How To Maximise Revenue As You Reopen
October 29, 2020
The next few months are critical!
Melbourne is back! The whole city is buzzing as retail and hospitality open their doors and welcome back customers. Of course, nothing is as simple as just flipping a switch. Many businesses are now making adjustments to open in the next week, especially hospitality. For example, planning new menus, organising liquor licenses for footpath dining or buying new tables suitable for outdoor dining takes time.
For a full list of the requirements and restrictions please visit the Vic.gov.au roadmap here. While the instructions are straight forward the best way to go about reopening from a revenue perspective isn’t as clear. We have compiled a list of our best practices to re-open and maximise your profits.
Recommendations for Hospitality
The hospitality sector has been reinventing itself over the course of the pandemic. And now as we slowly ease back into COVID normal life businesses will need to change their seating and layouts. Take into account that your current chairs and tables may not be suitable for carrying in and out. And it is important to ensure that the tables fit into the space well to ensure the distancing requirements are met. It is important to decide if now is the best time to invest in new furniture. With reduced revenue conditions it is important to consider the benefits of having tables that will maximise profits now and into an uncertain future. While restrictions will be lifting more in November, true COVID normal life will not return until there have been no new cases for 28 days and no outbreaks of concern in other states and 14 days with no active cases. Keeping this in mind it could be more cost effective to plan for new purchases in bulk to keep costs lower. It is wise to plan ahead to acquire seating that maximises the space and reduces potential lost revenue.
There are also menu planning changes to consider. The prices and portion sizes should be adjusted to suit the new dine in rules. New menus should feature less options at price points for optimised revenue. For example, if people can stay for a maximum of 90 minutes on a Saturday night do a break-even analysis to ensure you understand how much each person must spend to make a profit. Redesign the menu to produce a combination of meals and starters that will achieve the minimum spend in a simple way for customers. To understand what the minimum spend should be please use the following formula for pricing each dish:
Break even quantity = Fixed costs / (Sales price per unit – Variable cost per unit)
The final aspect of retaining profit margins is calculating how many staff to schedule. While there are less people dining in and will need potentially less staff it is important to remember there are extra duties. For example, gathering names for contact tracing and extra cleaning duties. Use software such as Deputy
and ENTO
to create rosters and set budgets for staff shifts. The software also allows for the creation of budgets to ensure your break-even numbers stay intact.
Remember there is plenty support from local council so do not try to go it alone. Reach out for information or support for all liquor license extensions and foot path regulations. All councils have dedicated staff and information available at this time to help hospitality open quickly and within all regulations.
Recommendations For Retail -
Retail stores will have built up email lists from web-based sales. Now is the time to maximise sales by investing in an email list manager. There are lots of options available from free to paid options. For example, Mailchimp
or Tiny Letter
is free for lists under 2,000 subscribers. There are paid options for larger lists on Mailchimp or more specialised ecommerce options such as Drip. All paid versions will help you understand the buying behaviour of your list. This makes it easier to send special offers to your best customers or to keep them up to date on the trading terms and hours of your business.
Use your newsletter and social media to publish clear rules for shopping in store. It is very important to keep customer expectations managed before their arrival. Social media posts explaining how to enter the premise safely, how many people are allowed inside at any time and the locations of hand sanitisers will help people to plan their visits. You can also offer phone numbers for customers to call ahead first to check before heading in at busy times. Do not wait to explain any changes to the business, be proactive and reach out first.
Retail is required to keep track of contact details of people who enter the store. This can be done at check-out with systems such as Square that can capture this information at the time of purchase. Or simply use a pad and pen. The government may release of a universal bar code later this year, but until then it will need to be managed by the business owners.
It is critical to remember that any systems set up now could involve some initial costs. Long-term profitability will involve the use of increased digital communication and management tools. If you have any questions on what options are best for your business, please do not hesitate to get in touch.
