franchise business owner

The Franchise Landscape by Jon Ostenson

On the heels of Covid lockdowns and quarantine, we are seeing unprecedented levels of interest in business ownership with much of this interest coming through the avenue of franchising. Year-to-date, our client placements have increased well over 50% vs. 2020, which despite Covid, saw similar levels of expansion over 2019. The vast majority of these placements have come in industries outside of food and lodging, which we will touch on later.

So who are these new franchise owners? More than ever before they represent a substantial cross-section of Baby Boomers, Generation X, and Millennials. As outlined throughout media headlines, Covid has caused many across the spectrum to reflect on their current path. For many, this reflection has led to the decision point that now is the time to scratch their entrepreneurial itch.

In some cases, these newly minted business owners are jumping in with both feet, leaving their corporate roles and taking on the reins of owner-operator of a new enterprise. In other instances, they are taking a step into entrepreneurship via a ‘semi absentee’ model with the plan to put in 10-15 hours a week. The latter group is seeing business ownership as an ‘asset class. Business ownership provides tax advantages that many other investments do not. With the stock market at an all-time high, low interest rate, and only so many good real estate deals available, investors are looking at alternative options for parking their record levels of sidelined cash. 

Why are so many opting for franchising over a traditional ‘start-up’? They recognize that franchising provides them with:

• A proven playbook from which to operate.

• In some cases, a recognizable brand.

• A ‘coach’ with aligned interests on the sideline in the franchisor.

• Support and learnings of owners in other markets.

• The ability to go in with ‘eyes wide open’ via the ability to review the Franchise Disclosure Document and validate with current owners before making a purchase.

• The potential for a more attractive exit based on an apples-to-apples comparison vs. traditional startups. 

So, what industries are resonating the most with would-be business owners? I have shared in many interviews that over the past year that we have seen a leaning toward ‘Covid, Amazon, Recession resistant businesses’. 95% of our placements have been in industries outside of food and lodging. These include home and property services, automotive, health and wellness, businesses that support the senior population, children/education, and pets. There are so many unique niches within these spaces that people have never considered. In fact, through my matchmaking process, I have found that over 80% of my clients end up in a sector that they never had on their radar prior to our ‘peeling back the onion’ and building a framework from which to evaluate opportunities.

Certainly, franchising is not right for everyone. For instance, I have to explain to a handful of my clients that they are ‘too entrepreneurial’. They are not willing to live within the franchise system, desiring to put their fingerprints all over a new business. However, for many would-be business owners, the support and resulting success rate that is found in franchising prove to be a perfect fit. Based on what we are seeing both at a macro level, as well as on the ground, franchising is poised for even more strong growth in the years ahead!

 

Jon Ostenson is a consultant, investor, author, and international speaker specializing in the area of non-food franchising. He draws on his experience as both the President of an Inc. 500 franchise system and as a multi-brand franchisee in serving clients across these capacities.

Connect with FranBridge here jon@franbridgeconsulting.com   Recent podcast interview

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

How to Choose the Right Software to Simplify Your Real Estate Accounting

Editor’s Note: This post was originally published in June 2018 and has been revamped and updated for accuracy and comprehensiveness. 

Let’s face it, bookkeeping for a business in the real estate industry is complicated. That holds true whether your niche is sales, management, construction, or tax and legal services. Unlike some other types of business, you must deal with variables like fluctuating income, expenses, payroll, and property values, not to mention a heavy load of government regulations.

All these factors must be accounted for completely and accurately to control profit margins, satisfy clients, and be prepared for tax filing. It’s a big hassle if you’re doing it the old-fashioned way, creating custom spreadsheets and writing down transactions in a ledger. However, the right real estate accounting software will do many accounting tasks for you automatically, leaving you free to focus on your core business.

Real estate business payroll

Processing payroll is a core function for any business. Using accounting software that takes some of the hassles out of completing payroll each period can save you time and keep your records accurate year after year. 

Your business may have one or more of these types of workers:

• Commission

• Salary plus commission

• Salary

• Independent subcontractors

As it relates to real estate accounting specifically, choose software with a payroll feature capable of calculating commissions and tracking those amounts for income tax withholding. Similarly, you should categorize payments made to independent contractors, as those are typically not subject to withholding.

A person works on their laptop.

Real-time remote work tracking

Whether your people are out on a building site or showing homes to prospective buyers, a cloud-based management app will give them access to the office. At the same time, the office is tracking their activities. Info on everything from materials used to schedule changes can be updated and shared with everyone in real-time.

A system that integrates all departments saves time and money for workers and managers. It also means that data from the field is incorporated into the books automatically, eliminating duplicated effort and potential errors for the accountant. The inherent challenge with real estate accounting is the many moving parts involved—everything doesn’t happen in the same place. Leveraging technology to automatically collect all of this information and incorporate it into a bookkeeping system is sure to lead to better results. 

Breeze through tax time

The topic of taxes will come up again and again in the search for the right real estate accounting software—and for a good reason. Taxes aren’t only necessary because they are a legal requirement but also because they can represent such a significant expense. If your real estate business holds properties, for example, the property taxes alone can take a big chunk out of your bottom line. 

You can’t get away from paying taxes, of course, but you can use good accounting software and a tax filing service like Xendoo to make sure you don’t pay more than your share. 

A real estate records her numbers for the week on a laptop,

Streamline operational expense recording

One of the best real estate accounting tips you can receive is to enter all of your transactions each day. Suppose you wait until a week before your tax return is due to get your books updated. In that case, you’ll be facing a major headache and the likelihood that there will be errors beyond tax filing. Keeping your figures up to date will also reveal when and where you’re losing money. This makes it easier to make sound decisions and avoid spending too much time on a losing endeavor. 

Consider accounting software that integrates with your bank, recording every transaction automatically and saving you a great deal of time and paperwork. Plus, you’ll be ready for an audit any day of the year. Many real estate professionals – and professionals in other industries – feel like they are constantly behind on accounting. The key to getting ahead of the game is not to spend more of your precious time on the task but rather to streamline it using the right real estate accounting software. 

