Oct. 24, 2015

The importance of financial planning for new restaurants

Your lifelong dream of opening your own restaurant is finally a reality. As exciting as it is to become your own boss, there are many factors that have to be taken into account when starting a new business. Keeping your finger on the pulse of your money matters is crucial for the success and longevity of your restaurant. Poor financial planning is known to be one of the most common killers of new businesses, even more so in the highly-competitive hospitality industry. Effective financial planning hinges on the management of various processes in your new establishment, and can be the difference between a struggling business and a thriving establishment. Here are some things new restaurant owners need to include in their financial planning to ensure success:


The importance of financial planning for new restaurant owners Your lifelong dream of opening your own restaurant is finally a reality. As exciting as it is to become your own boss, there are many factors that have to be taken into account when starting a new business. Keeping your finger on the pulse of your money matters is crucial for the success and longevity of your restaurant. Poor financial planning is known to be one of the most common killers of new businesses, even more so in the highly-competitive hospitality industry. Effective financial planning hinges on the management of various processes in your new establishment, and can be the difference between a struggling business and a thriving establishment. Here are some things new restaurant owners need to include in their financial planning to ensure success:

Cover all your bases and ensure that you have cash flow to see to daily and monthly costs

It goes without saying that you have to have your budget in place before you kick start your restaurant. It’s the management of finances that will make or break your business. Financial planning begins with the basics – daily cash flow management. In the hospitality industry there is a fast and constant turnover of products and services, which means your cash flow has to be monitored more frequently. You have to see to fluctuating costs such as produce, utilities and suppliers, while other expenses like rent, staff salaries and insurance are easier to manage. Also keep in mind that no matter how thorough your market research is, you can’t predict how many customers will actually dine at your restaurant once you open your doors. Planning for this financially will help you avoid running on your reserve before your business even takes off.

Consider your options before investing in equipment, property and other assets

The ideal scenario is to own the building you’re operating from rather than paying off someone else’s bond. But unless you have the money upfront, and depending on where your business is situated, chances are you will have to rent the space. During your financial planning, take into consideration the fact the monthly fee will escalate by at least 10 percent every year. When it comes to investing in equipment and other assets for your new restaurant, the same approach applies. It might be worthwhile to initially rent costly equipment rather than having more cash to distribute across the entire business – freeing up cash flow to see to other daily expenses.

Approach the hiring of staff with care

Human capital is an essential part of your business as no restaurant can operate without a chef, waiters and other staff members. Employing staff should be approached carefully as it may take a while for your new restaurant to start generating profits, adding pressure to your available cash flow. In time your restaurant will grow, so too will your staff contingent. Ensure that you include this in your financial forecasting. For some more insights, read our blog on some of the biggest misconceptions about hiring staff in the restaurant industry.

Include the marketing of your new restaurant in your financial planning

There’s no point in starting a new restaurant if no one knows who you are. Marketing is crucial for your business to be seen and for growing your customer base, making it essential to include it in your financial planning. Big franchises have access to a centralised marketing team that takes care of strategies and the setup of eye-catching campaigns. Luckily, with the rapid evolution of technology you no longer need a massive marketing budget or team to promote your restaurant. Utilising platforms such as Facebook, Twitter and Instagram can help to promote your restaurant – free of charge. But if you look towards more traditional forms of marketing, ensure that you are able to afford it.

Get a helping hand with a comprehensive point of sale system

Starting your own restaurant can be an overwhelming task, even more so if it’s your first establishment. While you are trying to get the hang of things, you need some assistance in keeping track of the movement of money through your business. A point of sale system is no longer simply a means of managing the payment process, but has evolved into an intuitive tool to help you improve the financial management of your new establishment. Pilot’s point of sale software is designed to help you optimise the management of your restaurant ensuring all costs are accurately captured through the monitoring of every process in your establishment. Pilot’s integration with international accounting specialists Sage Pastel ensures that the financial management of your restaurant is taken care of accurately and with the least amount of effort – letting you focus on growing your business. To find out what other benefits your new establishment can reap from our point of sale system, download our free Modern-day PoS Guide.