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Effective debt management is crucial for the long-term stability and growth of any business. While debt can be a valuable tool for expansion and investment, uncontrolled or poorly managed debt can lead to significant financial distress. This document outlines key strategies for businesses to manage their debt effectively, ensuring a healthy financial outlook. Understanding Your Debt Landscape Before implementing any debt management strategies, it's essential to have a clear understanding of your current debt obligations. Categorise Debt: Differentiate between short-term debt (e.g., lines of credit, accounts payable) and long-term debt (e.g., mortgages, term loans). Interest Rates and Terms: Be aware of the interest rates, repayment schedules, and any specific terms and conditions associated with each debt. Debt-to-Equity Ratio: Regularly assess your debt-to-equity ratio to understand how much of your business is financed by debt versus equity. A high ratio can indicate financial risk. Cash Flow Analysis: Understand how your debt repayments impact your cash flow. Ensure you have sufficient cash flow to cover your obligations without straining operations. Strategies for Proactive Debt Management Proactive measures can significantly mitigate the risks associated with business debt. 1. Develop a Clear Debt Repayment Plan Create a detailed plan for repaying your debts. This should include: Prioritisation: Determine which debts to prioritise. Often, high-interest debts or those with strict deadlines should be addressed first. Budgeting: Integrate debt repayments into your overall business budget. Contingency Fund: Establish a contingency fund to handle unexpected expenses or downturns, preventing the need for additional debt. 2. Optimise Cash Flow Strong cash flow is the backbone of effective debt management. Accelerate Receivables: Implement strategies to collect payments from customers more quickly. Manage Payables: Negotiate favorable payment terms with suppliers, but avoid delaying payments to the point of damaging relationships. Control Operating Expenses: Regularly review and reduce unnecessary operating expenses. Revenue Growth: Focus on sustainable revenue growth through increased sales, new products, or market expansion. 3. Consider Debt Restructuring or Refinancing If your current debt terms are unfavourable or unsustainable, explore options for restructuring or refinancing. Lower Interest Rates: Refinancing can secure lower interest rates, reducing your overall cost of borrowing. Extended Repayment Periods: Restructuring can extend the repayment period, lowering monthly instalments and improving cash flow. Consolidation: Consolidating multiple debts into a single loan can simplify management and potentially reduce interest costs. 4. Diversify Funding Sources Relying too heavily on a single type of debt or lender can increase vulnerability. Equity Financing: Explore equity financing (selling ownership stakes) to reduce reliance on debt. Government Grants and Programs: Investigate government grants, subsidies, or loan programs that may be available to businesses in your industry. Strategic Partnerships: Form partnerships that can provide capital or reduce the need for debt financing. Monitoring and Review Debt management is an ongoing process that requires continuous monitoring and periodic review. Regular Financial Reviews: Schedule regular reviews of your financial statements, including balance sheets, income statements, and cash flow statements. Key Performance Indicators (KPIs): Monitor KPIs related to debt, such as debt-to-equity ratio, debt service coverage ratio, and interest coverage ratio. Adjust Strategies: Be prepared to adjust your debt management strategies as market conditions, business performance, or interest rates change. Conclusion Effective debt management is not about avoiding debt entirely, but about using it strategically and responsibly to fuel business growth while maintaining financial stability. By understanding your debt, implementing proactive strategies, and continuously monitoring your financial health, businesses can navigate the complexities of debt and achieve sustainable success.
Raising Capital: Funding Options for Your Business Raising capital is a crucial step for businesses looking to grow, innovate, or simply sustain operations. Understanding the diverse funding options available can significantly impact a business's trajectory. This document outlines various avenues for securing capital, providing insights into their characteristics and suitability for different business needs. 1. Equity Financing Equity financing involves selling a portion of your company's ownership in exchange for cash. This method can provide substantial capital without the burden of debt repayment, but it means diluting ownership and sharing future profits. Types of Equity Financing Angel Investors: High-net-worth individuals who provide financial backing for small startups or entrepreneurs, usually in exchange for ownership equity. They often offer valuable mentorship and industry connections. Venture Capital (VC): Funds managed by professional investors that invest in companies with high growth potential. VCs typically invest larger sums than angel investors and take a more active role in the company's strategic direction. Crowdfunding: Raising small amounts of capital from a large number of individuals, typically through online platforms. This can be a good option for businesses with a strong consumer appeal and a compelling story. Private Equity: Firms that invest in established companies that are not publicly traded. They often seek to improve the company's performance and then sell it for a profit. Initial Public Offering (IPO): The first time a private company offers its shares to the public on a stock exchange. This allows for significant capital raising but comes with extensive regulatory requirements and public scrutiny. 