Financial reports data access

Using cloud-based software allows you to see your financial reports or share data with your accountant anytime, anywhere. And with no need for in-house servers to store your data, you’ll mitigate the risk of losing your data and bring down IT expenses as well. If you are currently storing all of the financial data for your business on a single computer in your office, you are playing with fire in terms of data loss risk. Turning to the cloud leaves you with off-site storage that is backed up and secure. 

Two noteworthy options

Most real estate businesses won’t need to take their accounting software search beyond two of the market leaders—Xero and QuickBooks Online. Each of these options includes all of the features you are likely to need to keep the financial side of your business in order. And, as an added bonus when working with Xendoo, we can provide you with a discount on either one of these two excellent accounting platforms. 

Xendoo believes that cloud-based accounting is the right choice for any real estate business looking to increase growth while reducing inefficiencies. By automating bookkeeping chores, we eliminate the hassles, the mistakes, and more than half the costs of traditional accounting. Our real estate accounting service will leave your business ready at every moment to meet challenges and seize opportunities for success.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

How Your Small Business Can Prepare for Florida’s Minimum Wage Increase

In recent years, we’ve seen a reopening of the debate over minimum wage. Advocates are currently pushing for an increase to $15.00 per hour by 2026, with the door open to possible increases in the years after that. If you’re a worker, this is good news. A slight bump in the Florida minimum wage can increase the pay you receive, compensating for rising costs of living and other expenses.  However, if you’re a small business owner, this wage increase can lead to tough decisions. Unless you’re a corporate giant, it can be tough to maintain your current roster of employees if you have to pay them more.

In this post, we’ll help you to prepare for the coming changes in the Florida minimum wage. We’ll also provide suggestions about the best ways to navigate the road ahead.

What is the Current Florida Minimum Wage?

As of January 1, 2021, Florida’s minimum wage has increased from $8.56 per hour to $8.65 per hour. Tipped employees have seen a recent increase in their wages, rising from $5.54 per hour to $5.63 per hour. 

According to federal law and in some states, like Florida, employers may pay tipped workers less than the mandated minimum wage. This is called a “tip credit” as employees earn enough in tips to make up the difference.  The “credit” is the amount the employer doesn’t have to pay.  So for employers, the applicable state or federal minimum wage minus the tip credit is the least amount the employer pays tipped employees per hour. If an employee doesn’t make enough tips during their shifts to earn the hourly minimum wage, the employer has to pay the difference.

Are There Plans to Change the Florida Minimum Wage After 2021?

These changes will not stop in 2021. In November of 2020, Florida residents voted to raise the Florida minimum wage to $15.00 by 2026. The minimum wage increases will take place in a phased approach, raising the minimum wage each year on September 30. The proposed schedule will run as follows:

  • $10.00/hour on September 30, 2021
  • $11.00/hour on September 30, 2022
  • $12.00/hour on September 30, 2023
  • $13.00/hour on September 30, 2024
  • $14.00/hour on September 30, 2025
  • $15.00/hour on September 30, 2026

 While there are no specific plans after 2026, the minimum wage increase may increase based on changes to the federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the South Region.

An employee hads a customer their food order.

How Should Small Business Owners Prepare for Florida Minimum Wage and Paid Leave Increases?

If you’re a business owner, don’t panic. At Xendoo, we understand the unique challenges facing today’s small business owners. 

Here are some suggestions on ways that your business can prepare for changes in the Florida minimum wage:

Audit Your Expenses

How much are you already spending on overhead, supplies, and operating costs? You may be able to cut a few corners with certain expenses or by eliminating wasted spending. The money you save can be channeled into your human resources budget.

Determine Your Budget

Using these increased wage figures, calculate your new operating budget. Forecasting your operating expenses will let you know what you’re dealing with and provide an idea of what your income needs to be to maintain your profit margin.

Update Your Tech Stack

A tech stack refers to the digital tools you need to run your business. An update can help you to automate your social media presence, streamline scheduling, or integrate automated forms into your company’s website. These improvements optimize your business without the need for additional personnel or work hours.

Check Your Employee Classifications

How many full-time employees do you need? How many part-time employees do you need? Of course, you don’t need to start considering downsizing, but at the same time, it can be helpful to consider what your future needs may be.

Staff Accordingly

You may find that in the future, you can get by with fewer staff members. Perhaps you can rely on part-time staff to fill roles that you currently staff with full-time employees.

Gradually Increase Prices

Your new operating costs will probably push you to increase your prices to maintain your profit margin. However, raising prices slowly will give your loyal customers time to adjust while still ensuring you get the revenue you need.

Outsource Your Back Office

Are you still handling your own bookkeeping and accounting? Paying an employee to handle these specialized tasks may put a strain on your operating budget. Instead, outsource these tasks to a company like Xendoo. We can keep your company up and running without allocating your employees to do the job.

Contact Xendoo Today

The increase in the Florida minimum wage might mean big changes for your business. At Xendoo, we can help you stay ahead of the curve, adapt to these changes, and remain healthy and profitable.

 We understand the challenges that Florida small businesses face. We can provide small business owners with Florida bookkeeping services that ensure accuracy and efficiency so that you don’t have to allocate precious resources to maintaining the books. 

We can also help you with your Florida tax preparation, helping you to navigate the laws and changes that are likely to come your way in the immediate future.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

Best Small Business Invoicing Practices

Is getting people to pay their invoice balance a challenging part of running your own business? You are not alone. According to a report in Entrepreneur, on average, small businesses had $84,000 in unpaid invoices. Waiting weeks and sometimes months for the checks to arrive and managing cash flow in the meantime can be daunting, to say the least. Since invoicing isn’t the most exciting aspect of your business, we want to share these tips for small business invoicing to help you get paid faster, increase client relations, and save time and money. 

What is an invoice?

