The fine ambience and great tasting food at an upscale restaurant can be quite mesmerizing. The atmosphere can be so appealing that it may even have you questioning whether you should open your own restaurant. Often, the allure presented by fine imagery conceals quite a different story from what is perceived as the truth. And this is why enterprising individuals can often find themselves in peculiar situations that once appeared to be promising opportunities.
To be honest, a restaurant business is a very challenging endeavour to undertake. From the outside, you would think that a busy restaurant means that a great profit is being generated. Unfortunately, the true reality can be quite sobering. The restaurant industry is notorious for being very difficult to succeed in. Seventy percent of restaurants fail within their first three to five years of business. That is higher than the fifty percent rate of small businesses that fail after five years.
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It can be said that no matter the business you operate, you will deal with challenges that test your abilities. As such, knowing the lessons provided by a failed restaurant can help you tremendously improve your performance as an entrepreneur. Here are a few lessons you can take away as a business owner:
Research and test before you launch your business
One of the first mistakes aspiring entrepreneurs make is allowing their enthusiasm to supersede rational thinking. If they fall in love with the idea of running a particular business, they tend to start that business immediately, without doing their necessary homework first. This is because the thrill of entrepreneurship provides an adrenaline rush that they continually want to chase. However, that excitement can wear off very fast when the reality of business ownership hits harder than they have anticipated.
Before you start any business, you must always do a test run to be sure that you have a viable idea. This means getting approval not just family and friends who only encourage your ambition, but also from your target customer. Proof of concept can only be provided by those who will be using your product or service. Therefore, you should do a small test run before you pour all of your money into opening a full-fledged business. If you receive a majority approval, then you can proceed with opening a full-scale business. If the feedback is more critical, then you need to work to improve your offering before investing in a business.
Think about how much stress and wasted money you could save yourself if you spent the time to gather marketplace feedback. You must understand that a business serves other people, rather than yourself. Therefore, it is vital that you know what your target market will actually pay before you start a business.
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Price your products and services right
So many entrepreneurs put their businesses in failing positions because they do not know how to correctly price their products or services. Just because money is being exchanged does not mean that a profit is being made. And this is where confusion tends to occur. Think about a 5-star restaurant and a chain restaurant. The higher-end restaurant has higher prices to match the quality of food they serve and immaculate service provided. You will not find a high-end restaurant offering 2 for $20 meals. This is because offering such a price presents a loss the business cannot incur. To turn a profit, these types of restaurants charge higher prices to cover the expenses incurred on high food cost, more experienced staff, etc.
Do not start a business with the lowest price model. Unless you are Walmart, you cannot charge extremely low prices to attract customers. They can do this because their pricing strategy starves out smaller competitors that lack the resources to offer the same pricing. If you want your business to be profitable, charge an appropriate value for your products or services. Also, take into account your business expenses when determining your pricing. You need to ensure that your expenses do not exceed your revenue. A profit can only be made when there is money left over after your expenses have been paid. If no money is left over, you are operating at a loss. This will force you to close your business doors sooner rather than later.
Entrepreneurship and business management require different skills
Most business failures happen because the business owners possess an entrepreneurial mindset but they do not understand the process of operating a business. Not understanding how a business works can quickly lead to your operations spiralling out of control, with your personal life doing the same as a result. A failing business can lead to you being overwhelmed by debt, which can cause severe stress being developed. Business owners who are dealing with a failed business tend to become depressed. This can lead to drinking and other forms of personal abuse.
If you want your business to succeed, you need to understand the dynamics of business. Your passion can only take you so far when that is all you are relying on. You must know how to market your business, acquire and retain customers, grow your company, and deal with external factors that can affect your organization. Furthermore, you must move beyond being a visionary and think strategically. You cannot guess your way to a successful business. The only way your company has a chance at succeeding is when you can devise a plan that determines what course of action your business will take.
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Outsourcing tasks to a reliable team
If you are not good at strategy and planning, find a partner who can handle the task or outsource it to an individual who specializes in business strategy. No successful business is truly a one-person operation. The businesses making seven figures and beyond were built from a team effort where everyone focused on areas that allowed their skills set to shine. If you know you are not great at managing the complexities of business, find individuals who can help you with this effort. Never let your ego get in the way of making smart business decisions.
It never hurts to be optimistic about starting a business, but you must understand that failure is more common in entrepreneurship than success. The reason this is true is that most individuals entering into the world of entrepreneurship do not understand the dynamics of business ownership. It is one thing to see success on television, but the process of creating success is something entirely different.
Owning and operating a restaurant is one of the most challenging, riskiest endeavours to take on. But no matter the type of business you start, you must come into business ownership with the willingness to constantly learn and improve. The sacrifices of entrepreneurship can be well worth your effort if you create a strategy that acknowledges both your strengths and weaknesses and compensates for the areas where your weaknesses can create serious liabilities. If you do this right, you will have no problem navigating your business towards successful results.
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