Sep20

Do you bury your head in the sand?

(20 /09 /2016)

 

During my days of doing turnaround management, I was confronted with many operators living in the denial about the health of their business and the affect that the current industry downturn would have on them.

I had just finished a letter drop to the Accounting Industry introducing my services as a hospitality turnaround manager when the phone rang.

“Hello”, I answered putting down my much needed coffee.

On the other end was an accountant who had recently received my letter!

“Good timing with your letter”, was the reply, “I have a challenge for you!”

As I am always up for a challenge I said, “Let’s met and go over the details”.

As I headed to the meeting I spent some time reflecting on my own experience as a restaurant owner and challenges I faced.  I too, had once thought I could take on the world with little business knowledge. I was a chef and I knew how to put meals out – surely that was enough! The reality is, the hospitality business has alarming failure rates – I think recently I read 60% fail in the first year! After nearly losing the family home, I set out on the journey of discovery to understand the hidden secrets that you don’t learn at trade school.

I arrived at my destination and waiting outside for me was the Accountant.  Firstly, this impressed me because he obviously cared about his client enough to show up but he was also there to warn me.  My first thought was this was a little concerning – however I appreciated the ‘heads up’ as he explained.

“You are about to meet the 2 owners – 1 very clearly understands there is a problem whilst the other feels it is all under control and they have nothing to worry about!”

I was greeted by Penny who was one of the owners and she was quick to point out that he husband, who was also the Chef, was hesitant in meeting with me because he was adamant that the issues were related to the tourist season being quieter than usual than anything actually wrong with their business.

What I have found over the years is that everyone had an excuse for the business going pear shaped.  Instead of really looking at the business from all sides – it truly isn’t just about cooking great food and unfortunately the day when the heavens open and the light shines down and the masses start to flow in the door is unrealistic to say the least.

So, after that first meeting I started on the mission of discovery to work out where it was that this business was struggling. It was a tough gig, Penny’s husband really didn’t feel he could learn anything.

“So what is your food cost % to sales for last week? “

“What food cost % are your recipes calculated at?”

“What is the value of your closing stock for the week?”

The response was – “But I go on gut feeling with all that stuff, I been cooking for 20 years now and I just know. Besides, who has all this time to all this paperwork?”

You really need to make time to know what is truly happening. Back then we didn’t have the ‘fancy’ software to manage some of the work, but if you wanted to survive you made the time. Gut feeling just doesn’t cut it and even if you were making money, you really owed it to yourself to see if there was any room for improvement.

So finally I got through to him, we conducted the first stocktake, updated the ingredient prices, culled the menu down to a single page from a Harry Potter novel, and did the costings before we set the prices.

We managed to slow the decline, but due to the “ship taking on so much water” prior to asking for help – the interest on the debt was our main problem. So the best we could do was keep the business going until a buyer could be found but at least we could show the business is viable.

So if you are facing financial issues don’t wait until it’s too late, get your head out of the sand and call for help.


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