An invoice is a bill generated by a vendor that lists details and costs for goods and services provided. You’re likely already invoicing your clients, but don’t forget it is a legally binding contract. Making sure your small business invoicing system is up to snuff can save you headaches down the road. 

Setting Expectations 

Review your contract template and make sure you set expectations for invoicing. Likewise, make sure your invoice aligns with what is in the contract. Include payment schedule, estimated totals, and project milestones for payment.

Consider your software

As you strategize for creating, sending, and organizing your invoices, we recommend automating as much as possible. Your accounting software likely offers a way to do this. At Xendoo, we use QuickBooks Online and Xero, which both have invoicing solutions and are known for being the best accounting software options.

If you’re considering an invoicing program separate from your accounting, ensure the two integrate and consider online payment processing. Clients love having the option to quickly pay online, so make sure your software can integrate with payments. The easiest method is the simplest—at Xendoo we offer solutions with online bookkeeping services, accounting, invoicing, and integrated payment processing all in one.

 

A bookkeeper shows a business owner how to set up an invoice

Make sure you include these basics in your invoices

  • Dates: Include invoice creation date. Consider including the date the good or service was delivered in the summary.
  • Unique invoice number: Especially important when sending multiple invoices to the same client.
  • Client’s P.O.: During the contract phase, find out if your client uses Purchase Orders (P.O.s). A P.O. is an agreement between a vendor and a customer that outlines the purchase details and is issued by the client before work is performed. 
  • Contact information for all parties involved: Include name, address, phone, and email for both companies’ project and accounting contacts.
  • Payment terms: Terms indicate how long the client has to pay you and are determined initially. Net 30 (due in 30 days), Net 60, and Due Upon Receipt are popular terms.
  • Summary description of goods/services provided: Make it concise! A common way to summarize is to refer to completed milestones that were outlined in your contract.
  • SKU numbers: If your company uses SKU numbers for goods/services, make sure to include them. SKUs are helpful when you need a pricing breakdown and to determine what goods are taxable.
  • Totals: Include the cost for each line item, subtotal, taxes or discounts, and the final total. 
  • Late/early payment details: Consider charging an added percentage if the payment is late and a discount for early payments.
  • Method of payments accepted: Indicate all options for how to pay and details. Let them know who to make a check out to and where to mail it, and include a link to pay online.

Be straightforward 

Make your summary description brief while ensuring the client will understand how you arrived at the total. Do everything you can to make it easy for your client to pay you. Keep your invoice to one page. 

Send invoices as soon as possible

An invoice should be sent promptly when the project has been completed. Your client will use the invoice as the first step in processing your payment and likely has internal steps to take before paying you. Therefore, the quicker you send the invoice, the quicker you get paid.

Give your customer multiple ways to pay your invoices

Consider including a “Pay Now!” button on digital invoices. Clients love the convenience of online payment and often take immediate action. And these online payments can sync with your accounting software and help you avoid the “checks in the mail” scenario. If you are issuing an international invoice, indicate which currency you accept.

A hiwte thank you note with black cursive writing sits on a table

The Art of the Follow-up

Frustrations aside, you must send professional follow-ups when you haven’t received payment. Consider making a schedule for follow-up emails in advance and writing templates, customizing them for each client. This might make the process quicker and less frustrating. 

Also, consider using read receipts. They are a great way to track when your communication was received and when to follow up.

When a few emails aren’t enough, call your client. A brief, friendly call gives you another opportunity to connect with your client. They are likely receiving invoices from multiple vendors. Stand out by offering a friendly, professional demeanor.

Don’t Forget to Say Thanks!

Once you’ve received payment(s), send a thank you note. It’s an opportunity to remind your client what a positive experience it was to work together.

Communication Strategy and Branding

Consider your invoice a branding opportunity! Xero and QuickBooks offer customizable options to add to your logo, colors, and fonts. If you’re planning to mail a thank you note, keep it on-brand, too.

Streamlining your small business invoicing process can help you retain customers, increase cash flow, and increase stability. In addition, your customers will remember your professionalism and gratitude. Sign up for Xendoo today, and let us help with bookkeeping and accounting for your small business.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

Using Your Food Effectively: Three Tips to Control Food Costs for Restaurant Owners

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

As a restaurant owner, you have a lot of expenses on your plate every month that a partner like Xendoo can help you manage, such as providing tax tips for restaurants. Like rent and insurance, many of those are fixed and are beyond your control except when it’s time to renegotiate those agreements. But others are variable and are within your power on a day-to-day basis. By far, the two most significant of these variable expenses are food and labor, and there are things you can do to minimize both without sacrificing customer service or menu quality. Labor is relatively straightforward, but food costs can often be an elusive target for new restaurateurs. Let’s take a look at some things that you can do to reduce food costs and increase your bottom line.

What Is Food Cost?

Put simply, your food cost is the ratio of what you spend on groceries to your front-of-house sales and is almost always expressed as a percentage. For example, if you have a good restaurant bookkeeping system in place and know that your monthly Sysco invoices are $30,000 and your sales for the month are $100,000, your food cost for that month is 30%. Of course, lower is always better when it comes to ways to reduce food costs, but 30% is the generally accepted ideal for most restaurants.

several plates of food with similar ingredients sit on a table

Reduce Food Costs: Know Your Plates

There is a science to menu planning, and it involves a lot more than just deciding what dishes you are good at preparing. First, you need to know exactly the cost of ingredients for each dish you offer on your menu, which is often called the “plate cost.” Calculating your plate cost can seem complex at first glance, but it’s fairly simple once you get the hang of it. Before you can calculate anything, you need to be sure you have standardized recipes with clearly defined units of measurement and quantities.

Make a list of each ingredient in the dish and do the same calculation for each one. You need to know the unit of measurement your supplier uses (the purchase unit), what your supplier charges you for it (the unit purchase cost), and the yield. Yield will only apply to some items that require trimming or peeling (like meat or potatoes) before they can be used, resulting in some waste that needs to be calculated into your cost. Standardized yield charts are available from most vendors. These three numbers will give you your actual unit price for the ingredient.

