No one likes to budget. It’s no fun. But with some expert tips from your ol’ friends at Cluboid, learn to easily keep your 3 biggest and most arduous bar and nightclub outgoings in check: Labour, Drinks and Fresh Produce.
Management is difficult. There really are no two ways about it. When responsibility falls upon your shoulders to turn a profit every month, stress levels run high and sleep? Pah, sleep is luxury.
One particular thing which can cause huge ramifications to your sales numbers is your ability to manage your 3 central costs: labour, drinks and food stock. When a large percentage of your outgoings are anchored here, it makes good financial sense to ensure that your strategy for keeping tabs on these central three is absolutely airtight before concerning yourself with anything else. Ensuring your staff garnish their plates with pretty parsley leaves can wait.
There are of course, systems you can implement to survey your numbers in real time, which do a great deal of the management legwork such as gathering data and compiling trend info, but they will never be able to replace you: the decision maker. For both independent and multi-unit operators, keeping a meticulous eye (and careful balance) between these three main costs is difficult, although not impossible. Let’s take a look at some cost curtailing techniques...
Despite the fact that labour is the most costly of the 3, it is perhaps the most pain-free to contain. This is because cutting even the smallest portion of a high cost, makes a world of difference to profit. It’s also somewhat fixed - in that it isn’t affected by things like wastage. Not unless one of your waiters is a Panna Cotta.
For sensible distribution of your outgoings, you should calculate what you can afford in labour by making it proportionate to your sales numbers, usually a marked percentage. For nightclubs and bars this would usually sit between the range of 18-24% of proceeds. That’s all well and good, until you realise that it’s essentially the wrong way around. How can I know how much my venue will make on the day that I’ve already staffed? Obviously, if you knew categorically that tomorrow would take £2000 in proceeds, you could easily identify (using the 18-24% guideline) that labour costs that day shouldn’t exceed £500. This is where you need to keep an eye on your bar or nightclub trends. You then use these to make daily proceed forecasts alongside your rotas and schedules. Like any skill, practise makes perfect and once you’ve honed your powers of prediction for long enough, eventually you’ll be surprised by how apt your predictions become, sometimes coming close to the pound. We mean, you’re not Mystic Meg or anything so don’t get too excited. It’s all rooted in mathematics.
Distribution of labour costs, eg: what percentage goes to wait staff, kitchen hands, bouncers etc will vary depending on the type of venue you run. Things such as: whether you serve food, what kind and how much, is your area or demographic particularly rowdy meaning more security are necessary, all need to be taken into consideration. And the list, as we’re sure you’re aware, goes on.
To be able to steadily maintain your costs of labour month in, month out, you need to master the ability to forecast. Underestimate your earnings and and you’re completely under-staffed, overestimate and you’ll have wasted valuable company resources that could’ve gone elsewhere and see your staff standing around twiddling thumbs. You may even end up sending people home, which is a surefire sign you’ve miscalculated. Just keep your eye on it the daily, and if necessary, make small incremental changes to staffing.
Produce. Hmm. Welcome to the harder stage of cost management. With drinks, you essentially need to budget your budget. In descending order, your drinks distribution should look a little something like this:
Bottled Beer 23 – 25%
Draught Beer 21 – 22%
Soft Drinks 6 – 8%
That then puts your average drink cost at around 20%, which means, if you charge £10 for cocktail, you want to be able to make it for no more that £2. Keeping to this ratio will see a sensible, and incremental profit. Anymore than 21% and you’re generally in trouble. The costs of food however, will set you back quite a bit more than your drinks. That’s obviously great if you’re a nightclub because, hurrah, you don’t sell food. But for a bar that does, not such great news. Traditionally, food costs will sit around the 30% mark, so significantly less of a margin there. Although their percentages are different, a lot of the same methods can be used to manage your costs for both food and drink. Here are some practises for keeping produce costs consistent month on month:
Enforce consistent and accurate methods - We all know someone who gets a bit Jamie Oliver with their measurements. It’s fine to be slapdash when it’s coming out of your own pocket, but it’s not fine to be frivolous with other people’s money. If everyone is making a mojito differently then it’s impossible to manage the cost. If no one is abiding by a recipe, then you’ve no way of even knowing which brand was used, let alone how much of it. The same goes for kitchen measurements. To contain cost, you must stick to a consistent formula, that all your staff adhere to. If you can guarantee that a standard JD and coke uses precisely 2 ounces of Jack Daniel’s, and 8 ounces of Coca Cola, then it will drastically increase your ability to keep tabs on your inventory. More specifically, make sure recipes stipulate exact brands as well as measurements, correct glassware and ingredients. Explain to your staff about the cost of making it, and consequent price of sale. If each drink it made with those guidelines in mind, then it will always achieve its cost percentage. After all, there are measuring tools on hand for a reason
Theft is extremely prevalent in barwork. This is because stealing doesn’t necessarily mean clearing a shelf into a rucksack and making a beeline for the door. You’ll find that even the most timid of staff may have poured a little drink for themselves from time to time, and a little skimming off the top never hurt anybody right? Wrong. There are many ways that bartenders can ‘cook the books’ so to speak and managers need to enforce strict rules regarding the til. Any time the cash draw is to be opened not during a transaction, you must have another employee (preferably an upline) present. This means, no ‘making change’, or exchanging from their tips. You should be able to account for every til draw opening with a timestamped transaction receipt, that corresponds with the time on your CCTV footage. It also makes it easier to spot irregularities on the CCTV. If there isn’t a customer at the bar the til draw is open- you’ve got a problem.
People pinching from the kitchen is also quite common, as a lot of the time management are dealing with front of house. To lower the risk of theft, and therefore contain your food costs, managers need to be ubiquitous. Don’t leave any area of your venue to its own devices for too long, and try not to be too predictable when doing rounds. That’ll help to discourage any opportunists from brazenly taking advantage of your absence. Management should make a point of staying close to the movement of product during the day, so you’re more likely to spot anything untoward, too.
Watch out for wastage and damage to stock. This cost is often underestimated. You can’t completely curtail damage and waste by just ‘being careful’. Thorough staff training, vigilance and respect for the business is the only way to keep costs low here. If your food isn’t adhering to health and safety codes, is made too far in advance so spoils or is flippantly cooked, then guess what? It’s going in the bin. Ensure your staff are trained to carry out their duties correctly. At the very least, make sure they’re following correct procedures to record any damages, spillages or mistakes that result in waste - that is your first step to being able to manage your produce costs effectively. It is extremely important to be realistic with waste margins too, there’s no use halving the wastage budget because you had a ‘stern word’ with them. That just means staff won’t always be so obliging and/or honest. You may even need to monitor the bins for anything that has been sneakily disposed of, keep an eye on your staff routines, and call them up on anything that isn’t following company procedure. We know this won’t necessarily make you the most popular person to have around, but, you know, they do say it’s lonely at the top.
Another tip is to be smart (and ruthless) with your buyers. By that, we mean monitor your dealer prices. The trick is to never let on that you are guaranteed business. Try and keep them working for your custom by staying in touch with other suppliers and monitoring going rates and potential better deals. Wherever can do you the best deal for produce, is where you should take your custom. Loyalty is great, sure, but this is business, and what you get paid to do is make the difficult decisions. It’ll keep your current vendors hungry and more likely to negotiate for your business next month.
At the end of the day, any successful business owner knows that it’s a numbers game. The management element comes into it by adopting some of these methods and practices to make best use of your time and resources. And with that little bit of time (and money) you’ve now earned back, you’re free to focus on what’s next for your business, because oh yeah, that’s your responsibility too. No rest for the wicked, eh?