The Importance of a Budget

 In 1. David Scott Peters, budget
Have you ever said this?

“I don’t need a restaurant budget. I know my numbers.”

You certainly aren’t the first restaurant owner to say it. And for some reason “budget” is a bad word for many restaurant owners. But you have to plan to be profitable and you can’t plan without a restaurant budget.

Some time ago, I went on a single-day consult with two team members to a restaurant that had a retail shop and motel attached to it. The overall business was struggling, and I really wanted to over deliver and show them how to bring everything into systems for success.

It was a lot to get done in one day. Two of us spent a good part of one day combing over numbers to create an accurate budget to be used as their plan for success. This was not a typical budget because of the three revenue centers. While we were doing that, the other member of our team was working on bar systems and training. It was a whirlwind.

Toward the end of our day, about 11 p.m., I was reviewing with the owner all that we had done on our one-day visit. I was feeling very good that we over delivered, until the owner said, “I don’t know why you spent all of that time on the budget. I don’t need a budget. I know my numbers.”

I thought I was going to explode! I calmly relayed the importance of a budget. Why it was critical to their success, etc. But the owner still thought it was not necessary. So while we reviewed the budget we put together, the owner insisted, “No that’s wrong. We have a 28 percent food cost.” I tried to explain that’s not what the numbers showed, but again, I was told we were wrong.

To demonstrate that the numbers don’t lie, I went one month after another and showed that the P&Ls showed 32 percent, 34 percent, 36 percent… there was not one month in the last 12 that was as low as 28 percent.

This exercise was not to prove being right or wrong, but rather the importance of really knowing your numbers. If you measure your numbers against your budget at least monthly, you can make changes to your business that WILL make you more money.

I have created a free special report all about budgeting: Erase Your Fear of Budgets Forever. Request a copy of this free report with step-by-step instructions for creating a budget here.

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