Without delving too deeply into hypotheticals, I’m going to describe a broad method of thinking which may assist in developing strategies to increase profitability in your establishment. As an experienced bar manager, I’ve concluded there are three core internal dimensions or ‘drivers of success’ in the hospitality industry which define and drive a venue forward.
The three core internal dimensions in the hospitality industry are:
- Profitability,
- Productivity, and
- Customer Service.
Profitability is the primary driver of any business, and is achieved by performing a process which delivers a high return-on-investment (ROI). Profitability is basically achieved by ‘selling products at a higher price than purchased’, but in hospitality, operational costs incurred by selling such products takes a large slice of the profit-margin pie. This is where staff culture, productivity and customer service come into play.
A positive staff culture will promote efficient customer service and productivity techniques which therefore increases your establishment’s levels of profit. A positive staff culture is therefore the fundamental building block for greater profitability, through high levels of customer service and productivity.
This approach to profitability can be represented using a pyramid structure – with internal staff culture at the base, customer service and productivity as building blocks for profitability (at the pinnacle). The ‘profitability pyramid’ I am describing is this:
If you wish to squeeze greater profit from your establishment, the enhancement of productivity and customer service serve as strong building blocks for greater profitability (hence their position on the pyramid).
Enhancing productivity is the process of getting as much of something out of as little labour as possible. By enhancing productivity in your establishment, it is possible to save operating costs (by reducing labour cost). Labour cost will be one of the most expensive in your business and it will be surprising how much money you can save by optimising and enhancing your systems. Hopefully you can see the connection:
Money saved on wages is most likely going to end up as more profit in your pocket (or money put back into the business).
There are many techniques to increase productivity in the hospitality industry, some of which I have detailed in the pages to follow. The best way to formulate methods to save on wage costs is to sit down with your key staff (key staff are different to senior staff – key staff are your essential, high performing staff and can range from bar backs to senior managers) and do some brainstorming. You’ll be surprised with the ideas your team synthesizes as a whole. And, the process will build morale amongst your staff.
Thirdly, enhancing your establishment’s customer service approach is the other building block of the profitability pyramid. The financial benefits of enhanced customer service will not be as obvious as enhanced profitability, but as a general hospitality mantra:
It’s cheaper to keep existing customers than find new ones.
If it’s cheaper to keep existing customers, the money you save on marketing (to reach new customers) is most likely going to be profit (or money put back into the business). And by enhancing your customer service techniques, customers are going to be satisfied with your product, which is a great sales catalyst: they are more likely to spend more, and re-visit your venue again and again (to spend more money). Satisfied customers talk to their peers which creates a positive ripple effect for your establishment – word-of-mouth marketing is extremely powerful, and also extremely cost-effective. Internal staff culture is an extremely influential factor in determining the levels of productivity and customer service your staff will deliver.
As the ‘base’ of the profitability pyramid, a positively orientated staff culture will assist your staff in delivering optimal levels of productivity and customer service, which therefore feeds upwards, towards delivering greater profitability.
Look at it this way: if your staff work happily in a consistent, high-morale environment, where they are respected, remunerated correctly and offered training and career progression (basically in an environment with a great internal culture), they are more likely to work harder and more willing and able to offer greater levels of productivity and customer service.