This week, I had quite a disappointing conversation with an operator. He didn’t make that much money and lived above the pub, taking out around £200 a week. We sat down together and went through his numbers after April’s increase in national insurance (NI) and national minimum wage. All of his profit was going to be wiped out; something that many of us will face. Sadly, it feels like the standard at the moment is cost increases are equal to current profits.
Even worse was the fact that he didn’t believe he could do any better at running labour; he did not see any efficiencies in his business. With this mindset, he likely will fail in the next 12 months – it is depressing and sad, but unfortunately, without spurring ourselves to get better, it will be the truth.
I would say that the current environment is probably going to be the hardest we have faced for a while. Was 2008 as bad? Or the smoking ban? At the time, I was working for a big corporate, so perhaps it didn’t quite feel the same. Right now, we need to be our best and at our bravest; we need to try things that we might not like as much.
You’ll be pleased to hear that with some persuasion and encouragement, we did manage to produce a plan with this particular operator to get him that extra £200 a week, so I thought I would share it with you all.
Top of the list was taking on single shifters. I speak about this quite a lot, as it is something I am a big fan of in my own businesses. When you bring on someone for a single shift, they will still fall below the NI thresholds, so you will immediately save 15% of wages, which is around £2 an hour. But single shifters are not just good for cost; they also typically only work when you need them, either seasonally or on a specific day of the week. In my own sites, Sundays close 30% of the sales for the week, so they are vital. We do not need more full-timers; we haven’t got enough hours in the week for them. Part-timers and single shifters are great for effective deployment and cost.
The second thing we focused on was managing to a cost. One of the major opportunities and improvements that many single sites can make is to know what they are planning to spend before the week starts. On-costs of NI, holiday and pensions add up and can vary significantly by employee, so it is becoming increasingly important to know what you are planning to spend before the week starts. As the adage goes, what gets measured gets managed. Once you know what you are going to spend for the week, you address some of the more marginal shifts and start and finish times.
Plus-one management was the next idea we looked at. Many owner-operators run their business by having themselves as an extra rather than being part of the shift. This is an expensive way to run the business, and probably also an exhausting one if you feel like you have been at work but haven’t been required, and yet have still been on the floor. Surely it is better to be a part of the shift and work in it. It requires the best sales forecast you can make, and then to add yourself in as part of the team.
So, three things to help get profit back to required levels, and maybe more. But as always, it is about changing the habits, which is difficult to do. Planning is one of the inescapable habits in our industry. I am a planner by nature, so I can never understand those who don’t like to plan, but it is a habit that many people avoid doing.
Whether it is changes for the business, financial planning or seasonal planning, it is crucial. Once we begin planning, we can also plan to change certain habits: looking at the week ahead, knowing what your cost is and changing from plus-one management are all key habits to have.
Many can proudly pat themselves on the back and say they do all of these well. But that doesn’t mean you shouldn’t challenge yourself to get even better. We’re facing one of our biggest challenges yet, so I can’t think of a better time to do so.
Alastair Scott is chief executive of S4labour and owner of Malvern Inns
