Wise Procurement Decisions Can Make The Difference Between Gross Profit and No Profit
Following on from previous blogs on mothballing a business and redesigning on a budget, Pete Seymour follows up with practical tips that operators can be employing right now to both save and make money, even though their businesses may be closed.
Having looked at hundreds of businesses with a wide range of margins, it’s clear that additional profits can be produced from the same turnover. We would normally expect averages of around 55-65% for alcohol (tied units are restricted to around 55%), and 60-65% for food. Yet I have witnessed GP of up to 72% for liquor, 75% for food and 85%+ for accommodation. With that in mind, if there is a way to increase your margin by between five and 15%, would you not want to investigate it?
If your business is spending a significant sum on goods and stock, then the major procurement specialists such as Pelican Procurement can help. However, if you feel your business’s size does not warrant that type of set-up to facilitate purchasing then it can in some instances be better to handle this yourself. However, it’s worth bearing in mind that aside from the obvious additional effort, time and attention required to oversee such a process, it can also lead to lower margins as owner will not be in full control of prices and sourcing.
During a recent chat with an longstanding client, he told me about a new procurement service he had created for small restaurants, cafes and public houses.
Launched by Stephen Scurr during the COVID crisis, Orders Made Simple was created to help businesses to save on average around 15% on stock and to give back to operators around 3.5hrs per week in man hours. One particular operator has saved an astonishing 36% on overall stock ordering, while another saved £3,000 a year on staff costs as they can now do everything via their smartphone.
In a year that has had such a devastating effect on our personal lives and businesses, revisiting your procurement practices is a great way to increase profitability while also saving time.
Pete Seymour is Head of Licensed Trade and Leisure Agency at Graham & Sibbald. Their team of specialist chartered surveyors work extensively in the Scottish hospitality sector, advising and assisting clients on all aspects of commercial property transactions.
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