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The challenges of running a café and how to ensure yours succeed

by OnDeck Australia,   Aug 29, 2019

 

 

We’ve all heard the stats, and they’re enough to scare any aspiring hospitality owner into a deep and warranted round of second thinking. If you haven’t, here it is: it’s estimated almost 60% of restaurant and cafe start ups fail in the first year, and of those that survive, only 80% make it to five years.

So if you conquered your first year, or even made it to your fifth anniversary, it’s smooth sailing…right? Kind of. Although plenty of well established restaurants and cafes hit stumbling blocks that deliver unexpected financial blows.

Luckily most of these challenges can be avoided or at least manageable if you are prepared. Here are some of the top challenges that pose a risk to established businesses and our top tips on how to prepare:

 

It’s hard to prioritise reinvesting in the business

It’s easy to get accustomed to a tidy profit, and many owners get attached to the idea of holding onto profit to either have as capital or build personal wealth. Even more challenging is the dilemma of wanting to hold onto working capital to ensure you have a healthy cash flow.

It makes sense, we even encourage looking after your capital!

The problem is, far too often this capital sits in accounts accumulating – and now working – while essential elements of the business go unattended to. This becomes a major issue especially if it’s maintenance of kitchen equipment where an unexpected equipment failure can lead to service shut down or injury, and a domino of unexpected costs that can cripple cash flow.

However investing in the business extends to all areas, not just the kitchen, and branding, investing in good people, keeping your decor fresh and updating your menu all cost money. Expecting that your start up capital is the only major investment you’ll make is a major mistake and will take its toll in the long term.

Be prepared to reinvest and do it early to help your business thrive rather than simply survive. Know what your risks are and commit to investing in keeping your venue safe, efficient and growing.

 

You’re working in the business and find it hard to find time to work ON the business

Knowing what your risks are and having a plan for reinvestment requires time. A good business plan will have you expecting to step back from hands on operations within a couple of years. We understand. It can be challenging to let go of control, or justify paying another wage when you are more financially efficient. However even if you’re running a small operation, being inside the business working front of house or in the kitchen means that you’re not paying the right amount of attention to your bookkeeping, sourcing alternative suppliers, creating marketing plans and making strategic business decisions – such as where and when to reinvest your money.

While plenty of owners consider themselves as cheap labour, the lack of foresight and planning that results from remaining too hands on can pose major challenges down the line. If you don’t have the cash flow to permanently step out, look at financing options to free up a portion of your time and put it into creating a strategy that will create the necessary revenue.

If done right the investment in your time and expertise will be sure to pay off and have you working on the business on a permanent basis.

 

Your workplace culture keeps changing and impact the customers

One of the major challenges of hospitality is learning how to create and maintain a workplace culture that is part of your product. Hospitality is called hospitality for a reason, and far (far) too often cafes struggle to put energy and attention into how they are treating the people at the heart of their business – the staff.

Plenty will argue the customers are at the heart, and understandably so. However the fact remains that it’s your staff that greet them, serve them, cook for them and bill them.

When a cafe’s staff culture goes sour, you can absolutely guarantee that the first people to feel it are the customers. It can be especially difficult given the nature of turn over in hops. You might start with a good crew then over time the people change and with the outgoing staff goes the vibe of the venue, and your regulars.

Investing in your staff culture means providing the right training, ensuring you have sufficient staffing levels, showing gratitude, incentivising, and encouraging culture buy-in by empowering staff to give suggestions and contribute in some way. Creating a consistent culture adds to your brand, and delivers a better product. When your staff are happy, your customers feel it.

We always go back for good food and great service. We never go back for great food and bad service. Nothing tastes better than good hospitality.

 

You’re struggling to keep your vision and branding fresh

Hospitality is cut throat, and arguably one of the most competitive spaces when it comes to trends and concept. Starting out with an original idea is a fundamental building block when it comes to getting past your first few years, but it’s not a golden ticket.

What was out-of-the-box when you started will most likely be either getting old, or if it was a winner, it’s getting copied. Staying fresh and relevant is a major challenge and means making sure your creative concepts and brand vision are continuing to evolve, and you’re making an effort to communicate this through your service offerings and marketing.

Ensuring you have a solid and consistent social media presence and paying attention to your brand go a long way to ensuring you keep front of mind in the industry and with your customers. Don’t have the time or expertise within your staff? This is the perfect opportunity to put into practice reinvesting and contracting a savvy social media freelancer or digital agency.

 

The bottom line for business longevity is for some business owners that you have to spend money to make money. Knowing when and how to reinvest in your business is key, so make it a priority to give yourself time to review your strategy (and urgently create one if you don’t have one) and identify your strengths and weaknesses.

If you have ideas and not enough working capital, talk to us today about a short term flexible business loan.

 

 

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