Article | August 18, 2021
The term "Horeca" is an abbreviation of "Hotel", "Restaurant" and "Café". It represents a very diverse sector, i.e. from star-restaurants to catering and canteens to brasseries up to small, local cafes. A small country like Belgium counted end 2017 almost 60.000 horeca-enterprises (7% of all Belgian enterprises), thus showing the importance of this sector. Furthermore with a total revenue (also end 2017) of over 15 billion EUR and more than 75.000 people employed in this sector, it remains an important economical actor for the Belgian economy.
It is undisputable that the Covid crisis has been a disaster for this sector. However, now that life gradually returns back to normal, it is likely that the trends which were already launched in the horeca sector before the crisis will be even enforced and accelerated.
With new habits come new customer needs related to the horeca. Think about the company canteens. With more people working from home, this sector will have to reinvent itself. Most likely they will start offering also prepared meals directly to consumers via supermarkets and other distribution channels. Obviously, this will force other actors in this market to reinvent themselves, thus launching a chain reaction.
Even more pronounced is the impact of take-away and delivery. While a large group of the population was still a bit hesitant to consume take-away, the Covid-confinements also forced this group to start exploring these new services. At the same time, restaurants which were not offering take-away services before were also forced to adapt. As a result, take-away and meal delivery services have known an exponential boost and this trend, although it will know a small set back when the pandemic is fully over, is here to stay.
Unfortunately the horeca sector was already a sector with a lot of difficulties before the crisis. The sector historically copes with one of the highest percentages of businesses bankruptcies , especially when looking at the first 5 years following the establishment of the business. This is often caused by the fact that many people consider the horeca as an easy way to entrepreneurship, founding their businesses with a poor of even no business plan. At the same time there is of course the strong dependency on labor. As this sector is very labor intensive, margins are low due to the high labor costs. Furthermore with hard work and irregular and long working hours, horeca businesses have more and more difficulties to find motivated and qualified personnel. Additionally the sector, being so fragmented, often lacks professionalism, not really for the horeca-activity (i.e. the preparation and serving of food and drinks) itself, but rather for the supporting activities like financial management, supply chain management (like good stock management), procurement… This makes that many restaurants have a poor view on the breakdown of their costs and revenues, thus losing a lot of money in inefficiencies like expired stocks due to too large ordering, certain dishes which are not sold at the right price, employees being paid too much expensive overhours, bad negotiations with suppliers…
Apart from the above very obvious trends, there are still a lot of other trends. These map perfectly with the 8 universal trends, I described in my earlier blog "Universal trends - Common over all industries?" - https://bankloch.blogspot.com/2021/01/universal-trends-common-over-all.html, i.e.
Pressure on margins: margins are historically already low in the horeca sector, but are becoming even more under pressure, due to new forms of competition, like meal boxes (like HelloFresh or Foodbag), prepared meal services (like Mealhero), sharing platforms (like Thuisafgehaald or Menu Next Door), virtual restaurants (also called Dark Kitchens, i.e. restaurants without a physical location, but only serving online delivery platforms), living room and concept restaurants… This forces restaurants to work more professionally and efficiently and find a specific niche (of clientele willing to pay extra for specific product or experience). These efficiency gains can be achieved via digitalization (with regards to personnel management, cash register, stock management…) and new technologies (like 3D printers or cocktail machines like "Tenderone", "Bottletender"…), but also by being more selective on opening hours/days (especially for weekends and holidays), putting less (more specialized) choice on the menu card, making dishes less complex by investing more in the quality of the ingredients, by pushing more self-service (e.g. let the customer cut the food for the whole table, which has as a welcome benefit that it increase the customer experience).
Trustworthiness: clients must have confidence (trust) in a horeca place they are visiting. Obviously, the customers must have the feeling of being treated fairly and respectfully (e.g. via a transparent and correct pricing), but they also want to be able to trust the product they are consuming (eating or drinking). This means providing more transparency, like providing more info about each dish and more its ingredients (important for specific diets and allergies), nutritional value and origin of the product (i.e. farm-to-table).