2. Debt Financing Debt financing involves borrowing money that must be repaid, typically with interest, over a specified period. This method allows businesses to retain full ownership but adds the responsibility of debt repayment. Types of Debt Financing Bank Loans: Traditional loans from commercial banks. These can include term loans, lines of credit, and asset-backed loans. Eligibility often depends on the business's creditworthiness, cash flow, and collateral. Business Credit Cards: While convenient for short-term needs, business credit cards typically carry high interest rates and should be used cautiously for capital raising. Mezzanine Financing: A hybrid of debt and equity financing, typically used for expansion or acquisitions. It often involves subordinated debt that can be converted into equity under certain conditions. Bonds: Debt securities issued by companies to raise capital. Investors who buy bonds essentially lend money to the company in exchange for regular interest payments. This is usually an option for larger, more established companies. 3. Alternative Funding Options Beyond traditional equity and debt, several alternative funding options cater to specific business needs and stages. Grants: Non-repayable funds provided by government agencies, foundations, or corporations for specific purposes, such as research and development or community projects. Eligibility criteria are often strict. Bootstrapping: Funding a business with personal savings, early sales revenue, and minimal external capital. This approach allows entrepreneurs to maintain full control but can limit the pace of growth. Revenue-Based Financing: Investors provide capital in exchange for a percentage of the company's future revenue until a certain multiple of the investment is repaid. This is often suitable for businesses with predictable recurring revenue. Crowdlending/P2P Lending: Similar to crowdfunding, but individuals lend money to businesses with the expectation of repayment and interest, often through online platforms. Factoring/Invoice Financing: Selling accounts receivable (invoices) to a third party at a discount to get immediate cash. This is a short-term solution for managing cash flow. Conclusion Choosing the right funding option depends on various factors, including your business stage, growth potential, risk tolerance, and desired level of control. It is advisable to thoroughly research each option, consult with financial advisors, and create a comprehensive business plan to present to potential investors or lenders.
Analysing Financial Statements: What They Tell You About Your Business
Effective debt management is crucial for the long-term stability and growth of any business. While debt can be a valuable tool for expansion and investment, uncontrolled or poorly managed debt can lead to significant financial distress. This document outlines key strategies for businesses to manage their debt effectively, ensuring a healthy financial outlook. Understanding Your Debt Landscape Before implementing any debt management strategies, it's essential to have a clear understanding of your current debt obligations. Categorise Debt: Differentiate between short-term debt (e.g., lines of credit, accounts payable) and long-term debt (e.g., mortgages, term loans). Interest Rates and Terms: Be aware of the interest rates, repayment schedules, and any specific terms and conditions associated with each debt. Debt-to-Equity Ratio: Regularly assess your debt-to-equity ratio to understand how much of your business is financed by debt versus equity. A high ratio can indicate financial risk. Cash Flow Analysis: Understand how your debt repayments impact your cash flow. Ensure you have sufficient cash flow to cover your obligations without straining operations. Strategies for Proactive Debt Management Proactive measures can significantly mitigate the risks associated with business debt. 1. Develop a Clear Debt Repayment Plan Create a detailed plan for repaying your debts. This should include: Prioritisation: Determine which debts to prioritise. Often, high-interest debts or those with strict deadlines should be addressed first. Budgeting: Integrate debt repayments into your overall business budget. Contingency Fund: Establish a contingency fund to handle unexpected expenses or downturns, preventing the need for additional debt. 2. Optimise Cash Flow Strong cash flow is the backbone of effective debt management. Accelerate Receivables: Implement strategies to collect payments from customers more quickly. Manage Payables: Negotiate favorable payment terms with suppliers, but avoid delaying payments to the point of damaging relationships. Control Operating Expenses: Regularly review and reduce unnecessary operating expenses. Revenue Growth: Focus on sustainable revenue growth through increased sales, new products, or market expansion. 3. Consider Debt Restructuring or Refinancing If your current debt terms are unfavourable or unsustainable, explore options for restructuring or refinancing. Lower Interest Rates: Refinancing can secure lower interest rates, reducing your overall cost of borrowing. Extended Repayment Periods: Restructuring can extend the repayment period, lowering monthly instalments and improving cash flow. Consolidation: Consolidating multiple debts into a single loan can simplify management and potentially reduce interest costs. 4. Diversify Funding Sources Relying too heavily on a single type of debt or lender can increase vulnerability. Equity Financing: Explore equity financing (selling ownership stakes) to reduce reliance on debt. Government Grants and Programs: Investigate government grants, subsidies, or loan programs that may be available to businesses in your industry. Strategic Partnerships: Form partnerships that can provide capital or reduce the need for debt financing. Monitoring and Review Debt management is an ongoing process that requires continuous monitoring and periodic review. Regular Financial Reviews: Schedule regular reviews of your financial statements, including balance sheets, income statements, and cash flow statements. Key Performance Indicators (KPIs): Monitor KPIs related to debt, such as debt-to-equity ratio, debt service coverage ratio, and interest coverage ratio. Adjust Strategies: Be prepared to adjust your debt management strategies as market conditions, business performance, or interest rates change. Conclusion Effective debt management is not about avoiding debt entirely, but about using it strategically and responsibly to fuel business growth while maintaining financial stability. By understanding your debt, implementing proactive strategies, and continuously monitoring your financial health, businesses can navigate the complexities of debt and achieve sustainable success.
