Managing a restaurant without a proper budget is like running a kitchen without a recipe. A good budget helps you manage your costs, track your profits, and prepare for the unexpected. Understanding the basics of budgeting is vital for success. Let’s explore how to make a restaurant budget step by step.
Why is Budgeting Important for Your Restaurant?
Budgeting helps you control your expenses and maximize your profits. A well-planned budget acts as a guide to your restaurant’s financial health. According to a survey by Toast in 2023, 60% of small restaurants struggle with cash flow management, and poor budgeting is one of the main reasons.
A good budget ensures:
- You don’t overspend.
- You prepare for slow months.
- You set achievable goals for revenue and growth.
Now let’s dive into the process step by step.
What Are the 7 Steps in Good Budgeting?
- Understand Your Fixed Costs
Fixed costs are the expenses that stay the same every month. Examples include rent, salaries for permanent staff, and loan repayments. These costs usually make up 30-40% of a restaurant’s monthly expenses.
For instance, if your monthly rent in Kuala Lumpur is RM5,000 and staff salaries are RM12,000, your fixed costs would be RM17,000.
- Calculate Your Variable Costs
Variable costs change based on your sales and operations. Examples include raw materials, utilities, and marketing expenses. On average, Malaysian restaurants spend 28-35% of their revenue on food costs.
Let’s say your food cost percentage is 30%. If your monthly revenue is RM50,000, your variable cost for food would be RM15,000.
- Track Your Revenue
Revenue is the money you earn from your sales. Look at your past sales to predict your future revenue. If your restaurant is new, start with a realistic goal based on your average daily sales.
For example, if you sell RM2,000 worth of food daily, your monthly revenue estimate would be RM60,000 (RM2,000 x 30 days).
- Set Financial Goals
Having clear goals gives you direction. Do you want to save for expansion, invest in new equipment, or increase your profit margin? Make these goals part of your budget.
For example, if you aim to save RM5,000 monthly for a renovation, include that in your budget.
- Plan for Emergencies
Unexpected expenses can disrupt your cash flow. A smart budget always includes an emergency fund. A good rule of thumb is to set aside 5-10% of your monthly revenue.
For example, if your monthly revenue is RM60,000, keep RM3,000-RM6,000 for emergencies.
- Monitor and Adjust Your Budget
Budgeting is not a one-time activity. Review your budget every month. If your costs are higher than expected or your sales drop, adjust accordingly. - Use Technology for Budgeting
There are many tools available that can make budgeting easier. Apps like QuickBooks or Xero are great for tracking expenses and revenue.
Example of a Restaurant Budget
Here’s an example of a simple monthly restaurant budget for a mid-sized restaurant in Malaysia.
- Revenue: Let’s assume your restaurant earns RM60,000 a month from sales.
- Fixed Costs: These include rent, permanent staff salaries, and loan repayments. For instance:
- Rent: RM5,000
- Salaries: RM15,000
- Loan repayment: RM2,000
Total fixed costs: RM22,000
- Variable Costs: These depend on your sales and operational needs, such as:
- Food supplies: RM18,000 (30% of revenue)
- Utilities: RM3,000
- Marketing: RM2,000
Total variable costs: RM23,000
- Emergency Fund: It’s always wise to set aside 5% of your revenue for unexpected expenses, which would be RM3,000.
- Profit Target: After covering all your costs (RM22,000 + RM23,000 + RM3,000 = RM48,000), you’re left with RM12,000 as profit. This gives you a 20% profit margin, which is above the industry average in Malaysia.
This example shows how you can allocate your revenue and plan for expenses while aiming for a healthy profit margin.
How to Make a Restaurant Budget?
1. Understand Your Revenue
Start by analyzing your monthly revenue. Look at past sales trends to identify patterns, such as busy weekends or slower weekdays. If your restaurant is new, estimate revenue based on your daily sales. For instance, if you earn RM1,500 daily, your monthly revenue estimate would be RM45,000 (RM1,500 x 30 days).
2. List All Your Expenses
Separate your expenses into two categories: fixed costs and variable costs.
- Fixed costs include rent, salaries for permanent staff, and loan repayments. These don’t change month to month.
- Variable costs include food supplies, utilities, and marketing. These depend on your sales and operational needs.
For example, if your rent is RM4,000, and food costs are 30% of RM45,000 revenue, your food expense would be RM13,500.
3. Set a Profit Goal
Decide how much profit you want to achieve. In Malaysia, restaurant profit margins are usually 6-10%. To aim for a 10% profit, ensure your total costs do not exceed 90% of your revenue. For RM45,000 in revenue, your total costs should stay below RM40,500.
4. Plan for Emergencies
Unexpected expenses, like equipment breakdowns or sudden price hikes, can disrupt your cash flow. Set aside 5-10% of your revenue as an emergency fund. For RM45,000, this would be RM2,250-RM4,500.
5. Monitor and Adjust Regularly
A budget isn’t set in stone. Compare your actual expenses and revenue with your budget every month. Adjust for changes, like increased ingredient prices or slow sales periods, to stay on track.
6. Use Tools to Simplify
Budgeting apps like QuickBooks or a simple Excel sheet can help you track your expenses and revenue easily. Many POS systems also provide detailed sales reports to help you plan better.
Creating a restaurant budget is not just about crunching numbers. It’s about understanding your business and planning for success. Following the steps in this guide will help you manage your finances effectively.
Remember, the key to good budgeting is consistency. Make budgeting a monthly habit, involve your team, and always prepare for the unexpected. Your restaurant’s financial health depends on it!
What’s your biggest challenge with budgeting? Let us know in the comments below!
