9 Tips to Your Successful Start Up Business
Yesterday I had an interesting conversation with a chef. She studied in a culinary school here in Singapore and when she had completed her diploma, had went first to Thailand and then to South Korea to work under other chefs. She now has an interesting mix of culinary skills – Western, Local, Thai and Korean. She has come back to Singapore for personal reasons, but also with hopes to net a good job in F&B. She shared that while she is currently working in a reasonably-well patronised restaurant (even during COVID-19, the restaurant is seeing healthy patronage), she laments that she is unable to cook the dishes that she likes since the restaurant has a well-established menu, and she finds her creativity stifled. More importantly, she feels – and I agree – that she is underpaid. For someone of her talent – albeit implied – and experience, she should be paid more than the $4,600 she is getting at this moment. I asked her why she had not gone out to secure a better-paying job, but she laments that the market is very weak now, and no restaurant is hiring a chef at higher salaries. But her greatest desire is not to work for someone, it is to open her own restaurant business. (Of course, she added she will do that after she wins the Toto – a lottery in Singapore!)
Many people desire to start their own business, but few actually do it. Of the few that do, many of them fall prey to baseline statistics; namely, that 50% to 75% of the business start-ups (which includes tech start-ups) fail within the first 5 years of operation; and of those that survive, another 50% to 75% of them will fail in the next 5 years. So I told her if she wanted to start her own restaurant – which I laud – then she needs to bear these few things in mind (for those of you who think the advice is only for those who want to start a restaurant business, think again. It is actually for ALL types of business, just that the context is different. So, if you are thinking of setting up a business too – or have nothing better to do - please read on):
1. Know your customer Who are you targeting? This is a very important decision. If you decide to go fine-dining, then you are only targeting those who have means, and that also means that the number of covers per day is a lot fewer than a mid-entry restaurant. It also means there is heavy investment in this – of décor, of service, of menu, of quality. On the other end, if you were targeting the neighbourhood customers, then your start-up investment is less but you want to ensure that you are at a food court or coffeeshop that has high footfall. So, you need to know who you are targeting, what they want, and then position yourself to offer that. (PS: I have heard so many times from would-be business owners saying, “We have a product that is far better than Facebook! So if we just get 1%.....” That does not work! If you want to have a successful business, you need to select a target market, and be the BEST in your target!)
2. Good, sustainable ingredients What makes people come back to a restaurant? Good quality food at an affordable price (we shall discuss price next). To ensure that you have good quality, you need to source the best and freshest ingredients in a sustainable manner. Either you go to a third-party that does the sourcing for you (and when you do that, make sure that your supplier practices multi-sourcing so that your supply chain is not affected when one market is down), or you source it yourself, especially if you know good producers, or wholesalers. Always ensure that you know the quality of ingredients that is coming to your restaurant and ensure that you are consistently supplied that. This requires that you establish a good relationship with your suppliers.
3. Price it right Pricing is such a subjective thing. It does not just cover the cost of the ingredients and your labour, but it also prices in the ambience. Restaurants that sit by the beach with a very nice scenery of the ships or islands will price the view into their dishes. Going back to décor and service, if you have a high-end location with a very chic décor, then you price them into your dishes as well. Ultimately, your price must reflect the promise of a total customer experience. And, of course, you need to deliver on what your price promises! 4. Know your competition, know the market This is another key consideration. You have to know what your direct competitors are charging and then add or subtract from their prices as you see fit. The different factors that affect pricing as discussed earlier notwithstanding, you have to be mindful of what the market is trading at, especially if yours is more-or-less a commodity. For example, if you cook a mean Fried Hokkien Mee, you got to expect that each plate you sell is not more than $5. Yes, you can push it to $6.50 if you use unique ingredients like tiger prawns instead of tiny shrimps, but there is a limit to how much you can charge for a plate simply because there are many Fried Hokkien Mee sellers in Singapore, and there is an expectation that a medium-side plate of it will cost $4 to $5. Nobody will pay $10 for a normal plate of Fried Hokkien Mee.