Menu Engineering: Putting it all together

Next, think about how you prepare your dish and define the unit of measurement called for in your recipe (the serving unit). Next, figure out how your serving unit relates to your purchase unit and calculate your serving unit cost. For example, if you buy ketchup by the pound and serve it by the ounce, you would divide your purchase unit cost by 16 to get the price per ounce. Lastly, define the quantity of serving units in the recipe (portion size).

That may sound like a lot of numbers, but you can calculate your plate cost with these numbers in hand. Let’s take the example of a side order of french fries. You buy Russet potatoes for $2 per pound, and let’s assume four potatoes to the pound. After peeling, you have 19% waste (an 81% yield). Your recipe calls for 8oz of potatoes on the order, so it’s easy to calculate the plate cost from there. At $2 per pound with 81% yield, your actual cost per usable pound is $2.47. Divide that by 16 to get the price per ounce ($0.15) and multiply by 8oz called for in your recipe to get your plate cost of $1.20 for an order of fries. Sticking to the 30% food cost rule, you should be pricing this menu item at no less than $4.00.

Menu Engineering: Reuse Ingredients

Mexican restaurants are often cited as one of the most profitable restaurant categories. One of the key reasons is the relatively small number of common ingredients used in most menu items. Think about it: how many things on a Mexican menu can you make with some ground beef, chicken, tortillas, cheese, beans, and rice? A lot. Having common ingredients among dishes means you don’t have a lot of different items sitting around on the shelf not being used if a particular dish isn’t selling well. Avoid menu items that call for ingredients—especially expensive ones—that are unused in any other dish.

Take Regular Inventory

A good, detailed inventory taken regularly is important in figuring out how to reduce food costs because you need to know which items are running high and whether you might have food walking out the back door at night. No one likes to think that someone on the staff might be stealing, but the sad reality in the restaurant business is that theft does happen. Therefore, always have the inventory conducted and signed off by at least two people to reduce the inventory shrinkage. Other reasons for an item running high may be poor preparation resulting in unnecessary waste or spoilage from incorrect rotation.

Compare Foodservice Vendors Regularly

You have several options for foodservice vendors, and just because you’ve chosen one doesn’t mean you have to stay with your current choice. The vendor that had the best pricing a year ago, or even six months ago, may not have the best prices today. Food prices fluctuate based on market supply and demand, and vendors often try to entice new clients with low introductory pricing that they can’t maintain for long. So be sure that you’re shopping your options regularly to keep them honest.

Produce delivered to market with classic vw bug on cobble stone street in front

Check-In Your Food Truck

When your truck comes in, be sure that someone checks off each item on the invoice and verifies the correct quantity before the driver leaves. Foodservice vendors will often run out of stock in the warehouse and either make substitutions or omit back-ordered items. Be sure that your rep knows what substitutions are and aren’t acceptable and what items are critical for your business. You should receive a credit for any back-ordered items, but sometimes the vendor might make an oversight, or the driver might simply make a mistake unloading the order. You can’t afford to pay for food you never receive, right?

First In, First Out

One of the most common reasons for spoilage is the lack of proper rotation on the shelf. When the food truck comes in, ensure that the person putting it away understands that new items always go in the back and older items get rotated to the front. It’s often tempting when things get busy to stick the new inventory in the front where it’s most convenient. A periodic spot check of expiration dates will usually reveal whether your team is rotating items properly.

Prevent Cross-Contamination and Spoilage

The way you store perishable items can sometimes affect their shelf life. Be sure that your cooler is set at the recommended temperature (28-32° for fresh meats) and that items in the cooler are correctly stored to prevent cross-contamination of microorganisms that can lead to early spoilage or even sickness. In addition, be sure that raw meats, poultry, and seafood are placed on bottom shelves to prevent meat juices from dripping onto other foods and causing contamination. 

Run Daily Specials

Daily specials are a great way to offer a tasty variety to your customers and get rid of that extra inventory lingering in the pantry a little longer than it should. Train the front-of-house staff to sell the specials effectively and promote them on social media. If you offer a buffet, that’s also a great way to reduce food costs while keeping your customers happy.

Food cost will always be one of the challenges of the restaurant business, but it doesn’t have to be a nightmare. Using these tips, you can help keep your food cost under control and tame one of the biggest variables to your profit margin. If you are already close to the ideal food cost of 30%, congratulations, you’re ahead of the curve. But if not, you now have the tools to figure out where your grocery money is going and make sure you’re getting the most bang for your buck. Xendoo is here to help, so be sure to reach out and discover the full suite of services that Xendoo offers to restaurant owners just like you.

 

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Tips for Managing Restaurant Labor

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

As a restaurant owner, you know very well that managing your expenses can be a real headache. It doesn’t take long for high food or restaurant labor costs to start eating away at your bottom line. Fortunately, Xendoo is here to help. Aside from fixed expenses like rent and insurance, food cost and labor cost are the two most significant expense categories that an owner will wrestle with daily. We’ve already shown you how to manage your food costs, so let’s take a look at some tips for managing restaurant labor costs efficiently.

What Is Restaurant Labor Cost?

It’s a given that without your cooks, servers, bartenders, and hosts, your restaurant is nothing more than a grocery store with tables. Hiring the right team to give your restaurant legs and make it go is essential. But bringing on that team entails some restaurant labor costs because you have to pay them. Your restaurant labor costs are the ratio of what you spend on payroll during the month to your gross sales for the month. Restaurant labor cost is almost always expressed as a percentage.

