The Top Ten Mistakes of Restaurant Owners
No one is perfect. We all make mistakes. The best part about mistakes is that you get to learn from them, so they are not repeated. But even better than making your own mistakes where the price tag can be steep, is learning from the mistakes of others. Below you’ll find some common blunders of even the most successful restaurateurs.
1. Some successful restaurant owners frequently ignore their own wealth planning. When your income exceeds your needs and your entity(s) are thriving, life is good. It’s easy to procrastinate and not attend to your investments, insurance, estate plan or succession plan outside the stores. Ask yourself this: why am I an owner of a restaurant? If enhancing your income, net worth or lifestyle are a part of that answer, then you need to create the time to manage your wealth and manage the possibilities of good times and bad as well.
2. Most business owners have a team of “go to guys” at their call. These typically include a CPA, attorney, insurance agent, benefits agent, investment professional etc…. But rarely does the business owner client of these service providers step back to evaluate the collection of professionals individually or collectively. Sometimes important items slip through the cracks, and none of the professionals on the payroll thought to plan for the issue or recognize that there was an issue in need of attention. Successful entrepreneurs need to think like owners of sports teams and have a head coach to coordinate these diverse issues to make certain that nothing falls through the cracks and that the team of professionals are aware of the game plan and the direction in which the team owner wants to travel.
3. Integrating your business into your life plan. One thing is often certain: successful entrepreneurs didn’t start a business so they can work 14 hours a day 7 days a week. In fact, the secret to success often lies in one’s ability to clone yourself, and create systems and processes to repeat successful production and service, whether the founder or owner is there or not. Give yourself the gift of time, and reflect on how you’d like to spend your 168 hours each week. If working 98 of them is your answer, great. You’ll save a lot of money on payroll. But if other things like family, fishing or travel are a part of your life vision; make it work. Your business will benefit from your time away and appreciation for quality time.
4. Not having a succession plan. Another fact of life is the fragility of both health and life. If something happened to you tomorrow, how will your business survive? Your stake holders all want the answers to this question. They are your family, your employees, your suppliers and financers. A solid succession plan will help with more than simply the possibility that you don’t wake up for breakfast. It will protect you in the event of a long or short term disability and will provide financing sources. Another benefit of planning for succession now is the empowerment of your management team. When they are a part of the plan, and aware of your respect and expectations of them, they are more likely to rise to the occasion in times of need.
5. Getting a better grip on your accounting. If you thought that inventory control and current financial statements are only for bigger restaurant chains, think again. In order to know that you are doing the right things, an owner needs to understand their financials and develop short term metrics for evaluating success. Working with a bookkeeper and accounting firm who knows your industry can guide you to developing meaningful and current financial reporting mechanisms to keep you completely on top of your numbers.
6. Develop a tax saving way of being. Saving on income taxes isn’t something that is done at the point of filing the tax returns. Tax savings are best achieved when you know in advance where the tax problems originate and planning to minimize the tax cost associated with those issues. Your tax savings may begin by better coordinating your investment portfolio, enhancing your retirement benefits or timing your purchases of capital goods a little better. While income tax savings alone will not make you wealthy, a little savings here and some more deferral there can add up to become significant over the course of a career.
7. Build a culture of accountability and results. Setting goals, even big audacious goals are a good thing. Successful business owners everywhere will tell you that their big goals only became reality by surrounding themselves with quality people who were equally possessed with the big audacious goals. To do this, you need the right people and a culture where accountability and rewards for success are directly tied to the day to day functions that the team believes are the most enduring route towards accomplishing the team’s objectives. If your compensation and other reward systems are connected to the activities needed to succeed, the rowing now seems a little more directed at every level within the organization.
8. Not investing enough in social media. Like it or not, social media is how new customers will find you. Ignore this at your own peril and possible extinction. A good social media presence is more than simply being there, it is being attentive to the needs of your customers and their desires. It means responding to their gripes, and offering premiums to get them back in and have another chance at winning back their trust and loyalty. To do this well takes time. Time that I suggest you don’t invest but instead hire some younger, hipper social media person who knows how to position you to be found by your ideal customer profile.
9. Developing a funding strategy for growth. Getting traditional bank financing for a restaurant project has never been tougher. This has forced entrepreneurs to look for other sources to fund their growth. Amongst their choices are private financing, where the rates are frequently in the double digit range and include equity participation, home equity or personal financing or a reinvestment of profits back into the entity. Each of these situations creates its own unique set of challenges and will require some financial analysis to vet out your best course of action.
10. Keeping the family from spoiling the soup. In the USA, many small successful businesses are rooted in family. But to keep the focus on the goal, leaders of the family enterprise must separate the roles, compensation and growth trajectory based on ability and not blood line. This can get especially difficult as you address the topics of succession and estate planning. Most family businesses do not survive the second generation. If your goal is to pass your business down the family tree, either because of pre mature death or a part of the long term goal, start your exit planning discussions well in advance of your hopeful departure.
In business, what works today may not work tomorrow. As you progress in your business, you will make mistakes. The key with mistakes is to turn the negative of a mistake into a positive asset. The only way that I know how to do that is to take a close look at what happened and what you would do differently if you could start that experience all over again. For those of us on the lifelong journey to greatness, this process will be repeated frequently.
This article was written by John P. Napolitano.