Capital is king in business, and with cost blow-outs forcing an average of 44 small Australian businesses to close their doors every day (Roy Morgan, 2013), it’s critical to safeguard your capital and keep your cash flow positive.
Running a restaurant is a challenge; you need to cover many bases, from food quality, making sure you have the right equipment, to recruiting and training amazing staff. However, this is only possible if you have enough money to keep your restaurant afloat, day in and day out. It takes time for a restaurant to generate the revenue required to cover costs and show a profit. Therefore, it’s important you figure out the finances in advance.
There are many costs associated with running a restaurant, which need to be addressed in the right way; here’s a few listed below:
- Supplies and Materials
- Salaries & Wages
Thankfully, there are various types of financing options available. Let’s look at some of the most commonly used ones:
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Some restaurateurs get the finance they need from a bank in the form of a loan. There is considerable risk for both the bank and the restaurant owner in this situation. For the owner, he/she has to deal with the long term debt. On the other hand, the bank takes into account that one out of every four new restaurants fail in the first year. Therefore, you may be able to get the money you need but the terms and conditions are likely to be strict.
Another option for finance is to ask investors to put their money into your restaurant. More often than not, this can be trickier than getting the bank to sanction your loan. This is because most investors want to see a comprehensive projection of your revenue and profits before they provide the money you need. They also want to know what the return on investment would be like to know if they will make money or lose money by financing your ideas.
Lack of sufficient finance could halt the growth of your restaurant, so make sure you sort this out before you start operating. Best of luck!
Photo Courtesy: http://www.smallbusinessfunding.com