When your staff understand money, everyone is better off. Set time aside to explain the fundamentals of your business to your team members, writes Ken Burgin.
If your staff don’t know how business finance works, they’ll always think that you’re rolling in money. They need to know that your constant reminders about waste control and driving sales aren’t just because you love the sound of your own voice.
Start with teaching them about labour costs and productivity. Take an average worker on $760 for 38 hours, and show the real cost of employing someone, with the addition of superannuation and workers compensation, uniforms and meals. Now show how group tax is worked out and where it goes, resulting in the pay slip they receive.
Take it further and divide the total payroll (with on-costs) by the hours you’re open to see the cost of running the place. Divide the payroll by the total number of customers to see how much it costs to look after each one of them before you purchase any food. Bring it close to home by dividing up figures into departments – bar, restaurant, functions and kitchen, comparing their own sales and costs if possible.
2. Cost of goods
Cost of Goods can be easier to explain. If overall food costs are 28 percent, how can you afford to sell a steak for $24 when it costs $10? Here’s where you explain ideas of menu engineering, do some recipe cards and graph gross profit and sales numbers on a chart to show how it all fits together – high profit items are balanced out by lower profit ones. You will also come up against the problem many staff have using calculators, and the mystery of percentages. Use the more numerate ones to coach those who’ve never liked maths. You may also find a surprising level of sophistication amongst some young staff, many of whom did business studies at school and wrote business plans for cafes.
3. Menu pricing
What about selling prices – why do you charge $8.50 for a few wisps of lettuce with tomato and an olive? First, get them to take off the GST that was never yours (divide by 11 and multiply by 10), then discuss concepts of value, competitive pricing and how the gross profit still has to be used to pay for all the other variable costs (utilities, waste, marketing etc) plus rent, leasing and insurance. With a little patience you can tie these together and explain the concept of breakeven point, and how the contribution margin that’s left after deducting the ‘making’ costs is used to pay for fixed costs. If you explain it carefully and staff really ‘get it’, you will hear them defending prices when customers raise their eyebrows, instead of pretending they don’t know why you charge so much. Now they are business partners, not just casuals.
4. Personal finances
There’s another angle that needs attention – the personal finances of your people. Everything from mobile phone bills (defaults can damage a credit rating), credit card costs, online banking and insurance options. They have to make informed choices about superannuation funds, and in the background there are parents and other old-timers talking about the need to save. Huh? Explain compound interest, and show how a one percent difference in superannuation returns can make an awesome difference over 10 or 20 years. Warn them about the pitfalls of ‘free’ financial advice and show how to make informed decisions. Grab newspaper articles about economic growth, China, skill shortages, electricity prices and demographic changes, and relate them back to what they mean for your business in 2016. Put all of this together and there are at least a dozen reasons why great staff want to work for you and learn – they’ll also insist their friends do too.