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February 14, 2018
By Paul Gainford at RMT Accountants & Business Advisors Ltd
Given the North East’s enduring reputation as a party destination, it’s fair to say that the leisure sector has held an enduringly important position within the wider regional economy.
It’s also fair to say that our pub and restaurant businesses, along with their peers everywhere else in the UK, have suffered disproportionately over the five or six years, with disposable incomes dropping dramatically as the recession bit and revenues shrinking appreciably as a result.
The improvement in the economy over the last 12 months has begun to provide a little respite, and while no-one in these industries is exactly popping the champagne corks quite yet, recent research from insolvency trade body R3 suggest that those fabled green shoots of recovery are beginning to become a little more robust as each month passes.
The number of active pub businesses in the North East has increased by around ten per cent over the last eight months, from 488 in November last year to 533 in June, with the proportion of them facing a higher than average risk of insolvency falling by over 3.5% between May and June.
Similarly, the equivalent R3 research into the restaurant sector found an increase of almost 100 restaurant businesses over the same period (1,126 to 1,218), and a similar fall in the proportion of them facing a higher than average risk of going bust.
There’s clearly a degree of confidence amongst people in this industry that they can make new ventures commercially successful, so if this is an area that you’re considering, what are the key points to remember on the commercial side before you throw your doors open to the paying public?
First of all, as with any business venture, make sure you have done your homework. Invest time in knowing who your customers, competitors and suppliers are and what they’re doing, try to give yourself clear points of differentiation with rival venues.
Surround yourself with good people, both internally and externally. Successful entrepreneurs recognise that they can’t do everything themselves, and bring in specialist financial and legal help early in any project will pay dividends later on.
Don’t under-estimate the importance of marketing, and unless you’re (genuinely) a marketing expert, seek outside advice on the best channels to use to reach your target audiences.
Ensure that you have both timely and reliable management information available, as you can’t really know if the decisions you’re making on running the business are the right ones if you don’t, and set yourself firm budget targets, so you can monitor immediately and accurately how the business is operating.
Finally, make sure you adhere to the most important cliché in business – cash is king – and ensure your management systems provide you with the information you need to manage your cashflow properly.
Paul Gainford heads up RMT Accountants& Business Advisors’ corporate team, which acts for a significant number of operators in the region.