How to Make $300 Million More This Year

invenotry controlIn an industry that claims slim margins, a high failure and turnover rate, and a lack of traditional employee benefits, it’s acceptable to be extremely wasteful and leave thousands of dollars on the table monthly.

In fact, US bars and restaurants lose about $28 billion dollars each year. That’s lost revenue due to one in four drinks walking out the door from poor company culture, lack of innovation, and not tracking or analyzing one of the most expensive assets—liquid cash.

Most bars and restaurants (from independents to big chains) count the money in the register each shift, but they count the inventory—liquid cash, which is worth much more—maybe once a month, maybe never. While this liquid cash is not counted accurately, it is still used to calculate financial metrics. These are then compared to arbitrary industry benchmarks but not truly analyzed to understand how to make better business decisions.

As a result, we have overwhelming alcohol shrinkage of 23%. No other industry would accept this standard. If a business makes $30,000 in beverage sales each month, it would lose $9,000 per month at this rate.

No wonder we don’t have funds for vacation days or new equipment.

If we could capture 1% of the $28 billion dollars lost this year, we’d make an extra 300 million dollars. Those lost liquid dollars would allow bars to take better care of employees and be truly successful. Yet in most cases, bars don’t realize how much they are losing and the disservice this loss is doing to our entire industry and the folks in it. This is true for even the largest and most successful companies in food and beverage.

On top of everything else, as an industry we spend money on upgrades and new tools without understanding the ROI. We follow methods and standard operating procedures without questioning if there’s a better way to do things.

Today, we’re going to do the opposite of what’s expected in our industry. We’ll review five lessons from lean tech startups that you can use to capture part of that $300 million and find success for your team—behind the bar and beyond.

Challenge the status quo. Start questioning how to do everything better, even if the answer isn’t conventional.

The best tech startups, companies, and visionaries didn’t come out of complacency or by following the same path as everyone else. They identified their pain points and put the time and resources into committing to solve them.

Take, for example, Danny Meyer’s no tipping policy. Whatever your opinion of this policy, Meyer stands out as a person of influence taking a risk to solve an acute, ongoing problem in our industry.

And this ethos is for everyone. Change the way you think, question, and innovate to make sure you don’t get lost in mediocrity. Build a culture of constant improvement and empowerment, which will lead to an amazing team.

Have clear goals. Clear objectives unify and motivate your team while driving profitability. Alignment is crucial to ensure everyone is rowing synergistically and empowered to have ownership over projects.

Since humans are driven by purpose and positivity, it’s important to have aspirational goals as well as metrics that keep everyone motivated, happy, and ready to go to war for your vision.

In Silicon Valley, all these concepts are encapsulated and executed via the mission, vision, values, and objectives and key results (OKRs). Objectives are aspirational quarterly goals. Key results are measured, smaller goals that help your company meet objectives.

I could write an entire book about OKRs and these concepts but someone already did! Here’s your homework: Read Christina Wodtke’s book Radical Focus.

Track, analyze, and understand why. Most tech startups don’t have the luxury funding you believe they do. And even those that do, consistently track and analyze important indicators and key results to determine how their business is doing and what needs to be improved. The best companies would never look at their numbers just once a month!

Analyze your business and what you track, how you track it, why, and how this information helps you understand and build a better business and culture.

In the example of inventory and beverage cost, why do we all—from top-tier CFOs to brand new bar leads—guess on a 10-point scale, then want a brand-by-brand reconciliation, only to use an arbitrary “industry average beverage cost” as the performance indicator of success? We have to do a better job looking into our own data.

As discussed, Step #1 is questioning and innovating to escape mediocrity. Innovation doesn’t stop at your cocktail menu—it should continue into the most conventional, time-consuming, and problematic parts of your business.

Focus on ROI. You need to embrace technology, understand the value of time, focus on your ROI, and run experiments.

As an industry, most of us don’t understand ROI. We’ll cut a cost, but what does it actually cost us in the long-run?

For example, you may say you “can’t afford” digital operations tools to increase the efficiency and effectiveness of your business (together known as efficacy). You’d rather do things yourself, whether that’s scheduling, social media, inventory, or accounting. But what’s the opportunity cost, and what could you have done in this time? What errors were made, and how does this impact your employees and potential hires? What vital data are you not getting as a result?

If you don’t hold yourself accountable as a real business, look at your own data to understand what you’re getting back in return, and align it to your goals, you’ll continue having all the same issues—tight margins, turnover, and burnout.

User-focused technology where design is the focus holds the key to a lot of answers in understanding ROI and improving our businesses. Don’t buy it all blindly but truly track the return on your investment. Treat everything as an experiment with a clear goal.

If you get a new piece of technology, ask yourself: How many more patrons are hearing about and entering my bar? How much time and cash did I free up? How do these roll up to my bigger goals? Do my returns exceed my investments?

Work on your Business, not in it. Make a commitment to take a few hours each week to strategize on how to execute your vision and set your team up for success. You’ll be surprised by the results.

By Anjali Kundra, Co-Founder and Vice President of Customer Success at Partender, a global startup that began in Gainesville, Florida and reached over 15,000 bars in less than two years.