Partner Piece – How can food & beverage companies grow their business?

September 26, 2016

How can small restaurants grow their business without falling into some common traps that can lead any business into decline? The key is to balance growing sales and controlling costs, while pursuing the right strategy for growth at each stage of the business.

The number of restaurants opening in London is outpacing those closing at the rate of 3:2, according to the recent edition of Harden’s London Restaurant Guide.  The guide records 179 newcomers in its latest edition, which exceeds the 2008 pre-financial crash level of 158 and last year’s 148. The number of closures was 56, slightly higher than the 47 closed in 2015, which was the lowest since 2000.

One trend is an increasing focus on the quality of ingredients, whilst another is a focus on restaurants pursing a single activity or even having a single (often “signature”) dish.

Greg McGuire, a restaurant blogger, says that small independent restaurants who have survived the recession need to start thinking about growth, otherwise they will begin to decline. He acknowledges that growing a restaurant business in the current economic climate is very difficult.
McGuire sets down some key principles for small restaurants to follow:

Maintain your focus – ignore items which aren’t vital to operations

Don’t forget who you are – maintain your local appeal rather than expanding or moving

Be a tightwad – only spend what you have to and keep building your working capital.

Be a cut-throat shopper – relentlessly search for discounts and control overheads

Sell the **** out of your product – don’t forget to sell meals, not just control costs

I have learned a number of important tips on growing a business while working with various clients over the years, and by sitting on the boards of various businesses. These all apply to small restaurants as much as to any other business. Among the key ones are:

  1. Business growth is a mind-set
  1. Faster growth can be achieved by actually doing less
  1. Listen to your market
  1. Work hard and continue testing, testing and testing
  1. Follow the appropriate sequence of growth steps

The last point is something you can do using what is known as the ANSOFF matrix (see the diagram). This involves using a sequence of steps to move from one stage of your growth strategy to the next, as follows:

  1. Sell more of the same product to more of the same people
  2. Sell new products or services to your existing customers
  3. Take your current products and services into new markets
  4. Create new products and services for new markets

The highest probability and lowest risk strategy is A, whilst the second lowest risk and fastest payback is B. However, quite often business leaders bypass A and B and leap right into the higher risk C and D strategies.

My advice is for business owners to find ways of increasing the strategy of A before moving on.  I can hear some business owners saying they believe they are doing all they can in A but too many times I have seen new ideas and different techniques applied to existing sales and marketing efforts which have a significant impact on turnover.

If you want to grow your restaurant business, think carefully about how you balance your sales efforts with keeping an eye on your costs, and make sure you understand which growth strategy is really the best for your stage of market development.

rk-restaurant

Written by Richard Kleiner, CEO of Gerald Edelman.

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