Accountants

There is an alarming increase in the amount of accountants offering actual operating advice in hospitality businesses with no hospitality back ground or understanding of the operational side of a very complex industry.

My example is I sat in on a meeting with a new inexperienced operator and her accountant, she was quite cashed up but the money had come from a completely different world, mining actually. She had decided to buy a hospitality company that owned a number of outlets as well as an importing business and a few national supply agreements as well, a tidy little company. Her idea was to further develop the importing business and let the outlets provide some cash flow along the way. Sound thinking  thought.

Her accountant advised her to get out of the outlets which where facility management deals, rather large canteens as they where costing her far too much money and did not represent sound business in hospitality standards, in his words almost bleeding the business dry. He explained to her that the outlets or restaurants should be operating on a third and a third and a third. One third food cost, one third labor and overheads and one third for her, where the other 10% went I am not sure. This lady was devastated and her first comment was, call my solicitor I have been cheated. Wow this was going to be fun as I had recommended the deal to both her and her husband.

Once the emotion had settled I then explained to the accountant that he was way out of line in making ill-informed statements about things he clearly had no understanding of. The outlets that the lady had acquired where actually quite sound businesses, they attracted no rent, no utilities and even though they where operating with a total wage cost of 50% and a food cost of 34% it did yield a clear profit 16%. Not many restaurants achieving that I can tell you. Add that amount of profit over four outlets and business then looked quite good.

The outlets also consumed some of the imported product which then gave the distributors some initial pull through which ensured they were not stuck with stock, all in all quite a clever operation and business model. So my message here is clear, your everyday tax accountant is a very helpful guy, they know the tax laws and can interpret your figures to keep the tax man happy, give you a clear indication of how your financial side of the business is travelling and also assist you in keeping you out of the big house. Be careful though be sure to only extract the best information from them that their skill set provides and talk to hospitality experts about hospitality matters. Each to there own