Following on from my previous blogs on “mothballing” your business and redesigning on a budget, I want to follow up with something that everyone can be doing now, even though their businesses are closed.
For many years now I have looked at hundreds of businesses a year and seen a wide range of gross profit margins across similar businesses. Why is this important, well every pound you can save on goods is an extra pound of profit from the same turnover. Something every business owner should keep an eye on. I’ve seen GP of 72% for liquor, 75% for food and 85%+ for accommodation, whereas we would suggest that averages are around 55-65% for liquor (tied units are restricted to around 55%) 60-65% for food. So there is a lot of variety out there, but if I told you that you could increase your profits by 5 to 15% would you not want to look at that?
If you business is spending a significant sum on goods and stock, then the major procurement companies can help. However if you feel that your size does not warrant that expense or system to facilitate your purchasing then you have had little choice but to handle this yourself, or worse let your staff handle it for you. This therefore leads to businesses achieving significantly lower margins as you are not in full control.
During a recent chat with an old client he let me know about a new procurement service he had created for small restaurants/cafes and public houses. If you are not using a procurement system then you really should investigate this or other systems for time saving and potential cost saving.
“In a year that has had such devastating effects on our personal lives and our businesses, the hospitality industry has been left severely wounded – although it is not fatal. Instead of seeing the COVID-19 pandemic as a problem we just hope to see the back of, we should take this opportunity of forced shutdown to have a closer look at those systems and procedures that we would otherwise have very little time to consider.
One of the most important things to consider is your procurement process. The recent lockdowns have given us time to reflect and reconsider, use this time of quiet to revisit what you are currently doing and see if there are ways to improve your bottom line and increase your efficiency.
One thing to consider is using a new procurement software, started by a home grown Scotland company, called Orders Made Simple (or OMS for short). OMS is a stripped back app based platform that allows SME hospitality businesses to look more closely at the stock they are ordering, give you more control, speed up the ordering process and save you time and money in the process.
Orders Made Simple was launched during the COVID crisis to help businesses and they have managed to save on average 15% on your stock and give you 3.5hrs of your time back per week. One particular business has saved an astonishing 36% on their overall stock ordering and another business has saved £3,000 a year on staff costs as they can now do everything on their phone. OMS’s savings more than pay for the cost of the commission for the service.
In a year that has had such devastating effects on our personal lives and business, revisiting your procurement practices and incorporating OMS is a great way of increasing your Gross Profit percentage and bottom line profitability all whilst saving you plenty of time in the process, giving you more time to focus on your business or spend time with your family.
To find out more about the new software visit www.ordersmadesimple.com“
Previous blogs can be found here – Should you hibernate over winter? & Make mothballing work for your business – advice from leading designer John Amabile