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The reality of starting a F&B Company

Summary

Annually in Singapore, a conservative average of 600 and new F&B companies begin and almost the exact same number of shutdowns. How is this happening and these new companies, can they become less inclined to be the next shut down? […]

Annually in Singapore, a conservative average of 600 and new F&B companies begin and almost the exact same number of shutdowns.

How is this happening and these new companies, can they become less inclined to be the next shut down?

Licensed Food Establishments – Food Shops in Singapore

The majority of us regard F&B company is a fast way to generate money as you pay your meal only when you have your food. So it’s money business and no outstanding debt compared to other company.

Or you’re a food lover who just enthusiastic about food, or perhaps you and a couple of friends have some new ideas, have cash, so let’s make it happen. You hire the appropriate people, open a shop and you’re there, a new restaurant of your own!

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Honestly, that’s the perfect way to fail.

Let’s rewind a few steps and take a look at your preparation before opening the store. And let’s have a reality check as below,

  • Have you ever analyzed the viability of your idea or concept?
  • Have you guessed the CAPEX and OPEX?
  • How long can you maintain with your investment/cash flow?
  • What are the menu and the source of the ingredients

The list goes on.

But the majority of the F&B startup may bypass the step to check the viability of the ideas or concept; rather, their projection is base on success stories or gossip of their”successful people” or to entice investors with no understanding the failing risk.

During my career in F&B, I’ve seen the vast majority of investments or proposal which has severely undermined the pitfall of unforeseen circumstances that could happen and perturb the first financial planning to sustain for at lease the leasing period agree with the landlord. I can name a few such as change of passed by footfall traffics, change of preference due to news or media, staffing issue, hygiene issue, insufficient or no IT systems like Point of sale to document earnings.

It’s unrealistic to rely on sales earnings to deposit your monthly cost, particularly in the first year once the restaurant is brand new. Your restaurant manager is hoping to construct a rapport with clients and suppliers, streamline the restaurant workflow and train the staff up. You’ll require far more resources than you planned, and when the cash ran out, everything will fall apart, just like Murphy’s Law.

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From the F&B Business, the guideline for a single shop to be profitable, its thought to have the following cost percentages to have an adequate profit.

Lease + Labour + Cost of Goods Sold + Fix Cost + Variable Cost = 90%

Gain = 10%

So you may ask.

“That much money is going out, but just that tiny profit?”

Yeah exactly sales revenue isn’t profit, and it is a money collection company, not a money churning business.

Real planning is vital not to get rid of money and closed down on your first business model, followed by opening the umbrella through growth. That’s where the profit lies.

So now begs the question: Is the idea structure and concentrated place viable to accomplish the above?

If you do not have that answer, it’s time to reconsider your preparation until too late and danger all of your hard-won money evaporate back into the market.

Good Luck and reach out!

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