How To Survive Your First Year In Business (page 3) 

Perfect Planning Prevents Poor Performance

One of the fundamental mistakes small businesses, such as pubs, make is to neglect financial planning in the first year of business. One of the key management tools a publican needs to understand is cash flow. A realistic cash flow forecast, properly formatted and regularly reviewed can mean the difference between success and failure at any time, but during the first year of business it can be paramount.

Having a well thought out marketing plan will enable you to hit your target audience (customers you want to retain or introduce to your pub) at the key trading points in the year. Of course, not all pubs are the same, some are quiet during the summer, some during the winter; some are quiet at lunchtimes others in the early evening; some are busy during the week but most pubs are busiest at the weekend. Understanding the phasing or seasonality of your pub business is vital not only for marketing but also for cash flow. For instance, much as we might hate the thought of it, but the best time to start marketing for Christmas/New Year is in September. It sounds counter-intuitive to be taking Christmas Bookings when the kids have only just gone back to school and Hallowe’en hasn’t even passed, but customers as well as businesses like or have to plan ahead.

Turnover Is Vanity, Profit Is Sanity

It’s a bit of a business cliché, but as with most clichés, it’s born out of experience by many pub operators. The trick to surviving your first year in business is to concentrate on sustainable growth and maximum profit from everything you do. There’s precious little point in going hell for leather increasing turnover if, after all your efforts, you turn in a loss that threatens your business’ continuing existence.

In the same way as you have to be realistic about your cash flow forecasting, you have to be realistic about what you, your staff, your pub premises and your customers can deliver. How many times have you heard the expression “victims of their own success”? Pub businesses which grow beyond their capability to deliver consistent, high quality products and service, are doomed to failure, as customers are particularly unforgiving if you raise their expectations beyond what you can provide for them. For instance offering financially ruinous meal deals or drinks promotions early on in your first year means many customers will expect them all the time and the moment you stop providing these goodies they’ll start looking elsewhere. It’s far better to have an offering that concentrates on quality, not quantity and to follow the principle of getting it right first time and every time.

If it ain’t broken don’t fix it…

You’ll want to make your mark on your new pub business but scrapping everything a previous owner did can be detrimental to your fledgling business. Don’t be afraid to keep on things the previous owner can demonstrably prove are successful and profitable. For instance, if like me you can’t stand football, don’t fall into the trap of scrapping the Sky TV/BT TV contract just yet. You may find the trade this form of entertainment  generates is vital to your business survival. Take your time to consider, and more importantly witness, the effect on your business of all such activities, when you’ve had time to settle in you may be surprised at what works and what doesn’t.

If it’s broken fix it…

Following on from the above, if things the previous owner did are patently damaging your pub business then fix it or scrap it. For instance if the previous owner had six hand pulls for cask ale on the bar, but from stocktake reports it’s clear the pub will only support four pulls, then have the extra ones removed; concentrate on providing quality and choice through the remaining four; you can always re-install those lines should demand warrant it.

If your marketing plan or the very nature of your offering simply isn’t working, and you’ll soon know if they are or not, then don’t be afraid of revisiting your business plan and alter your offering. After all, even with the best due diligence on your part, what you plan to do with the pub before you take up the business is at best an estimate. Your experience of actual trading conditions or customers’ lack of appeal for your “new improved menu”, for instance, must dictate whether any or all of your plans are realistic and viable. If your grand idea isn’t working, then act quickly to amend your offering, because as the saying goes, “you can lead a horse to water…”

Damned if you do, damned if you don’t…

A word of caution here relating to how you manage staff, there may be certain practices or customs that have developed in the pub over many years. Unless they are dangerous or illegal, take your time to consider the consequences of changing working patterns etc.

As an example, consider the issue of smoking or using mobile phones at work, whilst the previous owner may have allowed staff to take “smoke breaks” as and when they felt like it, you may feel that smoking breaks should be abolished and staff can only go outside and smoke during their break(s). Whilst you might be well within your rights as an employer and operator of a public space covered by the smoking ban, will the immediate cessation of this “custom and practice” be counter-productive? Might the reduction in staff goodwill to your business, plus the inevitable bitching about it to customers, outweigh the wages saved? I am not condoning staff taking liberties or advantage of your goodwill, but a little concession here might go a long way down the line when you “need a favour” from them.

In any event, make sure you don’t alter the fundamental terms and conditions of staff you inherited (hours, pay, holiday entitlements etc), as under TUPE rules you must honour all the existing clauses of their contracts of employment or open yourself up to possible arbitration or even prosecution.

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