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May23

What you don’t learn at cooking school (part 3)

(23 /05 /2013)

This is final of a 3 part series reflecting on my personal experience and the lessons that one learns not at cooking school but from the hands on operation of running your own business.  In part 1 I looked at the dream and vision I had for running my own business.  In part 2 I discussed what was actually happening.  Now the final part covers exactly where I went wrong.

Part 3: What went wrong?

If I look over the this experience and add to that what I have learned over the years since then, I can recognize so many mistakes that were made.  Mistakes that if handled better would have resulted in a totally different outcome.

Let’s take a look at these in more detail.

Becoming emotionally attached:

I loved that place from when we first walked through the gate into the garden and along the path leading to this grand old lady. I could see it as being the Grand Dining Room of the Dandenongs. I was so consumed in the emotion that I had to have it no matter what. However, reflecting on the deal that was struck for the takeover it should never have happened.  But I had the emotional attachment to the place which meant that I really didn’t take the time to check it properly.  I was only making the decision based on the emotional attachment.

Not doing sufficient research:

Once we had the place, we never took the time to understand the customer base and what their expectations were of my new venue.  Did the current clients really want what we were going to offer?

We just assumed that they would flock to what we were going to build.  As the saying goes, assume means to make an ass out you and me.

So many of the regular clients, which were the bread and butter at the time, were really disappointed that the change was so big and so sudden.  I was so arrogant at the time and adopted the attitude of “if you don’t like don’t come”. With that we lost a large number of the hands that fed us.

Having the wrong team of advisors:

We had a number of people that we used for advice and direction with the venture however we never really checked if the they were really up to the task. As it turned out the landlord really had the upper hand.  So much so that they joked later that they just threw in clauses to see what they could get away with it. They were amazed in what they were able to get away with.

The advisory team that we had around us consisted of an Accountant and a Solicitor.  Neither of which were really acting in our  best interests.  Neither of which had much in the way of experience with the type of business we were running.  Advice that I expected to get from them wasn’t forthcoming, but we had no-one else.

Having a strong and experienced advisor will provide you with a set of eyes to identify issues that you aren’t necessarily aware of.  They will look at what is happening from a different perspective – from out of the box as it were.  A good advisor is also impartial and will be able to openly discuss what is happening.

Not having a business plan:

I thought why did we need one?  We will just sign the lease, set up the bank accounts, connect all the required utilities, get the food, set the table and throw open the door.  Following that we would just hang on as the influx of hungry clientele would blow us away. That to us was the business plan.

Having a business plan is absolutely imperative as you then have to put the logic behind the emotion and evaluate exactly what your plans are and if they are indeed going to provide a return on your investment.  They also help to identify where your key risk areas are and what you can do to mitigate those risks.

Now there are companies out there who specialize with assisting business owners to develop and implement business plans.  If you aren’t comfortable preparing one yourself, work with someone who can help you.  But make sure they have the experience with the industry to identify the common pitfalls.

Having a business plan isn’t sufficient in itself.  Plans need to be reviewed regularly to ensure things are going as expected and that the business is heading in the direction it is expected to be going in.

Failing to properly budget:

At the time, our budgeting approach was that if we needed money, we just went and got it.  The bank would be able to cover the bills and with the prices we set for the menu and functions the money we would make would certainly cover those expenses.

Most people focus on knowing and controlling their expenses.  How much your roster costs, how much rent you need, and the utilities. However few actually understand how much revenue each seat needs to generate to cover everything. At the end of the day each empty seat is costing you money.

Once you have a budget, don’t think it’s over.  As with the business plan, budgets need to be regularly checked and updated to reflect what is actually happening.  This will undoubtedly provide a means of identifying actions that need to be taken to correct issues within your businesses finances.

Failing to cost the menu:

What is costing and why did I need to do it? My mind was set that I just had to make the dishes with the freshest and best quality ingredients we could get and this would impress the diners. As it turned out I was literally standing at the entrance to the Grand Dining Room giving money to each customer as they were entering.  My customers loved it but that is how it is if you don’t cost the dishes on the menu.

Costing involves knowing how much a plate of food costs to produce, knowing your margins and ensuring your prices are set properly (and are realistic for your market).  Costing also allows you to identify impacts of moving ingredient prices.  Without this I was flying blind.

Mixing family and money:

I cannot stress this enough – never involve family and friends in business. Borrowing money from family is definitely not a good idea.  My parents almost lost their home because I had this false sense that all will eventually  come  good. The chances of that happening was remote and in reality we were nose diving to nowhere. The fact that we just kept borrowing just stalled the inevitable.

If you can’t raise the money as a business transaction this could be a sign to walk away.  I have seen and heard of a lot of families and friendships that have ended just because of this.  The impact then flows on to those who leant the money with many losing everything.

Borrowing and the pitfalls:

It is easy to say don’t borrow, but for some of us it is the only way to achieve the dream. After the life changing experience that I had, I would think twice before taking on the world with a fist full of borrowed money especially in the volatile world of hospitality.

Looking at it now if we had not borrowed but had a large treasure chest we would have been better off.

The biggest pitfall is that when you take on borrowed funds you don’t completely understand the commitment you take on and the increased level of risk to you of doing so.  If you are going to use borrowed funds, make sure you completely understand what will happen should things go wrong.

Not seeing the writing on the wall:

Watch for signs of things not going well. When you start to see those signs, jump on them.  The quicker the better. Whether it is that food costs are too high, a drop in patronage or a drain on cash flow.

The mistake I made was to live in a false sense that tomorrow is another day and that there would be a huge change in fortune.  But sadly the tomorrows turned into next week, and then to next month. Even though we were busy to the point of madness, I was not making any profit and by keeping my head in the sand, I was not seeing exactly what was happening to my business.

Stopping the slide:

If I knew then what I know now then I would have been successful in this venture, but I didn’t. I believe strongly that you have to live this industry to understand it.  You cannot learn the industry from a desk or in a class room.

I believe that to stop the slide you need to ask for help from someone who has experience in the industry.  Just knowing how to cook great food and provide great customer service is not enough.  You need to know how to properly run a food service business and what areas need to be focused on other than the food you prepare and the service you provide.

Don’t be too proud to ask for help.  Especially from those who have the experience needed to help get you back onto the road to success.


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