For the past few weeks, we’ve been talking about the importance of forecasting, and why it’s so vital for the survival of all businesses. Forecasting has the power to dispel uncertainty, help recalibrate strategy, and surface the data points business owners and accountants need to make the right decisions. By now, most owners and advisors are aware of what forecasting can do—but what does forecasting look like in practice?
To shed some light on the matter, our North American Senior Account Manager, Patrick Stern, hosted a webinar, with guest speakers Rafael Skovron, Xero Enterprise Accounts Director, and Marie Phillips, Founder and CEO of Connected Accounting. They discussed the realities of operation for clients in the restaurant industry, and walked through a demo forecast for a fictitious restaurant in Vail, Colorado.
To listen to the full webinar, click here.
Optimise cashflow through expense management
A PR firm client liaised with Connected Accounting as soon as the crisis began to hit, to discuss their strategy for getting through a predicted slump in revenue. Cloud software adoption meant that Connected Accounting had all the data immediately on hand, and could create a forecast immediately.
"You can do it dirty, by hand, with excel, but that takes so much time,” says Marie Phillips. “When everything's already in the cloud and you have it in Xero, it's so easy to link it to tools like Spotlight. And once you're in Spotlight you can do multiple versions: let's keep business running as usual, let's look at a best case scenario, and let's look at the worst case scenario."
The worst case scenario for this PR firm was that partners would receive no distribution whatsoever. However, Connected Accounting managed to chart a different path for the company, by carefully considering outgoing costs, and prioritising their spending. The company ultimately decided that 401(k) matching was important to them, as well as retaining all their employees. Their solution was to cut employee pay by 20%, pause all commission, and cut partner distribution by 50%.
Although this was a difficult decision to make, it meant that there were no layoffs, and no furloughs.
Pivot offerings to take advantage of a changing world
The restaurant industry is one of many that has been hit hard by regional lockdown rules. Many businesses have had to close their doors, and have subsequently seen a drop in revenue, but this isn’t the case across the board.
“We have two Popeyes franchisees [as clients],” says Phillips, “and they've had some of their best numbers [during this rough period]. Everybody loves comfort food.”
Their success, she says, is down to the fact that their business model included pick-up and drive-thru, meaning that they could continue operating under local lockdown regulations.
Another successful client is a cloud kitchen, who lease fully equipped shared kitchen spaces to restaurants to create delivery-only meals. This reduces the upfront cost of rent, while still allowing businesses to be operational without a sit-down experience. During the crisis, Cloud Kitchen partnered with local hospitals to deliver food to frontline workers, boosting the brands of their restaurant partners, and providing a much-welcomed service.
Shared kitchen spaces to create delivery-only meals
Innovate, and boost your brand
Mitigating a drop in revenue requires some creativity on the part of businesses. For example, restaurants have been able to sustain their businesses during periods of slump by selling gift certificates that increase in value after their local lockdowns are lifted. Another such innovation has been the sale of ingredients along with services—for her birthday, Marie Phillips received a cake that was sold in tandem with toilet paper!
Mealbox subscriptions are another such idea to boost revenue. The nature of the crisis has forced families to start cooking at home more, while being simultaneously reluctant to visit their local supermarket. This gap can be plugged by a service that regularly delivers ingredients and recipes directly to households. Many restaurants have begun offering instructions for home-cooked versions of their most popular dishes, and there’s no reason why the demand for this will not continue once things begin to pick up again.
The move from in-house dining to delivery services means that restaurants are now receiving more information than ever about their client base. Delivery addresses effectively let businesses know where their clients live, allowing them to plan effective delivery routes, and perhaps distribute flyers and offers. If anyone shows interest in your brand, keep them in the loop through an email newsletter. Remember to thank every client who supports you—personalised communication builds brand loyalty, and there’s no substitute for that.
To practically illustrate the power of forecasting, the webinar concluded with a scenario and forecasting demonstration, with Rafael Skovron with Xero, and Patrick Stern with Spotlight Reporting. For more information on our forecasting tool, check out the video below.
You can watch the full webinar here. The forecasting demonstration begins at 31:39.