Back to Basics: Your strategy for survival

If the doom-mongers and economists are to be believed 2008 is set to be the most challenging year financially in more than a decade for individuals and businesses alike.

With the rising cost of living, people are tightening the purse-strings and there is less disposable income out there as a result.

There are many knock-on effects of an economic downturn. Normally, one of the areas hit hardest is the leisure industry and this time around will probably be no different.

While consumers have to buy commodities such as food and utilities to survive, there isn't quite the same need to buy a pint of beer!

The signs are that pubs are in for another turbulent trading year, thanks mainly to:

• A year-on-year fall in on-trade beer sales

• Continuing high excise duties driving bar price increases - exacerbated by the recent Budget

• Negative effects of the smoking ban

• A consumer credit crunch - causing reduced lending

• Dealing with more social responsibilities and the health lobby

• Cuts in the price of beer in the off-trade.

When you add in the increasing customer desire for more comfortable drinking surroundings, the continuing decline in the manufacturing sector and competing leisure pursuits such as online gambling, then it's clear the industry faces its toughest challenge to date. Some have said a 'perfect storm' is approaching.

Yet it's still possible to keep your business out of serious trouble - if you catch it early enough.

Where Avance has been called in to a pub within three months of problems being identified, we have managed to rescue the majority of businesses.

Unsurprisingly there are many common denominators in terms of why a business is struggling, and there are effective, in some cases simple, solutions to help turn things around.

So rather than accept downturns in your business as inevitable, you should start fighting back. Whatever you decide to do, it is important to recognise changing market conditions and act before it's too late.

Based on 10 years' experience of doing this for pubs, here is our 10-point survival plan. Let's hope it goes some way to helping you change your fortunes for the better.

1 Control wage costs. It's been more difficult with the arrival of the minimum wage, but pay still represents far too high a percentage of turnover in many pub businesses. With the on-trade market facing a natural annual decline, wages need to be controlled in line just to stand still.

2 Always revisit margins across the full range of products you sell. Be satisfied that promotions are actually cost-effective. Look at your function trade, for instance. Could prices be amended in your favour for a captive audience?

3 Find additional ways of keeping customers in your outlet - activities, sports events, themed evenings. Look for new income streams - food, accommodation, poker evenings. Do some market research in the vicinity of your outlet and further afield. Marketing the business remains key to customer awareness.

4 See the smoking ban as a positive. Use it to sell different products and food and attract new customers. Statistics show that the new 'gastropubs' are benefiting from the ban as diners take advantage of the smoke-free atmosphere.

5 Continually monitor cash income for signs of adverse trends. The most common areas open to abuse are machine income and door entry fees. Ensure security controls are in place and take action by, for instance, changing staff working patterns and removing unprofitable entertainment.

6 Negotiate better supply deals on everything - particularly utilities and insurance - to improve gross profit and cashflow. If you have never switched your utility supplier, look into doing it. There is a lot of competition for your business and you are in a strong bargaining position.

7 Train and incentivise staff to upsell products such as larger measures of wines and spirits and encourage customers to buy premium draught products as opposed to the standard fare.

8 Monitor what the competition is up to - don't be afraid to take new ideas that are working for them and try them for yourself!

9 Review your opening hours to establish what are busy and quiet times. It's no use spending money on wages and energy when you are not selling enough to cover the outlay.

10 Make sure your premises and products are of the highest standards possible. Ensure your staff buy into the ethos of customer satisfaction.

Rob O'Neill is a senior investment risk manager at Avance ​