Frictionless experience: the customer experience should be at pleasant as possible, meaning any friction should be removed where possible. This consists of frictionless ordering processes, via digital menu cards (providing details of each dish and allowing easy filtering) and direct ordering (directly to the kitchen), all the way to a frictionless checkout, consisting of digitally receiving and paying the bill. A multitude of solutions are available here, like full ERP solutions for horeca businesses (like Apicbase, Horeko, Square for restaurants, HorecaMakers, Growzer…), digital menu card solutions (like Kimeru, Digital Wizards, Futuresto, EasyButler…), ordering terminals and apps (like Futuresto, EasyButler, MyOrder, QCard, PayMyTable…), cash registers (like Lightspeed, RestoMax, Gastrofix, HorecaMakers…).
Personalization: the most important trend for the horeca is obviously the personalization. This results in products and services adapted to the specific needs and desires of every customer. Additionally horeca businesses are being converted more and more into "Experience" places (i.e. surprise your customers, by selling them moments and letting them escape from the stress of day-to-day life), i.e. ensure to give the customer a unique, unforgettable experience, not only via the food and service, but also via the texture and color of the dishes, the building, the interior design…
More in detail this trend means:
New types of restaurants, like living room restaurants (enforcing a more personal touch and home feeling), concept restaurants, food markets, pop-up restaurants…
Accommodating for different food and drink choices. Already around 20-25% of people have a specific food choice, meaning restaurants have to accomodate for people wanting to eat vegetarian, vegan, lactose-free, gluten-free, halal, kosher, paleo, biological… Additionally people want alternatives for the traditional wine-card like different types of water, mocktails, non-alcoholic wine, champagne and spirits (e.g. Seedlip), luxury soft drinks (e.g. Crodino, Finley, Pinky Rose, Fentimans & Fritz-Kola) or special types of tea to drink the meal.
Horeca places should become places to socialize, i.e. provide a home-feeling (i.e. a feeling of comfort, stability, trust, intimacy, warmth…), engage socializing between guests via guest tables, street food or sharing plates…
Allow customers to compose their dishes themselves, cfr. Subway, Hawaiian Poke Bowl…
Democratization: by working more efficiently, more automation and digitalization, it becomes possible to offer certain services and products in higher volumes and at lower costs and thus at a lower pricing. This means certain horeca products, which were before only available to the happy-few cannot be offered to a larger segment of the population. A good example are star-restaurants offering a standardized (simpler) version of their dishes via a take-out or catering service.
Authenticity: restaurants are focusing more and more on providing an authentic experience, e.g. by transforming old factories or churches to restaurants, integrating open kitchens where guests can see the cooks preparing the dishes, chefs finishing plates at the customer’s table… Additionally there is a trend towards pure, simple and honest, meaning natural, artisanal and/or high-quality products (ingredients), which are prepared and served in a simple way. A good example of this are also the traditional dishes in a more luxury fashion, e.g. new types of éclairs (Chez Claire), croques (RemorK), hamburgers (Ellis Gourmet burger), meat balls (Balls & Glory)…
ESG (Environment, Social and Corporate Governance): with customers being more sensitive about the environment and society, horeca places need to accommodate to this customer desire. Restaurants are working more and more with local, healthy (e.g. use of superfoods, use of less salt and fat…), biological/organic and Fairtrade products, but also with products with a lower ecological footprint, like e.g. replacing meat with insects, soya-based meat replacements or vegetables. Additionally horeca players need to avoid waste, via a no-waste kitchen concept (via e.g. smaller portions, trash cooking, creative usage of waste…), via anti-food-waste platforms (like Too Good To Go) and by reducing/avoiding packaging (e.g. avoiding plastic straws, cups…).
Partnerships: as many businesses, a horeca business is more and more integrated in a concept, like incorporated in a shop or combined with an experience (like a horeca place in a brewery). Additionally due to the digital revolution, horeca places need to partner more and more with online ordering and delivery services (like Deliveroo, TakeAway.com or UberEats, potentially integrated via Deliverect), social media (like Facebook and Instagram) and food review platforms (like Yelp, TripAdvisor, Zomato, Foursquare…), reservation platforms (like TheFork, Tablebooker, Resto.be…) ordering and payment apps (like Dorst.app or Yummy.app). Additionally new players are coming on the market to help horeca businesses with their typical problems, like procurement (e.g. Tippr or Horeca Direct Shop) or recruitment (e.g. Mise en Place).