Raising Capital: Funding Options for Your Business Raising capital is a crucial step for businesses looking to grow, innovate, or simply sustain operations. Understanding the diverse funding options available can significantly impact a business's trajectory. This document outlines various avenues for securing capital, providing insights into their characteristics and suitability for different business needs. 1. Equity Financing Equity financing involves selling a portion of your company's ownership in exchange for cash. This method can provide substantial capital without the burden of debt repayment, but it means diluting ownership and sharing future profits. Types of Equity Financing Angel Investors: High-net-worth individuals who provide financial backing for small startups or entrepreneurs, usually in exchange for ownership equity. They often offer valuable mentorship and industry connections. Venture Capital (VC): Funds managed by professional investors that invest in companies with high growth potential. VCs typically invest larger sums than angel investors and take a more active role in the company's strategic direction. Crowdfunding: Raising small amounts of capital from a large number of individuals, typically through online platforms. This can be a good option for businesses with a strong consumer appeal and a compelling story. Private Equity: Firms that invest in established companies that are not publicly traded. They often seek to improve the company's performance and then sell it for a profit. Initial Public Offering (IPO): The first time a private company offers its shares to the public on a stock exchange. This allows for significant capital raising but comes with extensive regulatory requirements and public scrutiny. 2. Debt Financing Debt financing involves borrowing money that must be repaid, typically with interest, over a specified period. This method allows businesses to retain full ownership but adds the responsibility of debt repayment. Types of Debt Financing Bank Loans: Traditional loans from commercial banks. These can include term loans, lines of credit, and asset-backed loans. Eligibility often depends on the business's creditworthiness, cash flow, and collateral. Business Credit Cards: While convenient for short-term needs, business credit cards typically carry high interest rates and should be used cautiously for capital raising. Mezzanine Financing: A hybrid of debt and equity financing, typically used for expansion or acquisitions. It often involves subordinated debt that can be converted into equity under certain conditions. Bonds: Debt securities issued by companies to raise capital. Investors who buy bonds essentially lend money to the company in exchange for regular interest payments. This is usually an option for larger, more established companies. 3. Alternative Funding Options Beyond traditional equity and debt, several alternative funding options cater to specific business needs and stages. Grants: Non-repayable funds provided by government agencies, foundations, or corporations for specific purposes, such as research and development or community projects. Eligibility criteria are often strict. Bootstrapping: Funding a business with personal savings, early sales revenue, and minimal external capital. This approach allows entrepreneurs to maintain full control but can limit the pace of growth. Revenue-Based Financing: Investors provide capital in exchange for a percentage of the company's future revenue until a certain multiple of the investment is repaid. This is often suitable for businesses with predictable recurring revenue. Crowdlending/P2P Lending: Similar to crowdfunding, but individuals lend money to businesses with the expectation of repayment and interest, often through online platforms. Factoring/Invoice Financing: Selling accounts receivable (invoices) to a third party at a discount to get immediate cash. This is a short-term solution for managing cash flow. Conclusion Choosing the right funding option depends on various factors, including your business stage, growth potential, risk tolerance, and desired level of control. It is advisable to thoroughly research each option, consult with financial advisors, and create a comprehensive business plan to present to potential investors or lenders.
Analysing Financial Statements: What They Tell You About Your Business
