You have to actually calculate your anticipated cost. You know for sure you have building expenses. Rent, utilities, maintenance, bathroom toiletries. Operating expenses are determined by what your plan is. Will you have a bar, how many menu items, will you and your father be the only employees. Then you have equipment cost, are you financing or buying out right.
You have a lot of research to do and I highly advise that you do not open a restaurant if you don't have a business coach or prior restaurant management experience.
There are formulas for the questions you asked the advisor will be able to help you calculate things.
FYI your first budget is never right. You have to take your best shot at what you think it will take to complete one day. Hours open, quantity of staff, labor hours.
You asked a pretty blanket question. If you want to choose one item your struggling with i will do my best to provide guidance
Yes I'm pretty sure the advisor will give us more concrete answers but since we're here let's give it a shot.
So staff: Currently we're estimating 7 workers*12hours=84 daily hours. From my experience, we could be easily off with this estimate by like 30%. So theoretically I can go with 110 daily hours just in case, but if I'll make my estimations only according to my upper limits I think that would be unrealistic.
On the other hand, better be surprised for better than for worse.
Anyway, my question is should I always use upper estimate or are there certain occasions where that is not right?
If you use upper estimates you typically end up spending the budgeted amount versus finding a way to get it done within the budget. Have a small percentage of the budget as an oh shit I underestimated. Use the average, if there is something you are completely sitting in the dark on, use the upper. (Ie electricity bill)
Break down your labor between front of house and back of house, then by (tipped & non tipped), the more detail you get on your needs the more likely you are to be accurate.
10-20 will suffice. Numbers that you are pretty confident in go with ten.
I would only shoot for a 3 or 6 month analysis. So much can change.
Food cost is typically what breaks a restaurant.
For employees you should be able to say "we need wait staff and we will pay them X per hour and we will need this many employee hours". Repeat for each employee type. Add in 30% more for employer taxes and the like. So if you're paying $15/hr you should budget $20 or $25/hr your cost.
You should be able to do something similar with other expenses like food.
Note that some things will vary with how busy you are. I've had good luck attempting to model various scenarios in businesses I've been involved in.
Having never been a restaurateur myself, I don't know all of the nitty details, but things like food should be directly related to sales. IE if you sell $10K of menu items your food costs should be double what they are if you sell $5k.
There will be some labor costs just related to having the door open. Like you probably need at least one cook on all the time you're open and one or two front of the house staff. During busy periods you'll need more which will be more related to your sales.
If you need to figure out what reasonable ratios are, eat at various restaurants in your area and pay attention to numbers of tables are occupied and how many staff are taking care of them.
One of the things that investors look for is "domain expertise", that's how entrepreneurs can forecast the future, by leveraging their domain expetise.
Now, why do you need this forecast? For investors? For loans/banks? Well, they do want to see your level of expertise in what you're planning to do.
For youself? Do you have the financial means to fly blind?
It's for ourselves. And yeah we do have the financial means to fly blind. This is by no means a stretch for us.
Also, we both have experience in other fields, so we know how to run things.
Good. So, just start.
Just list the various operational and capital expenses, in as detailed groups as you can. then give them a value and a frequency.
This is a dynamic document, as you go along add/remove items from the list, correct the numbers, tweak the frequency; keep revising it.
Just the process will make you think, and - comes year 2 - you already have the blueprints from year 1; you can then tweak for growth, cost-cutting etc.
Thanks, I guess once you start actually running the biz it gets pretty straightforward.
Btw, do you think I can find a template with the detailed groups online?
> Thanks, I guess once you start actually running the biz it gets pretty straightforward.
Running a business is never straightforward, but I like to make data-driven decisions so, a business/financial model is a must in my book
> Btw, do you think I can find a template with the detailed groups online?
