Part 3 – The Building Block Approach™

When do you want to accomplish this goal by – Timeline

Part 3

As discussed in Part Two of this article it took a while for Bill and Stacy to come to the realization that they needed to sell their tavern. The reason being was they didn’t have the background to run a Tavern, the desire to learn, nor the money to continue to infuse into the business during a ramp-up and education period.

After Bill and Stacy understood the challenges that lay ahead we decided that there would need to be a year of rebuilding the tavern’s bottom-line. Once that was accomplished we could place the tavern on the market and wait for a buyer. Along with turning a profit before it was placed on the market we had to make sure that the tavern maintained a profit between the time it was placed on the market and it sold.

In short, the timeline was two years. One year to make it whole again and another to sell it. The timeline looked like this:

Start>>>>>Rebuild Infrastructure>>>>>List Tavern>>>>>Maintain & Improve>>>>>Sale!

In-between Start and List a host of things had to be planned and then executed on. Some of the things are listed below in no particular order:
Increase top line revenue              Turn the staff                                      Revamp & Price Menu
Decrease expenses                         Hire specific staff to meet needs     Seek out new vendors
Grow net profit                                Training new staff                               Maintenance
Marketing                                         Procedure & Policy Manual               New POS System

Last however most important, the dedication and commitment from Bill & Stacy to do what we agree to do within the timeline.

The above items and many more became the Building Blocks Approach™ to attaining the first milestone in the timeline – Listing the Tavern.

Let us look at a 10,000 foot level at each one of these tasks listed above.
• Grow net profit: Although this sounds like “mom and apple pie” you would be surprised at
how many small business owners do not understand this simple concept, like Bill and Stacy.
As we all learned in economics 101, topline revenue comes in, you subtract out COS (Cost of
sales), and other expenses like, occupancy, payroll, supplies, property taxes, et cetera to
eventually end up with a positive or negative net profit. The key is, how do you do it?

• Seek out new vendors: Why take the time to look for new vendors you might ask. Well in short
to minimize your COG’s and certain overheads like fuel, supplies, et cetera. “Play one
vendor against the other for fun and profit” I always say.

• Revamp & Price Menu: My motto has always been “20% of your offering will give you 80” of
your sales. So we went in and chopped the offering on the menu and with the new cheaper
prices we were receiving from our vendors repriced the offerings.

The prices for the menu items were a tried and true restaurant formula for food and alcohol.
Food = 1/3 COG, 1/3 Payroll, 1/3 overhead expenses. Anything you can save goes to your
bottom line, e.g. 30% COG + 30% Payroll + 30% overhead = Net Profit. Hard liquor we shot for
an 80% margin and for beer & wine we shot for a 40% margin.

• Maintenance: The tavern had to be upgraded to an extent, e.g. paint, some reupholstering of
seats, et cetera. which we prioritized – Most impactful to least and as money allowed.

• Staff: Over a three month period we interviewed then hired staff. In most cases the current
staff left of their own accord as they realized that things were changing. A few
terminations were needed.

We planned to hire a professional chef and management level bar tender. We got these folks
from a local Technical College and trained them to our protocols. The back-up kitchen and
wait staff in the beginning was Bill and Stacy and as business grew they took on more of a
hostess/host roll which was done for marketing reasons. DO NOT EVER underestimate the
positive effects to your top line revenue the owner roaming around and talk to customers.

• Procedure & Policy Manual: I wrote earlier about hiring new staff which would have been a
worthless exercise without developing a Procedure & Policy Manual. Now there was one place
that everyone could go to, in order maintain standards. In the Procedure & Policy Manual was
a section on Human Resources, Job Descriptions, and Standardized Review forms. Plus how-to
sections on food preparation, dining room setup, ordering procedures, et cetera. The
Procedure & Policy Manual is reviewed and updated quarterly.

• New POS: The Tavern used an old system of writing guest checks, ordering products manually,
moving between several different accounting programs, e.g. QuickBooks, Excel, written
ledgers, et cetera. There was often confusion and much duplication of tasks. Over a long
search we found a POS system that cost the tavern a low monthly fee. The fee was recouped by
shopping around for the best fee charged on processing credit cards.

This new POS system did it all. Placing customers’ orders, storing customers ordering
history & contact info, inventory, popularity of an item, the cost of an item, payroll,
Profit & Loss statements on demand, et cetera. In the end, I estimated that the new POS
system added one whole percentage point to the Taverns’ net profit.

• Marketing: The Tavern had never really marketed itself because Bill and Stacy thought it
would cost too much. That is when I introduced them to “Guerilla Marketing.” In short,
Guerilla Marketing is not unlike Guerilla fighters in a clandestine faraway war. Your
employees run it. In short it is easy and inexpensive.

Add to the equation the record keeping of our new POS system that captured the Tavern’s
customers. This brings to the table a whole new world of marketing like: texting, .com and
FaceBook™ advertising.

Again it all has to do with dedication and persistence to the timeline.

In the next segment I want to talk to the “who” is going to accomplish this.