Sometimes I worry that I’m too negative about the difficulties of running great cafés and coffee shops but our recent research, in conjunction with Caffé Culture, as well as a meeting last week made me realise just how important this message continues to be.
At this meeting a client of mine described how his previous employer had just entered a Company Voluntary Arrangement. This is, if you’re lucky enough to not know, a way to avoid bankruptcy by doing deals with your creditors on what you owe them. You either persuade them to accept full payment but drip fed over several years or some percentage of what you owe them. Whichever route you choose you face humiliation and months, possibly years, of sleepless nights. And you’ll have unhappy creditors.
I’m very familiar with the process since it’s what we had to do with our sandwich bar chain and factory nearly twenty years ago. Trust me, it’s no fun.
What amazed me about this story was that it so closely mirrored my own situation. In both cases the businesses never stopped being profitable. And, in both cases, the issues involved overly fast expansion and a complete disregard for the day-to-day details of cash flow and management accounts.
Putting it more bluntly each case involved the owners losing sight of the fact that they were running businesses… businesses that require, however unsexy it might seem, a very clear grasp of the fundamentals of business. In my case we were far too focused on product development and opening new outlets. In my clients case the emphasis had been very similar but with an even stronger emphasis on marketing. What that left was nobody clearly managing the cash and operations.
The reality is this applies whether you have a single site or a chain of fifty coffee shops. You must ensure you have solid control of the following key aspects of your business:
- Operations – ensuring you consistently deliver exactly what the customer wants, whether you are present or not
- People – ensuring you recruit, train and retain the very best people you can possibly find
- Money – a relentless focus on whether you’re making money… or not
- Marketing – ensuring you have a steady stream of new customers, that your existing customers are coming back as often as possible and that, when they visit, they spend the maximum amount with you
You can, of course, expand these into various other sub sections and call them what you want. And you might even find that you are the person who manages all of these areas but, even if that is the case, you need to be aware of it.
What you cannot do, which we all have a tendency towards, is simply focus on the area that you most enjoy. That might be marketing, it might be simply working on the floor, ensuring “the job gets done” and the customer is happy or it might be focusing on the food or coffee part of the business.
Regardless of what this desire might be, our in depth research showed that 22 of the very best operators in the world have a relentless focus on making sure the figures add up at the end of the week. They also have an almost continual recruitment and people development program in place.
The flip side of the research showed that those owners and managers who were struggling with their businesses were almost all frustrated with their staff and exasperated with the money side. This tendency to blame external factors like VAT payments, the government, employees, lawyers, landlords and such is again a common factor.
So, the lesson is clear – if you want to avoid the humiliation of business failure you must make sure that you have clear strategies and systems in place to manage and develop the people who work for you and an almost obsessional level of control over the money.
The full details of these interviews will be in our new book – Wake Up And Sell More Coffee – which is due to be published in December.
Johnnie Richardson
[N.B. This blog post was first published on the excellent Caffe Culture website]