Summary of Business
- Situation – 3 Cafe’s all owned by one person
- Product/Service – Cafe and daytime dining
- Goal – Original goal was to develop marketing plan (but this changed)
Understanding from Analysis
Initially asked to develop and implement marketing strategies to aid one of the cafe’s.
Wanted to look at all accounts which showed significant losses and cash flow problems in all cafe’s. This was disputed by the business owner because accountant had told her that margins were excellent.
Payroll and VAT payment, problems did occur soon after accounts and businesses were analysed.
Aside from the immediate profit and loss problems, there was one glaring change that had occurred over five years but not noticed. Most businesses can be analysed and compared against other similar businesses and this is one way to do a double check on performance.
What showed up was the change in payroll costs which had slowly spiralled and were now almost out of control. From around 30% of revenue to 42% + of revenue.
Cash flow was also causing problems and this was a cash generating business so shouldn’t have been a problem.
The whole dining sector was also having problems with some big brand failures.
Goal Changed
The business owner had decided to focus on improving profits instead of marketing.
Action Plan
- Changed the accounting system from Excel to QuickFile (very low cost and easy to learn). As a by product of this strategy the business was able to reduce accounting fees from several thousand per Cafe to a few hundred.
- Agreed terms with suppliers to enable better cash-flow.
- Instigated a program to reduce costs from all areas of the business.
Eventual Outcome
It took a short while but the business owner was able to turn it around with my help. The end result, each business moved into profit, the business owner was able to draw a decent wage out of the business. Approximately a 300% return on my costs.
Sad to say, but each Cafe is now closed (as of 8th April, 2020) due to Coronavirus aka Covid-19. My hope is that it will burst into life once we are through this enforced break.
