You need to plan the exterior, interior, and overall motif.
It goes without saying that you need to plan an incredible menu.
However, just as important, you need to conduct thorough financial planning, too. If you don’t project your restaurant’s revenue and expenses, no amount of success will keep it open for long.
The 4 Features of Your Restaurant’s Financial Plan
While the primary components of your restaurant’s financial plan will be sales and expenses, we can divide those up into four helpful subcategories.
Obviously, sales are where your money comes from – the single-most important factor to keeping your restaurant open.
Based on your menu and estimated daily volume of customers, you should be able to calculate how much your restaurant will bring in. Of course, you want to update this when the real figures arrive.
As time goes on, make sure you track these numbers and compare them to the same period of the prior year, too. You want to get a sense for when your downtimes are in the year and when you see the most sales.
Likewise, keep a running tally of average customer counts and check size, so you can adjust your prices if necessary.
2. Prime Cost
Your restaurant’s prime cost covers the total cost of your sales and all of your payroll costs. These include:
- Payroll taxes
- Workers compensation
There may also be some expenses unique to your operation.
If you’re running a table-service restaurant, the rule of thumb is that your prime costs should not exceed 65% of your total sales. This will still leave you with plenty of room for a healthy net income.
3. Operating Income
You may also hear this referred to as your restaurant’s “controllable income.” This number encompasses those expenses that management have control over. That makes this a very important number because it serves as a reliable benchmark for assessing how effective management is at running your restaurant in New Mexico.
4. Net Income
After you’ve paid all of your restaurant’s expenses, you will be left with your net income.
The reason this number is important probably doesn’t mean much of an explanation.
That said, it’s still worth comparing your net income to that of prior periods (just like with sales). You want to get a sense for if you’re gaining or losing ground. Doing this could mean catching a prime opportunity to right the ship or double-down on what’s clearly working.
You should also compare your net income with the total amount you invested into your restaurant. This will give you your ROI (Return on Investment). In short, that will tell you if you’re making your money back and is an extremely important metric if you hope to entice investors into future restaurants.
Need Help Creating Your Restaurant’s Financial Plan?
Your restaurant’s financial plan is vital to its future, so if you’d like some extra help creating yours, the New Mexico Restaurant Association is at your service. Join us today and you’ll have all the resources you need to get your restaurant off the ground, take it to the next level, and turn it into the next must-visit dining destination in New Mexico.