Dave, I need to trim costs considerably in just about every facet of my business. Where do I start? I can’t afford to cut quality of my product, I know, but I can’t afford not to make cuts everywhere else.
San Diego, California
Peter, I feel your pain. And I’m glad you know right off the top that the one area you can’t touch is your quality. Substitute a lesser quality cheese or meat topping, and you will suffer for it immensely.
I have an outline I call “Death by a Thousand Cuts.” Sometimes, there are areas where the fat needs to be trimmed. But I see plenty of operations get a little too happy with the knife and do permanent damage (or worse).
Run down this checklist and see what improvements can be made off of it before you start slashing everything in the building.
- Plug all holes in cash handling procedures. Intentional and unintentional cash shortages are avoidable. Institute a zero tolerance on cash shortage policy.
- Portion control your cheese.
- Become a menu-engineering expert. You must know which menu items are producing the most and least profitability. Promote the stars.
- Know your exact entrée costs.
- Examine a profit and loss statement (P&L) weekly.
- Re-price and re-print your menus and flyers at least twice a year. Quarterly is even better.
- Get an energy audit performed by your utility provider.
- Shop your insurance policies. You are most likely underinsured. In fact, it’s quite possible that you are one incident away from financial ruin.
- Set up a forced savings plan. Put what you can each week from checking into savings.
- Explore catering as an additional revenue source.
- Get yourself out of the “employee owner” routine and understand your position as CEO of your pizza company. In other words, work on your business, not in it.
- Think in percentages: food cost; labor cost; prime cost; occupancy cost; income before taxes depreciation and amortization.
- Develop a marketing strategy and a marketing budget.
- Decide, right now, once and for all, whether you’re going to be the lowest price guy in your town or the highest priced, highest quality producer in your town. Get off the fence.
- Try to negotiate a prime vendor agreement with your distributors. In this type of agreement, you are put on a cost-plus pricing model and you get the right to audit prices from time to time. Just make sure you’re purchasing at least 85 percent of your food and supplies — if not a higher percentage — from the supplier with which you are going to enter into this agreement.
- Lastly, over-train and cross-train your staff in order to maximize their contributions to your company.
Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. monthly contributor to Pizza Today.