A successful start in the hospitality business

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A successful start in the hospitality business

A successful restaurateur must possess a talent for versatility. Business owners in the hospitality industry must be prepared for what lies ahead. No matter what your career background may be, whether it be as a firefighter, doctor, or race car driver, each career comes with its own unique set of demands. The hospitality industry is no different. Keep in mind that just because anyone can open a café or restaurant does not mean that everyone can effectively serve their guests. Consider whether you possess the motivation and skills required to meet these demands before embarking on this journey. A thriving restaurant relies on more than just innovative ideas and the ability to inspire others. The competition is fierce, and the market is challenging. The following sections will provide a brief overview of the steps necessary to establish a company, focusing primarily on liquidity and knowledge.

Setting up a few chairs does not guarantee guests. To avoid financial pitfalls and disappointment, you should carefully review the following checklist. First and foremost, ask yourself if you are ready for the challenges of the hospitality industry. Are you prepared to deal with the paperwork? Before serving your first espresso, cooking your first steak, or selling your first scoop of ice cream, you must take care of the necessary paperwork. The best advice is to be prepared to invest both time and money into these formalities. Once you have completed them, you will be able to take pride in your accomplishment. It is crucial to seek the guidance of a business consultant with experience in the hospitality industry to ensure that you are on the right track. This will help you save both time and money in the long run.

A checklist of preferences:

  • Health
  • Enjoyment of decision-making
  • Willingness to take risks
  • Ability to carry out your plans
  • Support from family and friends
  • Positive attitude and energy
  • Extroversion
  • Creativity
  • Endurance
  • Basic knowledge of business principles
  • Physical strength and stamina
  • Financial stability
  • Vigor and enthusiasm

The costs associated with opening a catering facility can be substantial, ranging from several thousand euros. When starting, many facilities, including bars, restaurants, cafes, and popular pubs, share the same flaw: more details should be noticed during the planning and investment stages. It is essential to compare costs and obtain comprehensive information about each offer before making any decisions. This requires a focused effort and seeking the advice of an expert. Try to negotiate with your landlord and link the lease with your revenue. As a general rule, the lease should represent 8-12% of your overall turnover. To ensure a strong start, it is advisable to create a comprehensive checklist of all projected costs, from monthly rent to inventory, and double-check everything. It is also crucial to have a financial reserve to cover the initial phase and avoid any unexpected issues that may arise.

Inadequate financial planning is a common cause of restaurant failure, leading to numerous annual bankruptcies. A solid financial foundation, including personal capital and a detailed business plan, is necessary for securing private funding or government incentives. It is essential to consider your monthly and annual living expenses, as well as reserve funds for unforeseen situations and emergencies.

Additionally, it is crucial to accurately estimate the costs of running the restaurant, including materials, staff, rent, and investment costs. It is also advisable to have a monthly liquidity reserve and to consider the estimated turnover and costs over three years.

Starting a restaurant is a big financial commitment, and it’s crucial to plan your finances well to ensure success. To help you get started, we’ve created a comprehensive checklist of costs and financing options.

A checklist of costs

• Purchase price or monthly lease
• Advance payments
• Deposit
• Fixed costs (e.g., electricity, water)
• Personnel costs
• Renovation/adaptation
• Inventory and equipment (FF&E)
• Operating supplies and equipment (OS&E)
• First stock balance
• Establishment costs (e.g., trade, concession)
• Other fees (e.g., music copyright protection)
• Insurance
• Advertising the opening
• Lifestyle costs (including health/pension insurance)

Financing options

Contrary to popular belief, starting a restaurant can be financially viable with proper planning and equity capital. However, it’s important to understand that it takes more than just a few hundred euros and good luck to succeed. You’ll need a solid financial foundation and a comprehensive business plan to make it work. It’s essential to remember that starting a restaurant without adequate capital is a recipe for disaster. You’ll need to have something in your pocket, whether it is your savings or funding from a bank. Keep in mind that banks are wary of investing in the restaurant industry, as many businesses fail within their first year.

To secure funding, you’ll need to present a detailed business plan with a clear concept.

Consider the following financing options:

  • Personal savings
  • Bank loan
  • Government incentive programs
  • It’s a good idea to work with an expert or tax advisor to discuss your options and find out about government incentive measures and possible loans.
  • Planning for the Future
  • Keep in mind that your projections and estimates will change over time, but they will still serve as a helpful guide.
  • Ensure you have a solid financial foundation to secure for at least three months to avoid any delays or problems during the startup period.
  • Monthly/annual living expenses
  • Reserve for unforeseen situations (e.g., illness, accident)
  • Cost estimate for interior design and inventory
  • Capital available
  • Bank loan
  • Incentive programs available
  • Monthly costs for materials, staff, and rent
  • Investment costs spread over 12 months
  • Monthly liquidity reserve
  • Turnover estimate for three years
  • Estimated costs for three years

The hospitality industry can be rewarding, but it also comes with its own set of challenges. Before embarking on this journey, it is advisable to carefully consider one’s experience in the field and seek the advice of experts and tax advisors. Furthermore, it is essential to understand that operating a restaurant significantly differs from enjoying one as a guest.

In conclusion, while the restaurant business can be financially rewarding, it requires sound financial planning and a solid understanding of the industry’s unique challenges. By approaching the process with caution and seeking professional advice, restaurateurs can increase their chances of success and avoid costly mistakes.

Amer Ćorić
Dubos Consulting Sarajevo

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