It is clear that although the horeca sector is already centuries old, it is also undergoing major disruptions. In the end let us hope that all those evolutions can give us an even more enjoyable horeca experience.
Article | June 21, 2021
The U.S. small business sector accounts for two-thirds of the country’s net job growth and 44 percent of economic advancement, according to the U.S. Small Business Administration’s Office of Advocacy. However, despite their crucial role in the economy, small businesses have also fared among the worst in this pandemic.
In fact, of the small business owners who report lower sales due to COVID-19, 30 percent are unlikely to remain open without government assistance, suggests the Federal Reserve Bank. If you’re an entrepreneur or business manager, then you know just how difficult these uncertain times are for the small business community—not to mention, how vital it is to help each other out.
No matter the number of resources or influence at your disposal, there are many ways you can provide a helping hand. Use these simple ideas and strategies to support your fellow small business owners right now.
Article | July 29, 2021
The first and crucial part of building your small business is setting up finance for your business. Overhead costs for small businesses are also included in this broad category of business finance. An old proverb, “You need to spend money to make money,” gels perfectly with the business notion.
Business owners spend a lot of money creating a product or service, which is considered “direct costs.” Some expenses are not directly related to the creation of a product or service but aid in the operation of your business; these are referred to as "overhead costs" or "indirect costs." However, from an accounting standpoint, overhead costs are not considered expenses at all.
Small business owners have a lot of costs to consider especially overhead costs. Here are a few examples of overhead costs: a business license, accounts payable, invoices, office supplies, accounting, and legal fees, bank fees, and many more to pen down.
Business owners are behooved to be careful and make sure that their expenses should not outweigh their income. Business overhead is one area that most businesses face, and it is worth investigating further and managing it accordingly.
Overhead expenses consume most of the remaining space on your profit and loss statement. However, cutting your overhead costs will improve your business finances.
Let us further discuss few aspects of overhead costs and how to reduce overhead costs for small businesses.
What Are Overhead Costs?
Overhead costs are the indirect but requisite expenses for running a business. These costs do not directly generate revenue for the company, but they do not change as your business grows. Overhead costs must be borne even if no products or services are produced or sold for a period and cannot be
Here are few examples of overhead costs for small businesses:
Electricity bill, gas, water, internet, etc.
Rent for office spaces, warehouses, etc.
Business licenses and permits
Marketing and advertising materials.
Salaries and wages
Insurance for vehicles, employees, and properties.
The key is to keep track of your overhead costs and not let them interfere with your efforts to grow your business and turn a profit.
Once your concept of direct and indirect costs is cleared, the calculation of overhead costs becomes relatively easy.
Types of Overhead Costs
The overhead costs are divided into three main categories that can directly affect your small business fixed costs, variable costs, and semi-variable costs. Fixed costs are easily trackable. Below are few types of overhead costs for small businesses.
Fixed Overhead Costs
The majority of your business expenses fall under fixed overhead costs and do not change regardless of the profit earned by the company or change in the level of output; it remains the same each month. Fixed costs are easily tracked and managed as well.
Fixed costs are pretty predictable and are required to keep a business running smoothly.
Few examples of fixed overhead costs
Renting a manufacturing facility or a corporate office.
Fixed asset depreciation expenses.
Software subscription fees.
Fixed overhead costs are stable and do not deviate from the amounts budgeted for them. However, there are a few exceptions, such as if sales exceed what the company budgeted for, in which case fixed overhead costs may rise as new managers and administrative staff are hired. More employees are added to the company.
Similarly, if you decide to purchase a few additional pieces of machinery to increase production, this will result in a permanent change in fixed overhead costs.
Variable Overhead Costs
Variable overhead costs are those that change depending on the business activity, such as sales volume. Variable costs rise as your sales rise and fall as your sales fall. Variable overhead costs, as opposed to fixed overhead costs, vary from month to month.
Here are some examples of variable overhead costs:
Maintenance of equipment.
Unless the number of workers increases or decreases with production volumes, the labor involved in the production, or direct labor, may not be a variable cost.
Semi-Variable Overhead Costs
Semi-variable overhead costs have qualities of both fixed costs and variable costs. A business may incur such costs at any time, though the exact cost will vary depending on the level of business activity.
Utilities are classified as a semi-variable expense. These costs are only fixed up to a certain level of output. For example, the office’s electricity bill is a monthly cost but varies as per the season.