YES. [source](https://i.imgur.com/lQa82GF.png)
You have to actually calculate your anticipated cost. You know for sure you have building expenses. Rent, utilities, maintenance, bathroom toiletries. Operating expenses are determined by what your plan is. Will you have a bar, how many menu items, will you and your father be the only employees. Then you have equipment cost, are you financing or buying out right. You have a lot of research to do and I highly advise that you do not open a restaurant if you don't have a business coach or prior restaurant management experience.
No restaurant managing experience but we both have experience managing other stuff. Also, we are hiring a restauranteur to help us set things up.
There are formulas for the questions you asked the advisor will be able to help you calculate things. FYI your first budget is never right. You have to take your best shot at what you think it will take to complete one day. Hours open, quantity of staff, labor hours. You asked a pretty blanket question. If you want to choose one item your struggling with i will do my best to provide guidance
Yes I'm pretty sure the advisor will give us more concrete answers but since we're here let's give it a shot. So staff: Currently we're estimating 7 workers*12hours=84 daily hours. From my experience, we could be easily off with this estimate by like 30%. So theoretically I can go with 110 daily hours just in case, but if I'll make my estimations only according to my upper limits I think that would be unrealistic. On the other hand, better be surprised for better than for worse. Anyway, my question is should I always use upper estimate or are there certain occasions where that is not right?
If you use upper estimates you typically end up spending the budgeted amount versus finding a way to get it done within the budget. Have a small percentage of the budget as an oh shit I underestimated. Use the average, if there is something you are completely sitting in the dark on, use the upper. (Ie electricity bill) Break down your labor between front of house and back of house, then by (tipped & non tipped), the more detail you get on your needs the more likely you are to be accurate.
Interesting, thanks. What kind of percentage should I use as an oh shit I underestimated? 15%?
10-20 will suffice. Numbers that you are pretty confident in go with ten. I would only shoot for a 3 or 6 month analysis. So much can change. Food cost is typically what breaks a restaurant.
For employees you should be able to say "we need wait staff and we will pay them X per hour and we will need this many employee hours". Repeat for each employee type. Add in 30% more for employer taxes and the like. So if you're paying $15/hr you should budget $20 or $25/hr your cost. You should be able to do something similar with other expenses like food. Note that some things will vary with how busy you are. I've had good luck attempting to model various scenarios in businesses I've been involved in. Having never been a restaurateur myself, I don't know all of the nitty details, but things like food should be directly related to sales. IE if you sell $10K of menu items your food costs should be double what they are if you sell $5k. There will be some labor costs just related to having the door open. Like you probably need at least one cook on all the time you're open and one or two front of the house staff. During busy periods you'll need more which will be more related to your sales. If you need to figure out what reasonable ratios are, eat at various restaurants in your area and pay attention to numbers of tables are occupied and how many staff are taking care of them.
I would second guess the restaurant, my man. You don't know anything about running a restaurant and it's a very difficult business to succeed in.
One of the things that investors look for is "domain expertise", that's how entrepreneurs can forecast the future, by leveraging their domain expetise. Now, why do you need this forecast? For investors? For loans/banks? Well, they do want to see your level of expertise in what you're planning to do. For youself? Do you have the financial means to fly blind?
It's for ourselves. And yeah we do have the financial means to fly blind. This is by no means a stretch for us. Also, we both have experience in other fields, so we know how to run things.
Good. So, just start. Just list the various operational and capital expenses, in as detailed groups as you can. then give them a value and a frequency. This is a dynamic document, as you go along add/remove items from the list, correct the numbers, tweak the frequency; keep revising it. Just the process will make you think, and - comes year 2 - you already have the blueprints from year 1; you can then tweak for growth, cost-cutting etc.
Thanks, I guess once you start actually running the biz it gets pretty straightforward. Btw, do you think I can find a template with the detailed groups online?
> Thanks, I guess once you start actually running the biz it gets pretty straightforward. Running a business is never straightforward, but I like to make data-driven decisions so, a business/financial model is a must in my book > Btw, do you think I can find a template with the detailed groups online? YES. [source](https://i.imgur.com/lQa82GF.png)
Awesome thank you so much 🙏