Restaurant Management:
The Only Two Ways To Make
More Money in Your Restaurant
- Cut Costs
- Sell More
That’s it! Did you think this would be more difficult? Remember, this is not rocket science. (Well, of course, if you ARE a rocket scientist…)
In this chapter, we will examine each of these two strategies, in a broad sense. Later, in the chapters that deal specifically with "the ten places where money is hidden", you'll find some ideas that are either cost cutting, or increase sales. In either case, you'll be operating on
sound business principles.
How Money is Made
If you are in business now, you already know how money is made. You sell things for more than you paid for them. When you buy raw materials, assemble them and create a product, then sell them for a fair price, you make money. In a service-oriented economy, this is even easier to do, because
the cost of information and service is often very low. Yet, the selling price can be terrific. You see, it doesn’t matter what it costs you to produce something. It only matters what VALUE it has to your customers. The greater the value, the more you can charge for it. The more you charge, the
greater the perceived value!
Your customers are not interested in what it costs you to serve them. Remember, they really don't want the money they have. The money does them no good. They want to trade their money for things that are more valuable to them than the money they give you. As a business person, especially one
who is committed to MAXIMIZING the profits from you endeavor, you are simply buying low and selling high. The only difference between you and other business people is that you are adding more value to your products and services. This let's you do two things. First, you can satisfy your customers
better. Second, you can charge more. This helps to uncover the hidden money.
Who Has the Money?
You may wonder WHERE this "hidden money" is. Who has it? Why are they hiding it? The answers to the first question, "Where is it?", are given in chapter six of this book. We have researched the possibilities, and come up with some great
ideas.
The answer to the second question, "Why are they hiding the money?", is much easier. But before we answer that question, let’s discuss the identity of these people who have your money.
Basically, there are two groups who have your money right now. They are your suppliers
and your customers.
Remember, the only two ways to uncover the hidden money is either to cut costs (look to your suppliers), or to sell more, ( to your customers, of course!) Both of these groups are sitting on large amounts of your money. It is well hidden, but rather easy to uncover. In fact, both groups WANT you
to uncover it. They are happy when you are making more money!
Your suppliers want you to stay in business. Why? Because they want to sell you even more! And, how can they sell you more? Well, only if you are selling more to your customers. And your customers want you to sell them more, because this means that more of their problems get solved. They can
get rid of that pesky money that is done them no good at all. They can trade that money to you for the things they want - the things that solve their problems!
Cutting Costs by Adding Value
You have lots of suppliers. They may be phone companies, electric companies, equipment manufacturers, paper suppliers, etc. In fact, anyone who sells you anything for your business is a supplier. You are their customer. They are looking at you the same way you look at YOUR customers. They
think YOU have hidden money for them!
Each of your suppliers charges you a price for the things they sell you. Just like your customers, you have money that is doing you no good. So, you want to trade it to your suppliers for the things you need, the things that have more value to you than the money does.
This is the secret to uncovering money by reducing costs. You don’t have to pay less
for something. You simply must obtain more value
for it. Use your suppliers to help you make more money with "strategy 2", selling more. Tap into their expertise so that you get more value, then SELL that valuable resource to your customers at a higher price.
Let me give you an example. A friend of mine is a sales manager for a food company that supplies all sorts of things to restaurants and hotels. My friend is also a certified chef and a graduate of the Hospitality School at Florida International University. What type of value does he offer to
his customers? Not only does he sell them food and supplies, he consults with them on menu changes, storage techniques, merchandising, etc. His customers benefit from his expertise, and therefore can offer their
customers more value, (and charge them for it as well!)
Look at a retail shop. Do you see displays and promotional items that are not created by the individual store? Certainly. Who helps the retailer create these items? The supplier, of course. So cutting costs does not necessarily mean paying less for the PRICE TAG. Cutting costs also means
getting more value from your suppliers.
Here is a definition to remember: Price is everything you give up to get what you want
. Memorize this! It applies to your relationships with both your suppliers and customers. It is a true key - an absolutely powerful tool - for finding the money that is hidden all around you.
This information is so powerful, that if you use it consistently, you will create a great SURGE in your ability to uncover hidden money. You will be a money-making
machine!
Remember, if you want to use cost cutting as a strategy for identifying and uncovering hidden money, learn to form strategic alliances with your suppliers. Think of the psychology behind this move. After all, both you and your supplier are in the same business. You are both in the business of
serving YOUR customers. Make it a team effort.
In the previous chapter, we discussed the process of finding the BEST customer. If you want to reduce costs, you have to be the BEST customer for your suppliers. What can you do for them to make them value your business? "But that isn’t fair," you may be saying. "Why should I
have to prove my worth to a supplier? They should be coming to me!" Well, it depends on what you want to accomplish. Did you want to uncover hidden money, or did you want to make people come to you and beg you for your business? If you just want the ego trip, fine. But, if you are really
serious about maximizing your profit, get a partner!
YOU should go out and look for your suppliers. Don’t wait for them to come to you. Arm yourself with facts. How much will you be buying? How frequently do you order? What is the value of your business? These are all important to know.
