Today's restaurant profit tip is how to hit your target food and beverage costs
every single month.
Hey, everybody. My name is Ryan Gromfin. I'm an author, speaker, chef, restaurateur,
and I'm the founder of TheRestaurantBoss.com,
as well as RestaurantProfitAndPerformance.com
If you're a restaurant owner, operator, or chef,
you know how frustrating it is not to be able to pay your bills at the end of the month,
even worse is when 10 or 15 days later,
you're looking at a financial report only to find out that the reason
you have no money,there's no profits, you're not able to pay your bills
is because of a purchasing mistake that was made 30 or 40 days ago,
that some time earlier in that month
somebody had purchased too much food or too much liquor
or wine or beer
and now you owe all that money. You have no money left to pay yourself,
to pay your employees, to pay your bills and it's because of a mistake that happened
like I say 10-20-30 days ago.
There's nothing you can do about it now. You're in reactive mode rather than being proactive.
And so what we really need is a budget.
However, as I'm going to explain later, budgets can be really complicated.
So, let's start from the beginning. I'm going to give you a tip today.
A tool that in less than 5 minutes a day,
you will hit your target food and beverage cost every single month no matter what.
So, first, let's talk about what is a budget.
Well, a budget is really nothing more than a target
and with any target, if you aim small,
you'll miss small.If we shoot for the center, we might miss by one or two rings,
but we're still pretty close. If we have nothing to aim at,
then chances are we're going to miss by a lot.
And so we use a budget because what we measure, we fix.
Again, what we measure, we fix. It's important
to have at least a number to focus on rather than going into the month.
You hear me say all the time, hope is a strategy, it's just not a very good one.
So, a lot of times I hear people saying, I hope this is a good month.
Well, the tool I'm going to give you today will eliminate that hope.
It's a strategy, it's a system, it's a tool
that you can use to ensure that you're going to hit your target food
or beverage cost every single month.
And I talked a little bit about budgets earlier and one of the reasons why
budgets just simply don't work for us restaurant owners is well,
there's too much stuff on a budget,
they take too much time to create and they're just too complicated.
So, what I'm going to share with you today,
the simple solution for you is something that's called a declining
balance sheet and I'm going to explain you a little bit more
about what a declining balance sheet is here in a second,
as well I'm going to explain you how you can get the exact same declining balance .
sheet that I use completely free at the end of this video,
but basically, a declining balance sheet allows us to set a target
enter in our purchases throughout the month, then they'll tell us how much money we have left to
spend so as we get halfway through the month or close to the end of the month,
we know if we're on target, we know what adjustments to make and this is done with
three simple steps like I say less than five minutes a day.
Those three simple steps are as basic as setting a budget,
entering your purchases daily,
and then measuring and adjusting periodically throughout the month.
So, why don't you say we hop inside my computer?
I'm going to share with you the declining balance sheet that I use,
as well as like I said a way that you can get it completely free at the end of this video.
Okay, so as you can see, we're here. This is the declining balance sheet.
The first thing that we're going to want to do here is let's change the date to,
well today is May 1st. So let's call it May 1st, 2015
And on this particular sheet, we're going to track total costs of goods sold
purchases and let's assume that we have a
target cost of goods sold percentage of 30%
and our period sales budget is $100,000,
which means that you have $30,000
that you can spend this month on purchases and still hit your target,
so then all we would simply do here is we would enter in our vendor name,
so we can call this first vendor let's just say Cisco.
We can call the second vendor on, I don’t know, just vendor 2, etc., etc.
And then on a daily basis, you just go ahead and enter.
So if you spent a $1000 with Cisco
today and if you spent $500 with vendor 2,
then you can see according to this that you have $28,500 left
for the month and then you just keep going through and every day, you enter in your purchases
for the day and it'll total them up and it'll tell you how much money you can spend.
Okay, so if we look at this example that I have pre-created for you.
Let me zoom in on this. Oops, sorry! Zoom in on this a bit for you out here.
That's a little better.
You'll see that we've got purchases entered in throughout the month and then
you'll see that we have $2,325 remaining in our
budget that we can spend.
However, you'll see that we're only on the 25th day of the month,
so what this allows you to do with what six-seven days
left in a month is to make some decisions whether
we need to cut back on purchasing, we need to be a little more careful
if we're going to go over budget,
or maybe the reason that we're a little bit off here and we don't have that much money left
with seven days in the month, maybe sales
were a little higher than we thought and you're going to want to adjust that,
but basically what this sheet allows you to do if we come back and look here is,
this allows you to stay on target throughout the month
and to make sure that you don't have any surprises at the end of the month.
So, I hope you found that helpful. If you want a copy of this declining balance sheet,
click the button to download it. If you don't see a button on your screen here,
it will definitely be in the description below.
I would also encourage you to subscribe to my YouTube channel where you can get more
restaurant profit tips, strategies, and tools
just like this one completely for free delivered to your email box.
I hope you have a wonderful day and thank you for sharing the time with me.