Semi-variable overhead costs include:
Utilities (power and water costs).
Company vehicle expenses (i.e., gas).
Ways to Reduce Your Overhead Costs
Going paperless is a simple way to save money. Although it may not appear to be a high cost, paper and ink do add up. Instead, adopt technology such as a cloud-based system to store all of your vital corporate data online. This will save you time and money while also allowing you to keep track of details for a more extended period. In addition, going paperless is cost-effective too.
However, going digital also reduces clutter and makes it easier for business owners to stay organized. In the event of a computer or program failure, make sure you have a backup of all your documents.
Going paperless is an intelligent decision to reduce overhead costs for small businesses because of few advantages such as being environmentally friendly, easy access, and digital file system easy to organize.
Create a Systematic Purchasing Process
It's a good idea to appoint one person in the company to handle, examine, and authorize purchases so that he can see all the expenses that management plans to incur before they're paid. In addition, negotiating contracts and placing office supply orders should be the responsibility of this person.
By putting one person in charge of purchasing, that individual can devote all of their time to finding the most incredible deals. The individual in charge of purchasing should be a skilled negotiator who is not hesitant to ask for a discount. Request that your purchasing manager go shopping for better prices on the things you buy frequently. Consider rewarding your purchasing agent with a bonus if they achieve specific cost-cutting goals without sacrificing quality.
Purchasing equipment such as computers, photocopiers, and other necessities every year is a significant expenditure. As a result, leasing equipment is frequently the best option for businesses looking to reduce monthly costs. Renting or leasing equipment makes it easier to upgrade to newer versions of computers and other equipment. Additionally, while leasing, costs such as equipment repairs and maintenance will be reduced if not eliminated.
Tax benefits are frequently available for equipment leases. In addition, depending on the lease, you may be able to claim your payments as a business expense by utilizing specific legal provisions.
Leasing equipment is one of the most productive ways to reduce your overhead costs for small businesses.
Market to Your Existing Customers
Marketing to your existing customers can be a good strategy to reduce costs. This step reduces your marketing costs and shows that you care about rewarding loyalty, which gives your brand a boost.
Customers who are happy with your products or services are more inclined to tell their friends and family about them, and word of mouth is still the most effective marketing method.
Organic promotion from peers is more likely to be trusted by potential customers than paid advertising.
Choose a Business Credit Card That Suits You
Choose the best business credit card that suits you for your business expenses. Your company can benefit from credit cards in several ways. For example, Cash-back benefits, travel miles, or a point system are all available on cards targeted for corporate use.
When buying office supplies and paying for travel expenses with a credit card, these incentives can pile up quickly. First, examine the annual fees and interest rates associated with your credit card. Then, it could be time to apply for no-fee credit cards with lower interest rates.
Choose a credit card that is ideal for your company, particularly in credit limits, interest rates, and fees. This could be one of the methods to your cost-cutting.
Frequently Asked Questions:
What are typical overhead costs?
Overheads are business costs associated with the day-to-day operation of the business. Accounting fees, insurance, advertising, legal fees, interest, labor burden, rent, supplies, repairs, taxes, travel expenses, phone bills, and utilities are examples of overhead expenses.
How do you calculate overhead costs for a small business?
Divide the total overhead costs of the business in a month by the monthly sales to calculate the overhead rate. To calculate your overhead rate, multiply this figure by 100. A lower overhead rate indicates greater efficiency and profits.
Are overheads fixed costs?
Typically, overhead does not fluctuate with increases in product production, which is why it is a fixed cost. Mortgage or rent for buildings such as the corporate office are examples of fixed costs.
"name": "How to write resolutions for small businesses?",
"text": "Examine all aspects of your small business from the previous year to create a solid list of resolutions for the coming year. Consider your successes and failures and work to alleviate them."
"name": "What is a resolution for a business?",
"text": "In business, a resolution is a proposal made during a meeting of the company's shareholders or directors. It is discussed, and its approval represents an official confirmation of any action that the company will take. Resolutions are classified into four types: elective, extraordinary, unique, and ordinary."
"name": "Why should every business have a resolution?",
"text": "Resolutions help to focus your efforts and energy on new goals and reaching new heights. In addition, resolutions enable business owners to understand where they can increase efficiency and grow over the coming year."