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Dear Blogger: I am in the process of developing budgets and projections for 2007. My General Manager wants to estimate costs lower and project customers higher, which brings him closer to his bonus number. I want to estimate costs higher and project a reasonable customer increase not nearly as stratospherically as he has projected. Who is right?
Number one or two?
Both of you are could be correct: Seldom do operating costs decrease so in that case you are correct and if the GM has a creative and effective marketing plan to support his stratospheric customer count projections than he is correct.
The important element in the equation is can you increase customer count and at the same time increase sales? By accomplishing that goal, you would be dividing the need to hit astronomical customer counts and still notice an increase in financial volume.
History over the past years is a vital statistic in the upcoming budget planning. Have you been able to trim costs- while not eroding service or quality- previously? If you have, where have you trimmed costs? Was payroll less due to keeping a sharper eye on your dining room and kitchen hours? Alternatively, did you trim costs because of waste or better rotation? That would be a tremendous accomplishment. Those are two areas that lend themselves to immediate bottom line savings.
However, if you decreased costs because of losing staff and not replacing them, or you paid less for positions than you had before, this is not cutting costs, it is merely paper trickery unless you can exist, professionally, without depleting service or quality. On top of this, if you are working twice as hard, feeling the stress, and becoming less efficient because of the "cost cutting" measures, than you have not realistically cut costs you have just personally accepted more of the responsibility. When developing yearly budgets and projections, make sure the numbers are realistic. This will enable you to develop systems to decrease expenses once they are projected.
As far as the stratospheric customer counts, compare this growth to the actual increase over the past three years. When analyzing previous year customer counts, whether high or low make sure to consider everything: Were their less restaurants in the neighborhood? Did a popular competitor close? Did your restaurant suffer adverse publicity? Was service particularly bad for a period? Have you increased your marketing and promotional activities and budget? Do you have a plan for increasing customer count and financial volume? Have your restaurant been placed on the culinary map in your area thanks to word of mouth, a great review, or unbelievable popularity?
Before your budgets and projections can be completed, those questions need to be answered.
Budgeting will assist you on reaching your ultimate goal of showing more profit through decreased costs and increased customers. Don´t worry about who is right or wrong. Focus on your strong points, the GM´s, and the rest of the staff.
Upon budget completion, hold a staff meeting, explain the company looks forward to increased volume, and decreased cost cutting. (Don´t use numbers here, use percentages, so your volume doesn´t become gossip and fodder for fellow restaurateurs). Bring the staff into the process so they realize that a simple misstep by a bus boy, leaving a lasting mark on a good customer, can erode profits as quickly as a burnt steak from the executive chef.
The entire process is not easy and the grappling that will occur from the intense discussions will at times seem more stressful than the rewards. You both deserve a standing ‘O’ and mega Kudos for focusing on the future. Your budgets outline and define the restaurants success along with setting goals for you as the owner and the General Manager. Don´t take them lightly, live by them once they are completed, and you both agree that they are realistic.