5. Pay your suppliers on time I mentioned having a good relationship with your suppliers earlier and the best – and perhaps only – way to establish that, is to pay them on time and in full. Sure, you can negotiate for payment terms and for the best price, but once you got your deal, you MUST pay on time. Once you are a good paymaster, they will look out for the best ingredients for you, since they know their effort will be rewarded by full payment on time. And every now and then, treat them to your delicious meal with their ingredients. This cements a great relationship. And later, when you suddenly have some cashflow issues (and it is always a “when” and not an “if”), they would be more inclined to help out. If you view your suppliers as people out to “cheat” you, or to make money off you, very soon you will have no suppliers. And that means no ingredients. And that means no business.
6. Consistent, high quality, every time
If you are running a restaurant, you need to have a fixed menu. It does not have to be an extensive one; but it cannot change a lot. Sure, you can have a menu refresh every 5 years or so, but you cannot keep changing your menu because you want to create a loyal following who know where they can get their menu-fix. Changing your menu often creates inconsistency, and hence, no loyal customers. Once you have fixed your menu, work to deliver consistent high quality, day in and day out. Quality and consistency are again key ingredients (if you will) of a successful restaurant business – indeed, ANY business!
7. Create a loyal following In the age of social media, you cannot be without a following. Create your presence, create loyalty, and talk to your loyal fans. In fact, in the words of Ken Blanchard, you want to create raving fans of your loyal customers. Help them spread the word for you. Give them special recognition. And remember them. The more they feel special, the more they will come back to your restaurant. So, in your downtime, work the social media. Create great food pics that will speak of your passion for the food, your culinary skills and help your raving fans rave about you.
8. Manage your cash and inventory flow As they say, cash is king. Fortunately, the restaurant business is largely a cash business; so, as long as you manage it well, it can be quite sustainable. This means that you should never over-extend your payments. Don’t lock yourself into a long lease just to keep your rent lower. And, depending on your restaurant operations, you might need wait staff as you would need kitchen staff; so you have to hire just the right number at the right wage levels. You might also operate a liquor license which requires you to keep stock. All these require you to manage these like a good ballerina or gymnast – it is a fine balancing act. If you keep finding yourself running out of ingredients and rushing to the store to replenish, that will eat into your margins because spot buying of ingredients is expensive. If you find that inventory is standing, it is also a bad sign since all your money is tied up there and there is no cashflow. Hence, inventory and cash managements are crucial in a start-up since there is very little buffer. Even if you have deep pockets, you cannot allow the little costs to eat into your margin. In this case, you do have to sweat the small stuff! 9. Start small Speaking of small stuff, my final advice to this young lady (I cannot imagine that she is only 29 years old!) is to start small. Create her brand, create her menu, create her processes and test them out in a small outlet. This allows her to keep her costs low. Just look at the founder of Collins; he went from being a food hawker to the owner of a large Western food chain in Singapore. With just a humble investment of $70,000 which he broke even in a year, he is now turning in in excess of $25M annually. Starting a business is a process of getting the right formula through a lot of trial and error. If you enter into any business with the expectation of making millions in the first few years, you are in the wrong business! Every business needs to start small, and grow along the way.
This advice is not just for restaurants
I hope you realise that the advice I gave to the young lady is the same for all businesses. Some businesses will have less of one and more of another; some may not have any suppliers; others may not need fresh ingredients. Yet, the advice is the same for all businesses. Know your customers and what they need, understand the market and how it is trading, price your product based on what the customer is willing to pay for the benefits that you provide, take care that you diversify your supply chain and pay your suppliers on time, manage your cashflow well, and always reach out to them on social media or any other way - like this blog! Finally, always start small and work your way up. Rome was not built in a day, and neither will your business.
Build your growth mindset first
I am a proponent of entrepreneurship as a means of career fluency even though I am aware that not everyone is cut out to be an entrepreneur. To be successful in any business endeavour, you cannot take yourself too seriously and you must always embrace the growth mindset. While it does not mean that having the growth mindset will make you a successful business owner, it is for sure that one who has a fixed mindset would be part of the baseline statistic. So perhaps before you start out on your business-building journey, you might like to start building your growth mindset. Let me know if you need help in this area because we have a proprietary assessment tool to accurately identify your preferred mindset, and coaches to help you develop the growth mindset. And if you have ANY question whatsoever on building a successful business, please drop me a line. I can offer you some invaluable perspectives.
Here’s to your success!