If you have Xendoo’s bookkeeping for restaurants, all the figures you need should be at your fingertips. For example, if your gross sales for the month are $100,000 and you spend $25,000 on payroll, that means your restaurant labor cost for that month is 25%. Unlike food cost, there is no set labor percentage at which you should be running because labor varies widely in different segments and markets. But generally speaking, your restaurant labor cost should be between 25% and 35%.

a server stands by a booth full of customers

Break Down Your Payroll by Category

Servers are paid very differently than cooks or managers, so it’s often helpful to break payroll down into groups so you can see exactly which restaurant labor costs the most. Staff should be cross-trained to give you the flexibility to shift things around when you need to cut some costs. For example, front-of-house staff may offer some accessible opportunities to trim things down a little.

Depending on your current labor laws you can cross-train staff for certain roles. If your hostess is making $8 per hour and servers are making $2.13 per hour, maybe you could try staffing an extra server during slower times and make that person responsible for greeting guests who walk in. The same goes for bartenders, who are typically paid more than servers. If your servers are properly cross-trained, they should be able to fill in as a bartender during slow times. They don’t have to be experts in everything, just good enough to carry a little extra water when things are slow.

Calculate Restaurant Labor Cost Daily

Naturally, you will want to study your restaurant labor costs on your monthly P&L along with other expenses like filing taxes, but it’s also helpful to look at it daily. If something is amiss, you don’t want to let it go unchecked for a whole month, do you? It’s easier to manage it day-to-day when your memory is fresh about what happened that may have affected your labor. Run an end-of-day report and give it a quick once over to compare sales to payroll and adjust the next day’s schedule accordingly if you need to.

A restaurant owner looks at his POS system for scheduling.

Use Smart Forecasting

Many modern point of sale (POS) systems offer features to help you analyze your sales patterns by day and hour and create forecasts to help you schedule staff very accurately. If your system doesn’t offer these features, it might be worthwhile to consider upgrading. If you need to do forecasting by hand, sit down and compare the upcoming week to the same week last year and factor in any changes in the market. For instance, if you did $20,000 in sales the same week the previous year but you’ve been averaging 10% more year over year, then you would forecast sales of $22,000. Multiply that number by your target food cost, and then you know what your payroll budget is for the upcoming week.

Beware Turnover Cost

The restaurant industry is notorious for having a ridiculously high staff turnover rate. As an owner, you need to understand both obvious and hidden costs to employee turnover. The obvious restaurant labor cost is training time. You have to pay an employee to shadow another employee during training, essentially doubling the restaurant labor cost of that position for that period. That can spike your labor cost in a big way, but there are also more subtle restaurant labor costs associated with turnover.

A new, inexperienced employee will make mistakes that a more seasoned employee might not make, and those mistakes come with a price tag. Whether it’s unnecessary food waste, a customer refund, or a lost sale, it’s a cost that eats into your bottom line. So you should consider whether, in some cases, it might be advantageous to pay just a little bit more than the market average to keep those experienced employees and avoid turnover costs.

Xendoo is here to help you keep your restaurant’s bottom line as healthy as possible, and by using these strategies, you can keep those pesky restaurant labor costs in line. Be sure to check out Xendoo’s full suite of services for restaurants to find other ways Xendoo can help boost your profits.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

A retail shop displays an open sign in their window.

How to Make a Budget for Your Retail Store

As you look to grow your retail business and ensure you can maintain long-term stability, you will need to create and follow a retail budget. It’s one of the most important tools in small business retail management and can guide you as you make decisions, navigate unexpected changes, and work towards increasing cash flow and optimizing your profit. 

Your budget is something you make annually and adjust regularly based on actual expenses. This is where a skilled bookkeeper or accountant comes in handy! They can help make sure your budget predictions are accurate, and assist you in adjusting it throughout the year.

Being able to handle unexpected expenses on the fly is perhaps a budget’s greatest strength. A small retailer might face anything from windows suddenly covered in graffiti overnight to a global pandemic that forces them to temporarily close their doors. Budgets can help you hope for the best while planning for the worst. Here are the most common expenses a small business owner should consider when making a retail budget. 

Staffing

Everyone knows that retail business owners must regularly budget for their sales associates and store managers’ compensation, but don’t forget to plan for the associated payroll taxes and employee benefits including their time off. Additionally, consider additional labor costs for marketing, graphic design, inventory buying, facility maintenance, and order fulfillment and shipping. Keep in mind that Xendoo can help cut costs here by providing retail bookkeeping and accounting at a lower rate than on-staff employees.

A retail store front with a bike leaning against a post in the foreground

Photo by Sherzod Max on Unsplash

Facility Costs

When you first open your brick & mortar retail business the list of expenses associated with getting your physical space up and running is long. Painting, installing new lighting and hardware, choosing merchandise fixtures, installing electrical outlets, and a security system. Landscaping, adding in new vinyl graphics for your doors and windows, and don’t forget about signs. And there are more costs to maintaining your facility than one might expect. You will need to budget for unexpected expenses like plumbing problems, roof leaks, and ongoing maintenance such as replacing lights, signs, and store fixtures as needed. If your business has a second location you’ll need to make sure you budget separately for each space.

Marketing

Your annual marketing budget will change throughout the year. As you plan it out, keep in mind what times of year are best for sales – around holidays like President’s Day and Memorial Day, and as the seasons change. Plan to budget for paid social media and influencer marketing throughout the year, as well as any email marketing expenses you may incur. And don’t rely solely on digital marketing – your business may get great exposure by marketing through community partnerships, events, and even by mailing postcards to your customers.

Inventory

Inventory buying is one of a retail businesses’ most important and strategic costs to budget for. Retailers must prioritize inventory accounting, and keep a variety of things in mind like current trends, seasonal changes, and what sold well this time last year versus what didn’t. You’ll need to consider discounts and deals your vendors offer throughout the year, as well as freight charges. An excellent tool to consider using as you budget for inventory is an open-to-buy plan. An open-to-buy plan is an inventory management system that shows you how much inventory you can buy throughout the year.

