The following article is by Chris Lane, partner, Kingston Smith LLP and first appeared in Caterer & Hotelkeeper magazine. They have been reprinted with kind permission from the magazine.
19 April 2007
The problem
Justin has been running his French restaurant in a London suburb successful for nearly a year. He has heard that the first three years are crucial for a new business and is looking for guidance on what pitfalls and challenges he should be looking out for over the coming years.
Expert advice
It is generally accepted by business analysts that the first three years of any business's life are the hardest. Whilst Justin’s business appears to have performed well in its first year of operation, he is wise to be cautious. The main issue that Justin needs to watch carefully is his finances.
By monitoring his performance regularly against his original business plan he will be able to quickly identify potential problems and take corrective action. The business plan should be seen as a map for you to follow at all stages during the life of your business. Often outside factors mean that things change and the business plan will need revision. Monitoring your financials will need regular and up-to-date management information. Make sure the management information gives you all the necessary detail in the areas that you need to monitor.
Build a good relationship with your bank by making sure they have timely information as required. Don’t forget that free banking comes to end after your first year in business and therefore you need to understand what the bank charges are going to be and how to minimise them. As you have been trading for a year it may be possible to renegotiate with your suppliers for improved terms. This may simply be more favourable credit terms, but could be greater discounts if you are buying increased amounts. You will also need to think about your annual statutory responsibilities in respect of your accounts and tax returns. Do not leave these to the last minute, as they're also valuable management information.
Even if you are busy it's important to continue your marketing to win new business. Keep in contact with your existing customers and listen to their feedback. This will be valuable information on whether you are satisfying their expectations and could give you new ideas. To achieve all this you need to have a good team working with you. Make sure that once you have a strong team you hang on to them and continue to motivate them. If they are important to the business as a whole, make sure they share in your financial success.
Finally, don't forget about yourself. The early years can mean long hours and a lot of commitment. It can also be great fun, but the long-term success of the business relies on you being healthy. So do not forget to take a holiday and get your work-life balance right.
To do checklist
- Keep tight control of your finances.
- Make sure that you comply with relevant legislation.
- Maintain your marketing for new customers.
- Build and hold on to a successful team.
- Make sure you have the right work-life balance.
Contacts
Chris Lane is a partner at Kingston Smith, one of the UK’s top 20 accountancy firms, and can be contacted for further advice on: 020 7566 4000 or clane@kingstonsmith.co.uk. Chris and his team specialise in providing business and financial advice to the hospitality sector.
