It is the norm for business owners in the hospitality and leisure sector to struggle with finding time to manage their businesses efficiently and effectively and consider their strategic approach, but this is key factor to their long-term success.
Keeping focused on key areas of the business such as cash management and forecasting, whilst also making the most of their staffs potential, can help to minimize risk in the business and improve overall profits.
For business owners seeking to work on their business, rather than in their business, here are some important pointers:
Watch cash management closely
Businesses in the hospitality and leisure sector are often subject to seasonality, making cashflow management much more difficult. To compensate for this, business owners need to create clear and acute understandings of the working capital cycle and make provisions for loan repayments, VAT, and off-peak times.
Accurate cash flow forecasts should be drawn up and reviewed regularly, as this ensures cash movement is understood, and steps can then be taken to alleviate the pressure on cashflow where necessary. Business owners will not have to take tough decisions alone if a good working relationship with bank managers and funders is maintained.
Key Performance Indicators (KPIs)
If business owners have a clear understanding of what success look like they are then able to measure their performance on this basis, against pre-agreed KPIs. Staying on top of industry benchmarks and assessing where the business sits is also important.
In a fast-moving sector, business owners must not get caught standing still and remain focused on continually improving their offer by carrying out renovations, adding space, changing menus and introducing added value services.
Investing in the workforce
People are the engine that keep the cogs of any business turning. Yet, many business owners report difficulties with staff recruitment and retention.
Owners who invest regularly in their staffs training and development, and have career structures in place, and promote the industry as a career choice, tend to have much less difficulty in this area. The biggest overhead for employers in the hospitality and leisure industry are typically represented by people costs. Thus Investment in people is key. Increases in turnover and profits are often reported by those that focus on staff development and training.
Don’t let tax be taxing
There are a number of tax reliefs available, but businesses don’t always look to take advantage of them. Some of those reliefs not being claimed or used to the full, are capital allowances, R&D tax credits, and theatre tax credits. Business owners should be seeking advice about the reliefs that might become available to their business and prioritise making claims where suitable.
Employee benefits such as accommodation, food and drink, and entertainment are commonly made available to staff in the hospitality and leisure sector. Although Employers need to bear in mind the tax complications which typically apply to such benefits and subsequently they should be reported to HMRC. To avoid fines and claims for tax underpayment, business owners should be making sure they fully understand the tax exposure of their remuneration arrangements for both themselves and their staff.
Moving with technology
Technology has developed a lot in the last few years vastly improving the efficiency of financial and reporting systems immensely. The rapid advancement of technological innovation means that business owners should review systems and processes regularly, to ensure they are using the latest solutions.
For multi-business owners, a shareholder agreement can provide a business owner with invaluable protection for those involved, but they are often underutilised.
An effective shareholder agreement should include issues relating to control and decision making, future share changes, potential sale of business, and rights on shares, while also outlining any actions that need to be taken should disputes arise.
Having access to reliable financial forecasts is essential for management to run small and medium sized businesses. Forecasts should reflect the business strategy and objectives as well as helping the business to set sales targets. Business owners should keep a close eye on actual performance against budget and ensure that all variances are reviewed and fixed as soon as possible.
Personal tax planning
The benefits to individual shareholders from their ownership of a business include – salary, dividends, pensions, director loans and benefits in kind. However, the tax status of these types of remuneration may have altered recently and it is important for business owners to ensure compliance. They should keep their pay and remuneration under review and seek advice to ensure it is structured in the most tax-efficient way.
Working on the business, rather than in the business
Whilst it can be difficult for a business owner to distance themselves from day-to-day operations, spending too much time in the business, rather than working on it, could prove counterproductive.
Business owners that devote time to considering their strategic and personal goals and work towards achieving them, can mitigate risk and look forward to a more prosperous future.