All other information in a budget is known information — product costs should be available from your menu costings, utilities from your history, credit card commission from your history and your discount rates and so on. As mentioned, the only thing that you really don’t know are your sales. Once your budget for the year is complete, take a look at the profit and see if you are happy with it. If you are not, that is the time to address it before the year starts. Identify the areas to make adjustments to the budget — can we save money on linens? Are front of house labour costs a little high — can we tweak those down? What about food costs? Paper supplies seem really high, how can we do things differently?

Here are some key notes to developing a budget:

·    Do a month-to-month budget for the entire year (or even better, do it in four-week Monday to Sunday periods — a little tougher but more useful for review).

·    Make it as detailed as you can (within reason) – having good detailed budget allows you to spot areas of opportunity quickly and makes necessary operational adjustments easier to identify throughout the year.

·    Adjust budgets during the year if information changes dramatically (i.e., if utility rates suddenly get hiked making a large difference to that expense, then make the adjustment — there is no point in adhering to a budget that is not realistic).

For a sample of the detailed style budgets that we use for our clients, go to www.thefifteengroup.com/samplebudget.pdf

When you go through a budget process accurately and in detailed fashion, you often realize that you should be making a lot more profit than you are. I have had a number of clients say to us, “There is no way we can do that amount of profit,” or “Is that really what we should be making?”

Budgeting is not something that everyone can do – you may not be a “numbers” person and may find budgeting challenging. If that is the case, then you should get assistance from a professional to get it done. You have to remember that in business, profit is measured as a number – and it is calculated by subtracting a group of numbers from another group of numbers. That’s a whole lot of numbers -- if you don’t have a clear picture of those numbers, you won’t be able to see the forest for the trees.
When done right, though, it gives you a clear picture of the numbers and gives you a clear directions to get to your desired profit – there should be no disappointments when you arrive at year-end.

About the author:

David Hopkins is President and Founder of The Fifteen Group Inc., a leader in restaurant profit maximization.  With offices in Toronto and Vancouver, The Fifteen Group has helped over 150 restaurants achieve their profit goals. Visit, www.thefifteengroup.com, 1-866-483-4414