Why are we working harder for less cash?

Edward and Leanne Plumber built an extension at JPs bar, near Borehamwood, to help increase food trade, but now find they have less money for themselves

My wife and I have a leasehold pub with 12 years remaining. Just over 18 months ago we built an extension to expand our food trade at our own expense. This has given us 30 extra covers and has been a huge success as we are now very busy and our turnover is up by £4,000 a week.

We serve good-quality, traditional English pub food, such as bangers and mash, steak, fish and chips, ham and eggs and a range of home made pies. Every Sunday we do a choice of two roast dinners.

We set our prices fairly low so we could attract business. In our town there are many restaurants, including an Italian, Indian and a pizza place. There are two other pubs - neither of which serve much food.

I think we have identified a niche in good quality and value traditional pub food, accompanied by high levels of service. We have set ourselves apart from the other pubs with our popular daily specials board.

Myself and Leanne believe that our customers deserve the best possible service and we work extremely hard to ensure everyone is looked after. We have a table service during the evening and as a result of being so busy have had to take on extra kitchen staff.

We seem to be in a great position in that we often have to turn away customers on a Saturday night and Sunday afternoon if they have not booked a table.

The problem is that, with all the extra costs, we seem to be making less money for ourselves than we ever did before. It has got to a point where we are working harder and harder for less and less money and wonder if it is worth the effort. Can you help?

I recommend a business health check in three areas - gross profit, overheads and staff productivity.

1. Gross Profit - However tedious it may seem, make the time to cost your dishes properly. Don't wait for the annual accountant report, by which time it will be too late and you will either be in the funny farm or bust. Work at 60% for food while building the business and 70% once trade is established.

Implement strict portion control to avoid waste. Don't over-garnish - most of it goes straight in the bin. Put pressure on your suppliers - your purchases have increased, so should your discount. Make sure your staff know which products deliver the highest GP so that when a customer asks for a pint of lager and doesn't specify a brand they are served the drink with the highest GP.

2. Overheads - Put signs on electrical and gas equipment in the kitchen and bar saying 'Please switch me on at 11am' and 'Please switch me off at 2pm'. You will be amazed by the impact on the fuel bill as staff tend to flick all the switches on the minute they get in.

3. Staff Productivity - It may seem like the reverse of what you should do when profits are tight but invest in some staff training. Well-trained staff are more efficient, productive and motivated. Unless you train them to work to your standards you will continually be saddled with the ever increasing hands-on role you currently have.

Try to remember you are running a business, not a lifestyle club. You need to let your staff and systems run the pub while you run the business.

Alison Carter, former BII licensee of the year, the Bay View Inn, Widemouth Bay, Cornwall

It would be worth writing a business plan now so that you maximise your profit over the key Xmas/New Year period, otherwise you might be starting 2006 on the wrong foot.

Split your plan into two parts - your extension and the rest of your pub - so you can compare the two. You should focus on your cash-flow forecast for the next 12 months and aim, very quickly, to earn at least 20% net profit from your extension.

Your business plan should include at least three elements:

â ¢ planned sales (net of VAT), broken down into drink and food

â ¢ target margins

â ¢ estimated costs (detailed line by line)

Are there any ways in which you can drive even more sales from your extension? Can you use it more during the day or in quieter shoulder periods? Can you improve cover turnover or increase spend per head? Can your team sell up more and/or deliver better customer service?

In terms of margins, what does your margin on food look like? If it isn't at least 60% then you need to explore what you're paying for food, your menu prices, your food wastage and any potential stock theft.

Obviously you need to closely examine your costs. Look at your labour line in particular. Do you have any unnecessary hours - front or back of house? Be ruthless. Are some members of your team less productive than others? Train them.

It may be that it's the small things that are eroding your margins - it often is. Getting them under control now can make the difference between success or failure.

Ann Elliott, marketing consultant, Elliott Independent

The great news is you are busy. Once you've built a reputation, increase prices. Try not to take too much notice of the odd customer complaining, as most will be happy to pay a little more for good service and standards.

If, after a stocktake, you are not reaching a minimum GP of 60%, take a look at the following:

1. Negotiating lower prices with suppliers

2. Introducing a waste book to monitor waste

3. Locking the kitchen and checking consumption on a small selection of different lines against till reports every night to confirm that there is no pilferage

4. Checking stock holding against demand - there's no point having six tonnes of duck breast if you only sell one a day. If staff costs are over 25%, start re-planning the rota. Consider:

â ¢ training staff to sell up, ie push wines and desserts

â ¢ staggering staff hours, so rather than having three on at 6.30pm have one in at 6.30 and the other two at half-hour intervals, and vice versa at the end of the evening.

â ¢ training - sometimes it's better to have one member of staff properly trained at a high rate rather than two employees at a low rate. It improves the customers' perception and normally means tasks are completed more efficiently.

â ¢ staffing options - can you save money by letting less skilled staff tidy away and close down?

Advertising: Never advertise with cold-callers. Plan your advertising budget and stick to it. Ensure you know what response you are getting from your ads by using a 'bring this in and receive' type offer. Ideally this will involve having to give an address and email. That way you can contact customers when you have events or special deals to publicise.

Martin Roslyn, chairman, Roslyn Group, incorporating the Pub Accounting Company

Edward Plumber's verdict

The experts' advice has been incredibly useful. We got so carried away with being busy that we lost sight of our profit margin. And because we were so busy we never found the time to sit down and work through our GP on food. In fact, it turns out to be around 55% on average. Two meetings have been set up before Christmas - with our accountant to review our business plan and profit margin and with our suppliers. I'll go armed with suitable threats to that one.

The clear thing is we must up prices to above that magical 60% GP level.

The staffing issue is a hard one for us. I think, deep down, we know we have to make cutbacks but it is always hard to do as we have such a great team here. However, I think we could lose two members for the greater good. I like the idea of staggering staff as often waiting staff are twiddling thumbs at the beginning and end of the evening.

I was intrigued by the smaller things that add up to make a difference. The labels have been slapped on the appliances and here's hoping it works for us too.

We know we have a long way to go but, hopefully, with these tips we can drive the GP up and see some reward for our hard work.'

Have you got a question for our panel of experts? Contact Ewan Turney on 01293 610 388 or email ewan.turney@william-reed.co.uk

The Experts

Alison Carter, lice