or total weekly sales. Other analyse too many numbers and suffer from ‘paralysis by analysis’ – they just don’t take enough action!

Your hospitality operation probably consists of many businesses – bars, café, bottle shop, restaurant, accommodation, functions rooms, special events, gaming or more. Right now there are more than 1000 things that you could do to improve any one of your businesses.

But where do you start? How do you allocate your precious time between working on staff, systems, sales & marketing, suppliers, stock control and sustaining cashflow – then find that extra time for strategic planning.

Measuring your results is one key to running a successful hotel. “What you can’t measure you can’t manage” is a popular phrase with both accountants and consultants.

But are you really a ‘numbers person’? Do you love looking a P&L statement or do you prefer the buzz of talking to patrons? How’s your financial literacy – do you understand a balance sheet?

People come in two broad types – emotional and logical – and the full range in between. Emotional people or “people people” are big on passion, talking and entertaining their patrons. They spend a lot of time out front with customers. They don’t really like analysis, budgeting or financial planning. Logical people on the other hand are task-oriented, more introverted and really happy in the back room. They love the numbers, doing the books and analyzing them.

If you find that you’re not making much of a profit, it’s probably because you don’t like numbers. If you focus on your financials you’ll make more profit. What you focus on expands!

Start by measuring and finding out what’s really going on. So what can you measure easily?

A good point of sale system can measure and monitor your sales in detail and give you break down by time, type of products – meals, drinks, salesperson, covers/checks. You can use this information to increase sales, margins and profits with better staff rostering, menu design, stock control, advertising allocation, marketing programs, improving staff sales performance and even implementing a rewards and recognition program.

Add in a doorway Traffic Counter to find out how many people came in and you can calculate your sales conversion rates. You can find out if your patrons buying less than last year? Are sales down because of fewer people or are they buying less?

To get a handle on your sales and marketing performance you could count your enquiry phone calls, email enquiries, web visits, site inspections, quotes & tentative bookings to calculate sales conversion rates. Finding out source of existing customer enquiries and where they live can focus your advertising spend. Even a simple “Business Card prize draw” can help you find out where your customers work and get more corporate clients.

To help the kitchen and wait staff improve your profit you’ll need to know your High Margin & Low Margin items by measuring Total Food cost % or Gross Profit $ per item. Even a special project of weighing the rubbish or counting the bins can help reduce wastage.

Profit made on Food can be improved by the menu placement of low and high margin items, analysis of which items are selling. You can improve your food sales by focusing on Items per sale, Average dollar sale, Splits – Lunch/Dinner or E/M/D, Side Order % and even average tip %.

Counting the total number of customers on your database or email club can give you a measure of the effectiveness of your marketing efforts.

There are ways to make financials fun for the numerically-handicapped. Use visual feedback, charts & graphs around the office. Get your team involved in simple competitions based on sales results. Get your accountant to provide your numbers as a “Financial Dashboard” or organize a monthly meeting to verbally discuss the trends and suggested actions.

If your chef doesn’t like measuring numbers – at least calculate your Weekly Food Cost %. You can avoid the hassle of a weekly food stocktake by writing a list of all the delivery invoices for the week and totaling it up. Measure your food sales and divide by the weekly food cost. Average the last four weekly results to get a “running average Food cost %” each week. This should trend down over time as your chef realises the cost of food, the effect of pricing on margins and the results of selling low margin food.

Comparisons are useful – compare to last week, last month or last year. Watch the overall trend – are we up, down or sideways?

  • Measures of Efficiency
  • Benchmarking
  • Stock turnover – hows the wine cellar?
  • Rent as a % of turnover
  • Wages as a % of turnover
  • Food turnover per number of avail covers
  • Table turns on busy nights

Attract more prospects (walk ins), increase your conversation rate, increase your average $ sale, increase your transaction per customer (return rate) and increase your margins by buying better and increasing prices where you can.

Every Hotel needs a numbers person – beyond basic bookkeeping – a financial analyst.

Make sure you have Monthly Management Meetings with your accountant or advisor.

Setting any target or goal is very useful. What you focus on expands. As an old proverb goes “Man who aim at nothing hit it with amazing accuracy”

Remember- What you focus on expands and where your attention goes – money flows!