Security

Even the smallest of retail businesses need to budget for loss prevention. Keeping your inventory numbers accurate will help you determine how much shrinkage affects your business. Do you need to increase your security? Perhaps you need to invest in security cameras or loss prevention training for your employees. According to the National Retail Federation, retail shrinkage is on the rise —totaling $61.7 billion in 2019, which is up from $50.6 billion the year before.

Technology

As you plan and review your budget, look for spots where technology might be able to save you money. Are the systems you are using, like an eCommerce platform, credit card machine, and merchant services, or your accounting software too expensive? Are there cheaper solutions? Spend a bit of time researching options and you might find better solutions. Some of your providers might even work together, for instance, Xendoo customers get a discount on Xero and Quickbooks software.

 

Trust us, we know that staying on budget is often easier said than done, especially for small business owners who are stretched for time. A quality bookkeeper or accountant like the team at Xendoo can help you plan and stay on budget, as well as find areas where you can save money through accurate, timely reports and advice. Become a budgeting pro with Xendoo today.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

Bringing Home the Bacon: A Profit Growing Guide for Restaurateurs

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

It’s no secret that the restaurant business is tough, even in the best of times. Really tough. Even before the COVID-19 shutdowns, industry analysts estimate the failure rate for new restaurants in the first year was somewhere around 60%, with another 20% shuttering the doors before the 5-year mark. That’s only gotten worse during the pandemic, with hospitality being one of the industries hardest hit by shutdowns and restrictions. However, as bleak as that reality may seem, the restaurant industry is still viable, and there are things you as an owner can do to help increase restaurant profits and make sure you stay in the 40% that do well.

Understanding Profits: Gross vs. Net

When discussing how to increase restaurant profits, it’s important to distinguish between gross profit and net profit. Gross profit for a restaurant is defined as the price of the item minus the cost of goods sold, i.e., food cost. For example, if your signature lasagna dish sells for $20 and the ingredients to make it cost $7, your gross profit on that item is $13, and your profit margin is 65% (13 divided by 20). Industry norms and best practices suggest that food costs should run somewhere around 30%, which means that if your total sales for the month are $100,000, you should be spending roughly $30,000 with your foodservice vendor. Food costs that run higher than that can often be an indicator of excessive waste or theft (often referred to as shrinkage), so it’s essential to know your gross profit margin.

Net profit is the amount left over after ALL operating expenses are deducted, not just food costs. That includes expenses such as labor, food cost, rent, utilities, equipment repairs or leases, insurance, etc. Because it consists of a much more expansive list of expenses than gross profit, net profit will necessarily be a much smaller number. Typical net profit margins have shrunk in recent years but typically hover around 3-5%.

It’s critical to stay on top of your books and know exactly what your margins to increase restaurant profits because if you’re playing catch-up bookkeeping, you’re flying blind. Generally, when discussing how to increase restaurant profits, most people mean net profit because it’s the one that keeps the lights on for your business. With that in mind, there are two ways to boost your bottom line – you can increase sales or lower expenses. So let’s look first at ways to boost your sales numbers and increase your average ticket price or cover the average.

View of a restaurant menus with prices set for increase in profits

Review Your Menu Pricing

As we noted above, your food cost should be around 30% of your menu price, so you’ll need to calculate the plate cost of each menu item to help increase restaurant profits. To do this, first, make a list of each ingredient required to prepare the dish. Next, choose which unit of measure your foodservice vendor uses for the items (e.g., do you buy it by the pound, gallon, dozen, etc.) and identify your unit cost from your vendor. There may or may not be a yield percentage for the item, which would be waste from trimming or peeling the item before use. For example, certain cuts of meat may require trimming away fat or gristle, which reduces its useful yield. These can usually be found in standardized yield charts available from many vendors. 

Finally, do a similar calculation for the way you prepare the dish:

1.  Select the correct serving unit, which is usually as simple as the unit of measure that your recipe calls for.

2. Calculate the serving unit cost by dividing the cost per measure by the number of serving units per measure. The cost per measure for items with no yield is the unit purchase price, and for items with a yield, the unit purchase price is divided by the yield percentage. For example, if you buy ground beef for $4 per pound and your serving unit is ounces, the serving unit cost would be $0.25 per ounce ($4 divided by 16 ounces to the pound).

3. Select your portion size, which is the quantity called for by the recipe.

A simple plate cost for a hamburger and fries might look like this, assuming four potatoes to the pound and six slices per tomato:

Ingredient Purchase Unit Purchase Unit Cost Yield Actual Unit Cost Serving Unit Serving Unit Cost Portion Size Portion Cost
Ground Beef Pound $4.00 N/A $4.00 Ounce $0.25 5 $1.25
Bun Dozen $6.00 N/A $6.00 Each $0.50 1 $0.50
Tomato Pound $1.89 N/A $1.89 Slice $0.31 2 $0.62
Mustard Gallon $13.00 N/A $13.00 Ounce $0.81 1 $0.81
Potato Pound $2.00 .81 $2.46 Each $0.62 1 $0.62
$3.80

So we can see that the plate cost for this hamburger and fries meal is $3.80. Sticking to the rule of 30% food cost, the menu price of this item should be $12.50. If it’s less than that, it’s probably eating into your bottom line.

Identify Your Menu Hits and Misses

Now that you know your plate cost for each item on your menu, it’s time to compare those to some sales reports from your point-of-sale (POS) system to see where your profit is coming from. Create a spreadsheet with four categories and label them “HIGH PROFIT/HIGH SALES,” “HIGH PROFIT/LOW SALES,” “LOW PROFIT/HIGH SALES,” and “LOW PROFIT/LOW SALES.” Then, put each item on your menu into one of those categories to see where each item falls. Dishes that fall into the “LOW PROFIT/LOW SALES” category are candidates for removal in favor of more profitable offerings. Also, consider running daily specials that combine high-profit, low-sale items with big sellers to help move those lower selling items to get that incremental revenue.