Now, go to and INTERVIEW the people who wish to sell you things. Ask them what they can do for you that will help you add more value for your customers. This is a far better strategy than simply negotiating for a lower price. You want the price to be fair, not low. Isn’t that how you would
define YOUR best customer? USE your suppliers, don’t abuse them. Remember, price is everything you give up to get what you want. So, if you hammer your suppliers for a lower price, they will have to cut something out. You want them to be in business with you for a long time.
More Cost Cutting
Now that you know one of the great secrets of business, we can discuss how to literally CUT costs. There are several places to look immediately. The first is wherever you are actually WASTING money. Money is wasted when you buy something you do not need, when you make a mistake, or when you
are the victim of theft. Let’s look at each of these categories:
- Buying things you do not need -
We have all done it. Something looks good. It is so tempting. The salesperson tells you it is absolutely PERFECT. But, if you don’t need it, it costs you too much - whatever the price. Examine your purchasing records, or simply look in the storeroom.
There they are!
- Mistakes
- We all make them. Why? Because we are human, that's why. If your business were only operated by perfect people, you would have been thrown out long ago. When you make a purchase, ask yourself, "What value does this add to my business?" Of course, some mistakes may
result in over ordering or worse yet, under ordering. These mistakes cost money. Lower your costs by improving your planning.
- Theft
- People steal. Do all people steal? Probably not. But so many people DO steal that it is often a major cost. Be vigilant. Try to KEEP people honest by making it more difficult to steal. Will you stop it entirely? No. Can you slow it down? Absolutely.
The Danger of Reducing Costs
Reducing costs in the right way is excellent. It makes your business more efficient. But, lowering costs the WRONG way can result in dissatisfied customers. Remember our definition of price - everything you give up to get what you want. Don’t give up quality, delivery, guarantees, etc. Your
customers will get less value. Remember, you are the expert. Your customers trust you to be THEIR BUYER.
Selling More
Okay, so now you know how to cut costs - by getting more help for selling your products and services to your customers. Now it is time to discuss the selling process. Just how do you sell more? Who do you sell it to?
There are basically three ways to sell more. First, you can acquire new customers. Second, you can sell more to your existing customers. Third, you can help your existing customers find more uses for your product or service. Each of these strategies will result in the same outcome -
uncovering hidden piles of money!
Remember, we said that there were two groups of people who had hidden money. They are your customers and your suppliers. So, how do you get that money from your customers? By giving them something they want.
- New Customers
.- There are two types of new customers. One group is made of people just like the customers you already have. What would your business look like, and what would the profit be, if suddenly, you had more people buying your product or service? Would that make a difference in
your bottom line? I guess it would!
The other type of new customer is one that is completely different than the customers you have now. This is only possible if you come up with some kind of new product or service. What can your company do to attract new customers? Can your creative team design some new services that provide
value and benefits, and therefore attract new people?
- Selling more to existing customers
- Are you filling ALL the needs and wants of your current customers? Why not ask them? Many business people, even very good ones, sometimes lose sight of exactly WHICH problem they are solving for their customers. The famous case is the man who tries to
sell his customer a quarter-inch drill bit, because the customer says he wants a quarter inch drill bit. But really, that is not what the customer wants. That customer wants a quarter inch HOLE, not a drill bit. Yet, we constantly make the mistake of mixing up features and benefits. You probably
will not have much success trying to sell your current customers additional features. Learn to sell additional benefits. Benefits solve problems. Simply charge your customer for those benefits.
- New uses for existing customers
- This is an excellent way to uncover hidden money. IF you have satisfied customers, show them new ways to use your product or service. A real estate agent may sell rental properties to a couple who bought a home through him a few years before. Airlines
and hotels can get business travelers to return for holidays. Retail clothing stores can keep track of the types of clothing their customers are buying, then notify the customers about specials on similar apparel. It is just a matter of caring enough to keep in contact - and making the next
sale. Customer records can hold information about birthdays, anniversaries, milestones in life, etc.
Whatever your strategy for selling more, there is a customer out there just waiting for your attention. It requires imagination and good record keeping. The best time to set up a future sale is when the customer has just made a satisfactory purchase. Get in the habit of inviting customers to
return, looking for products FOR them, and turning those good customers into GREAT customers.
Money Making Strategy #3 - Supply-Side Economics!
This is a two step process. First, make a list of EVERY supplier for your business. This may be time consuming, but it is generally an eye-opener as well. When I was a consultant to a restaurant in Louisiana, we were looking at all the monthly bills to determine who our suppliers were. We
found that we were paying a monthly charge to a cold-storage house in New Orleans. No one had any idea what was stored there. It turned out to be 1,100 POUNDS of frozen crab meat. None of the present employees knew when the stuff had been ordered, or by whom. We had it tested and, guess what? It
was still good! Needless to say, we had several weeks of specials in the restaurant - all featuring crab meat. It was found money!
The second step is to start phoning each and every supplier. Ask them how they can help you lower your costs and serve your customers better. Some may not have any ideas at all. Consider changing suppliers! Others will have programs in place. They will be more than happy to add value to your
order by helping you serve your customers better. Keep these suppliers and become their best kind of customer.
|
