Better Menus equal bigger profits!
It’s a new world and it is a costly one. A costlier one, to be more precise.
Business owners that ignore this simple fact, and all that it means, will simply not fare well, financially. Personally, I believe inflation to be higher than the official government figures. If you’ve had a look at your costs lately, I think you would agree with me. Whilst, that is unarguably a bad thing, there is no need to make it worse.
The biggest costing mistake owners make?
Most owners leave this with their chef. Then, they have a brief meeting, where menu costing is just one item on the “menu”, and run off to repeat the same mistakes, confidently re-creating the same unprofitable results. The problems start right there. Why? Because your chef is creative i.e. right-brained. Typically, they are not very good with numbers. Think of them as Arnold, but with the right arm bulging and the left one, a stick!
Typically, costing a menu will require some input from your chef, but it’s meant to be a very important (and rather long) meeting between you and your bookkeeper or accountant – if the latter have food experience. If that fails, try reaching out to us or to hospitality or food consultants.
Is setting the menu a one-off activity?
There are many reasons why menus need to be revisited during the year. Firstly, seasons change and your menu costing should as well. How about if your suppliers increase their prices? Again, yank out your pricing spreadsheet or app and go for it. I get it that it’s difficult to keep track of all these changes. Depending on what size of business you are running, you could be faced with thousands of invoices – and many suppliers will try to sneak a price increase past you.
That is the reason why you now have software that monitors this and assists your price monitoring efforts. The overall aim, here, so that we are clear, is to ensure that you are not eroding your margins and your business into the ground instead of proactively tweaking your prices.
Manage your pricing like a Harvard MBA!
Some people don’t think it’s valuable to do an MBA. Others think it’s the bees knees. But I know that there is one thing they teach their graduates that is vital to any business. MBAs always ALWAYS do a post-implementation review. So, any projects they complete, at the end, there is a thorough review. The learnings are kept and applied on to the next project. What does this have to do with your business? Everything! You see, it is not enough to just re-do the costing every time a supplier increases your price.
There is more involved here – than just the maths. For example, your accountant (or bookkeeper) needs to be giving you sales reports, showing the impact of the price changes you are making. Many of the better owners have some kind of “waste reporting” too. That means they are on top of it as soon as it is reported, review their process & ensure that it never happens again.
They will do it over and over, until the reported numbers show progress in the right direction, forever comparing their actual costs to their budgeted costs. Improving the effectiveness of your menu costing is a never-ending battle.