The second of 5 top tips to grow your food business
2. Know your numbers
3. Resources - Physical, Financial, Emotional
4. Your opinion doesn't matter!
5. Smart Change - What have you got in the pipeline?
The second of 5 blogs to give you an an
advantage in 2017
KNOW YOUR NUMBERS
I have met too many food entrepreneurs who are constantly disappointed that they are making less profit that they
thought they would. One of the reasons for that is that they don’t have sufficient control of their business-critical numbers.
The first thing that The Food Agency needs to do for its clients is to find out where their strengths and weaknesses are so that we can focus on what needs fixing first. Far too often, the main weakness is - not having access to business critical numbers.
Business owners who have easy access to those numbers are better placed to make correct decisions along the journey to successful growth.
LESS IS MORE
Having too many numbers to work with can be wasteful and inefficient. I remember visiting a food buyer who had a thick pile of paper which her FD and dumped on her desk. The reports included; sales of products per day, cost price, sales price, promotional discounts, order lead times etc.
‘Very impressive’, I said,
‘Waste of time’, she said, ‘I haven’t got enough hours in the day to look at them let alone work out how I can use the information!’.
So, the message here is – LESS IS MORE.
Only produce the numbers that help you with your strategic decision making. Don’t spend hours agonising over your Total Debt Ratio when there’s little you can do to change it in the short to medium term.
WHAT NUMBERS ARE 'BUSINESS CRITICAL?'
Cash flow, sales & profit/loss are the big three and then there’s gross margin (including wastage) followed by the food industry’s all important - productivity.
Accurate cash flow forecasts – You’ve got to know how much money is in the bank all the time.
Sales – This means actual sales. Not the gross amount before marketing over riders have been applied nor the gross amount before credits have been issued but the actual sales total that will go into your bank account.
Profit and Loss – Are your P+L figures an accurate representation of how much you are earning? Have you accrued for that big expense that you know is coming up in a couple of months’ time? P+L reports that are as real time as possible give you so much extra control allowing you to make accurate and informed decisions.
Actual gross margin - Sure, you should know how much money you should be making when you’ve subtracted you cost of sales from your sales price but are you making as much as you thought? What about wastage, yields on various ingredients and packaging? Do you know exactly how much you are throwing away? – You should.
Productivity per employee – The amount of labour to make a product can vary so much in the food industry. Make sure that you know your labour cost per product range and every time you introduce a new product. Then, drill those costs down per employee.
ACCURATE, REAL TIME ACCESS
Whichever numbers you choose, they’ve got to be accurate and available with the minimum amount of hassle.