Up-Sell and Cross-Sell Effectively

It’s impossible to overstate the importance of staff training in proper selling techniques to increase restaurant profits. Train your service staff to offer customers an appetizer or cocktail before starting their meal, and train them to make quality recommendations. If you are a full-service restaurant and serve alcohol, educate your staff about wine types and selections that you carry. Distributors will often send a representative to do this training for you at no cost. Armed with that knowledge, the staff then knows that the new full-bodied cabernet that just came in yesterday goes wonderfully with a steak dinner and can offer that to a customer considering the steak. The result is a happier customer with a higher ticket who will tell his or her friends about your knowledgeable staff. Run contests to reward the servers with the highest average ticket for the week to encourage up-selling.

In addition to some general restaurant bookkeeping tips, let’s look at some specific ways to manage your operating expenses and keep your bottom line healthy.

Watch Your Invoices Closely

Food prices constantly fluctuate due to various factors, with some items varying wildly. It’s important to know exactly the current price of a pound of shrimp. If that price begins to rise due to an oil spill, hurricane, or another event that causes a shortage, it might be prudent to take the shrimp cocktail off the appetizer menu for a little while if the price gets too high. Also, some food service vendors will try to get your business by initially offering you low prices that they can’t sustain with the intention of creeping the prices up slowly in the hope that you won’t notice. This practice is called “speeding.” Be sure to regularly compare pricing from different vendors to ensure that you’re getting the best price when your food truck comes in.

A server sets tables at a restaurant.

Manage Your Labor

Along with food cost, labor is the other big variable expense that operators can control to increase restaurant profits. Labor is often a very fine line to walk. Too much labor during slow times is an unnecessary expense and may dilute tips among servers and affect their morale, while too little staffing can result in poor customer service and quickly land your business in Yelp hell. Many modern point-of-sale (POS) systems include advanced scheduling that uses sales history to predict how many servers you will need at any given time. Many POS systems can even suggest your best-selling servers on your busiest shifts for you. If you have such a system, take advantage of these features to keep your staffing lean and mean. If you don’t, it might be cost-effective to consider upgrading.

Stick to Multi-Purpose Ingredients

When planning out your menu, try to avoid items that require ingredients that aren’t used in any other dish. For example, if nothing else on your menu uses shrimp, you should probably avoid putting the shrimp cocktail on your appetizer menu because shrimp is expensive and has a short shelf life. But if your menu includes a grilled chicken salad and lemon pepper chicken, the chicken quesadilla pinwheels might be a better appetizer for you. By sticking to ingredients that are used in multiple dishes, you can cut down food costs and waste significantly.

Take Regular Inventory

Taking regular inventory is one of your best tools to detect waste and theft, so set a schedule to take a detailed inventory regularly. Compare it to your sales report to see if the sell-through rate matches what you expected from your sales report. That way, you know which items are moving and which are sitting on the shelf too long, and whether you might have some product walking out the back door at night. Have it conducted by at least two people to ensure that it’s done accurately and honestly. 

Get a Handle on Your Bookkeeping

Good bookkeeping for restaurants is essential, and as a restaurant owner, you probably don’t have the time to be doing your books. Your focus needs to be on doing what really matters – growing your business and improving your bottom line. That’s where a partner like Xendoo can help by offering a full suite of business bookkeeping products and services to help you know where every dollar is going. Outsourcing is more affordable than you might think, and it can pay for itself very quickly. Economists call it “opportunity cost.” It’s the hidden cost of foregoing one opportunity in favor of another because you don’t have time to do both. Yes, assuming you have the knowledge, you might save a few dollars in accounting fees by doing it yourself, but how much will your business operations suffer because you’re spending all your time on that?

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Time for a Makeover: Ideas for How to Increase Profits for Hair Salons

Editor’s Note: This post was originally published in October 2018 and has been updated for accuracy and comprehensiveness.

Just like your clients, your business operation needs a good makeover every now and then to help increase profits for your salon and keep your bottom line healthy. Unfortunately, we sometimes let ourselves get into a rut, keeping the same systems and processes in place mainly because they’ve always been good enough. But is “good enough” really good enough in an ever-changing marketplace? Do you really ever have enough revenue?

Here are ideas on how to increase profits for your hair salon.

Implement a Revenue Management Plan

Is your salon backed up with more business than you can handle on Saturday but full of tumbleweeds on Wednesday? If so, maybe you need to take a look at scalable pricing instead of just charging the same flat price to everyone. Unless you’re ready to expand your business, you have a fixed amount of capacity each day because you only have so many chairs and so many stylists. That means the one tool you have at your disposal to manage supply and demand is your pricing. Don’t be squeamish about raising prices where you need to. If you’re turning away business because you don’t have enough capacity, that means you aren’t charging enough. If you don’t have enough business to fill the day, that means you might be charging too much. In a perfectly balanced supply and demand scenario, you should be running at close to 100% capacity and not turning anyone away because you don’t have open slots. Charge a premium price on high-demand days like Saturday and run discount offers on slower days to incentivize demand and pick up that incremental revenue.

A salon owner checks her profit marginson a tablet

Outsource What You’re Not Good At

Your accountant doesn’t do hair, so you shouldn’t be doing tax returns. There’s a saying in effective management training: only do what only you can do. Stick to what you’re good at and outsource other things that aren’t in your wheelhouse. Those things are time-consuming and draw your attention away from what you should be doing – growing your business. At the top of most lists of tasks to outsource is bookkeeping for hair salons because it’s both complex and time-consuming. An accountant is an expert and can probably do in an hour what might take you an entire day, so it doesn’t make sense to waste your productivity on that. This is where a partner like Xendoo can help you because we specialize in small businesses like yours for a flat price that’s often less than what you would pay an hourly accountant. 

Do a Sales and Inventory Analysis

Do you know the sell-through rate of everything you keep in your inventory? If not, you should. Are you keeping enough of the right items in stock or too much of the wrong things? If you’re not sure, you might have too much money sitting on the shelf month after month doing nothing for you, so you need to do some homework. Print out some sales reports from your point-of-sale (POS) system and see which items are your best sellers. Most good salon software systems also have some inventory control features, so take a look at those to see how to increase profits. One key calculation you need is the sell-through rate, which is the ratio of inventory sold during the month to the inventory added in the same period. If your POS doesn’t have inventory control features, it might be worthwhile to look at upgrading to one that does. 

