We really love what we do at FLEXIKITCH.
Helping people start a new hospitality business is a privilege. Over the years we've had the opportunity to assist many customers through this journey, giving us significant insights into the factors that are likely to increase their chances of success.
Starting a new business however can be daunting. There are many things to consider from choosing the right location, financing, selecting the right equipment, and hiring staff.
One of the most common mistakes we see when opening a new business is not having enough cash and liquidity for the initial opening. It's very common for people to be physically and financially exhausted at the end of the set-up phase, which for a new enterprise is really the starting line.
What it takes to get a business going
As mentioned to get a business up and running there are a lot of factors to consider: design and fit-out, your target market, equipment, your point of difference ¦ the list goes on. The planning fallacy is a common reason why many businesses find themselves cash poor at the end of the set-up phase. It is very common to underestimate the time, effort and cost involved when undertaking a new venture.
The planning fallacy is a common cognitive bias that affects our critical thinking and decision-making ability. Like other biases, it has detrimental effects and can negatively impact our lives. We fall into the planning fallacy trap because our minds use shortcuts to reach conclusions.
The first 3-6 months are critical, your team need to be on their game churning out great products and providing great service. Often, while this is all going on, the financial performance of the business is climbing into the black. However, it takes time to get there, and all too frequently we find that during this critical period too many businesses are coming up cash poor.
We recommend leaving at least 15-20% of the total project value in cash or liquidity reserved for the initial trading period. This ensures that funds are available to cover any short-term trading losses, or unexpected expenses that can arise as trading conditions become clear. If the new business kicks off well you may find additional growth opportunities arise - having funds available can make it possible to jump on these and take advantage.
Lack of cash and liquidity after opening is the number one thing to avoid when opening a new cafe, restaurant, or food business. We have listed a few other common observations below.
Key Do's & Don'ts when opening a new Cafe, Restaurant or Food Business
1. Keep at least 15-20% of the total project cost on hand
2. Lack of industry experience and unskilled staff are a common cause of new busines failures.
3. Fail to Plan = plan to fail. Develop a clear business and operating plan with defined deliverables
4. Contingency, build a safety margin into everything all the time.
5. Less is More, Don't try to be all things to all people, Find your lane or niche
6. Efficiency, efficient operators create lean businesses. Develop an efficiency test in your plan to test everything you do.
7. Learn fast, great chefs don't necessarily make great business operators. Don't assume an industry skill automatically transfers to a business skill. Be prepared to learn and grow quickly
8. Assumptions kill. If you're starting a business you're the guy or girl with the idea and the courage to put it into action which takes strong views, but don't get fooled always believing you're right, be prepared to critically analyse and change when its required.