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4 Financial Considerations When Setting Up A Small Restaurant

Going from working under a head a chef to managing your own restaurant can be an exciting step on your career ladder. However, for those setting up their own restaurant for the first time, it can be easy to get carried away with marketing campaigns and creating the best dishes. However, if you do not take specific financial considerations into account, you could find that your restaurant is soon at risk from problems. These can vary from lack of cash flow to diminishing profits.

1. Invest in insurance

The most important aspects of any restaurant are its food and its ambience. However good a chef you employ, there may be times when these factors go terribly wrong. In these times, you may be left with a significant personal injury or illness claim to battle.

Common kitchen and restaurant accidents, which you will need to cover for, include faulty equipment, burns, cuts and slips, as well as the possibility of a fire happening. All such accidents can cost both the business owners and the staff, so it is wise to cover yourselfs.

To protect your assets, one of the first things that you should do when setting up a restaurant is to invest in the right insurance. Any business with contact with the general public should take out public liability insurance to protect themselves from the risk and cost of potential personal injury claims.

You should ensure that you are getting the right level of liability cover for your restaurant; Hiscox’s insurance policies, for instance, can ensure that you are protected against legal and compensation costs, cover up to £100,000. They also provide immediate insurance coverage during unexpected events.

2. Find the right funding

Restaurants need an extortionate amount of capital to get off the ground. Securing the right funding may be vital to ensuring that you stay within your budget and have enough money to stay afloat in your first year. There are many different funding options for restaurant owners, such as the Prince’s Trust and the Funding Circle. These allow restaurants to apply for funding which can help them to avoid the trials and possible disappointment of applying for a loan.

3. Setting up a realistic budget

It can be easy to lose track of expenditure when starting up a business and this is also true for restaurants. You should consider the cost of decorating, creating the right ambience and the quality of your ingredients. Then, it is vital that you set a realistic budget before you open your doors. Doing so will ensure that you can still make the profit and see a return on your investment. It will also lower the risk of potentially acquiring debt, or being unable to find the regular cash flow to stay open into your second year.

4. Consider start-up capital

Restaurants are notorious for being incredibly expensive to invest in, and there are many considerations that you need to think about before raising enough money. If you are looking to buy a restaurant, they typically cost around £250,000 to start up. This may increase depending on the location. Most restaurants are located extremely close to the centre of a town, where units will be more expensive. You should consider opting for a unit further away. Then, you should invest instead in an excellent marketing campaign to raise awareness of your location.

Keeping track of your finances is vital for small businesses, especially in their first year. However, following this guide will help you to maintain a healthy grasp of your finances well into your businesses’ second year.

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