A stylist talks to her customer about additional services

Up-Sell and Cross-Sell Aggressively

When people hear about up-selling and cross-selling, they often have thoughts of trying to sell clients products they don’t need, but that’s not the case at all. Clients come to you for your expertise. As a salon owner, part of your job is to educate your clients about products and services they need but don’t realize they need. For instance, if a client comes in wanting a particular color treatment that you know from experience will be harsh and make the hair dry, you might recommend a conditioning treatment to help mitigate that effect. Once the client understands and sees the value proposition, it becomes a win-win: the client gets better service, and you get more money.

Spend the time to make sure that everyone on your team is intimately familiar with every product that you carry and can discuss them with clients appropriately. Also, encourage your staff to use the products you sell and promote them in conversation with friends and social media. People trust their stylists and often feel like they’re getting a little inside scoop by using the stylist’s same products. 

Get Creative with Marketing

At the risk of stating the obvious, marketing is key to how to increase profits for your hair salon, and your strategy needs a refresh occasionally. If you’re in a mall or other high-visibility setting, create a nice-looking display in the window where passers-by can see it easily. Stock it with high-margin products you want to promote and put the most important items at eye level. Research has shown that “eye level is buy level.” That’s fairly traditional marketing, but don’t be afraid to get creative with it. Have you noticed that almost every store you visit these days wants to sign you up for a rewards program? Well, there’s a reason for that—they work. Customers love rewards and free things. Consider creating a loyalty program for your return customers and give them a $25 coupon after ten visits. Word of mouth is one of your most powerful marketing tools, and you can leverage that. Implement a referral program where an existing client who refers new business gets a discount on the next visit.

These are just ways on how to increase profits for your hair salon, but Xendoo can help you increase your profit in other ways, too. Contact Xendoo today to start your free trial and get your business on the road to maximum profits.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

How to Change from an LLC to an S Corporation

Remember back when you had to decide on a name to register your new business, forming a limited liability company—LLC? Now your small business has grown up thanks to your hard work and dedication. You may have outgrown your current legal status and it’s time to change from an LLC to S Corp to gain additional tax benefits that you’ve earned! Since determining the status of your business is important to its success and potential, we’ll break it down for you.

What is an S Corporation?

Under “S” corporation status, the small business owner’s income, losses, deductions, and credits “flow through” to you and are reported on your personal tax returns and assessed at your individual income tax rate. S Corp status is great for small businesses because you have the LLC protection from losses beyond your capital investments, while still providing you with the flow-through taxation.

How is an LLC Different from an S Corporation?

As an LLC owner, you could lose everything you have invested in the business, but your personal home, bank account, and other assets are protected. The main differences between an LLC and an S Corp are:

  • An S Corporation isn’t a business entity like an LLC—it’s an elected tax status.
  • LLC owners must pay self-employment taxes for all income. S corp owners may pay less on this tax, provided they pay themselves a “reasonable salary.”
  • LLCs can have an unlimited number of members, while S Corps are limited to 100 shareholders.

A small business team discusses changing from an LLC to an S Corp

Why you should consider changing from an LLC to an S Corp

Here are three great reasons to change from an LLC to an S Corp:

Self-employment taxes

S Corp distributions aren’t subject to FICA/self-employment taxes. This is one strategic way to minimize self-employment taxes, making it a great business structure for consultants, sole-proprietors, and more. If you have an S-Corporation and are active in the business, you must pay yourself a market-rate salary for your work The IRS won’t let you pay yourself entirely in distributions to avoid self-employment tax.

Tax-preferred retirement savings 

You can contribute more to retirement accounts with an S Corp than an LLC because with an S Corp you can set up a Solo 401(k) in addition to a Roth IRA.

Easier to scale

S Corps allows for a smoother transition from a C Corp. Stockholders are required to report their percentage of the profit/loss whether or not they actually receive that money as a distribution. If you own 100 percent of an S Corp and it makes X dollars in profit, you can keep that money in the business to make purchases next year. You are still required to report the profit on your individual tax return. If you anticipate keeping a significant amount of money in the business, you may be better off as a C Corporation.

How do I change from an LLC to an S Corporation?

If you decide to change from an LLC to an S Corp for federal tax purposes, you can simply make an election for the LLC to be taxed as an S Corporation. All you need to do is fill out a form and send it to the IRS. Once the LLC is classified for federal tax purposes as a Corporation, it can file Form 2553 to be taxed as an S Corporation.

With this approach, you don’t change the actual entity type, only the federal tax classification. Even though the IRS classifies the LLC as S Corp, it is still an LLC and may be taxed as such by the state where it is formed.

To change the actual entity structure you must formally change the LLC to an S Corporation with the formation state. If the simple conversion process is not allowed by the formation state, then you can do the following: 

  • send the IRS a letter informing them of the structural change
  • choose to be an S Corporation by filling out IRS Form 2553
  • cancel the LLC while filing with the state for a new corporation

Is Switching from LLC to an S corp right for my business?

When you’re ready to change from an LLC to S Corp, we recommend that you consult an accountant or tax preparation services to make sure there are no mistakes that could cause you to lose your money-saving tax status. Your Xendoo team of small business accounting experts can help you find the right solutions for your small business, and take the hassles of tax prep and filing off your shoulders. Whether it’s the 1120S,  1120, or 1065,  Xendoo’s CPAs will file the right return for you, right on time.

With bookkeeping, tax consulting, and tax filing all under one roof, your U.S.-based Xendoo financial team is here to answer all your questions and to file your business and personal taxes. We’ll do what we do best — and let you get back to doing what you do best to make your business a success. Sign up today.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.