Restaurant Bankruptcy in this time of Coronavirus/COVID-19 is one of the effects this pandemic has had on the Restaurant Industry. There’s a lot of different measures published on how to adapt to this new normal. Safety protocols and guidelines we’re given to the Restaurant Industry in order to continue to operate their businesses.
However, this pandemic has caught the whole industry, the whole world rather, in surprise. No one saw it coming thus no one was prepared enough for its impact on the whole Restaurant Industry. And as we all thrive to survive this pandemic, we give you these 4 attainable steps in order to avoid Restaurant Bankruptcy during this time of Coronavirus Outbreak.
4 Steps to Avoid Restaurant Bankruptcy during the Coronavirus/COVID-19 :
- Check your Restaurant’s basic essentials.
This is like the vital signs of your Restaurant Business. In order to avoid Restaurant Bankruptcy, it is important to check on its life-sustaining factors such as current cash balance, accounts receivable, cash flow, and expenses.
- Cash Balance is the amount of money in an account. It is calculated by adding the initial deposit to all subsequent deposits and then subtracting all disbursements. This is basically the amount you have in all your bank accounts. It is important to know your Restaurant’s Cash Balance as this will serve as your basis on how well your business is doing in this outbreak.
- Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Trying to thrive and survive in this time, it is important to ensure that every AR was collected and retrieved.
- Cash flow is the process of how the money is coming into your Restaurant Business. Knowing the cash flow of your business, you’ll have a clear view on how much money your restaurant business is still making.
- Expenses are the amount that your restaurant business is paying should you opt to operate or not. There are two types to check on to : Fixed and Variable Expenses.
Knowing these basics would help you prevent Restaurant Bankruptcy during this time of pandemic as you’ll have an idea of what to work with in this crisis. This gives you the opportunity to understand how much you have and will need in the long run. It also makes a Restaurateur reap the rewards of his Restaurant Business.
- Look out for the inadequacy.
Running a Restaurant Business in the middle of this pandemic would take a toll on you especially if you don’t have an idea on how you will sustain your sales with all the protocols being implemented. But, you have so much in your hands more than you expected. Checking these inefficiencies would help you to maximize what else your Restaurant can offer you thus avoid Restaurant Bankruptcy.
These are the inadequacy you’ll have to look out for if you want to prevent Restaurant Bankruptcy :
- Inefficient Assets – These are the assets or items lying around your business that’s not being used or you have already forgotten that existed. Take for example, you bought 4 coffee makers for your cafes and you ended up just using 2. Instead of just letting it collect dust and rust, you can sell them and make a profit out of it.
- Cash burn Rate – This is the rate at which a business is spending and losing money. It is the process of how you’re losing money thus the negative cash flow. It is important to determine the Cash Burn Rate of your Restaurant for you to solve and minimize the negative cash flow happening. Checking up with your expenses shall help you to track your Cash Burn Rate.
- Subscriptions – It is no surprise that your Restaurant Business is subscribed in many business platforms that helps you operate, but as we try to avoid Restaurant Bankruptcy, and with this pandemic crisis it is only natural to treat these subscriptions as excess fat and unnecessary. Cutting off this type of inadequacy would give you additional cash flow freedom in this challenging time.
- Expansions – Before making a decision to pursue the expansion you’ve been planning for a long time, this crisis asks you to reconsider your plans. It is important to check if this expansion could lead you to spend your money into nothing. Take note that dine-in options still have strict restrictions. This trying time asks every Restaurant owner to adapt but stick with their core business.
Always monitoring and checking what else could be liquidated or to be converted to cash is one way to help your restaurant avoid Restaurant Bankruptcy.
- Additional Funding
Restaurant owners should be able to identify the source/s for additional funding, and a common mistake observed is that doing this in times when you need it.
Planning is part of the everyday operation of a Restaurant, thus it is imperative to plan this thing ahead. This gives you an allowance to be prepared and you’ll be able to use the fund you’ll obtain wisely rather than just spending it to address the concerns that arose. Being able to look for additional funding ahead of time will do wonders for your business and for you as an owner.
Payment Deferrals are one of the main sources for additional funding. This helps a restaurant owner to save his business from Restaurant Bankruptcy through providing an opportunity to reserve as much cash flow as you can.
Another option is to look and identify companies that would give you a good deal for additional funding.
- Action Plan
Now that you’ve identified what can be salvaged from your business, it is now time to create an action plan, execute, and monitor the outcome. Make use of the information you’ve obtained from checking the basic essentials to asking for additional funding. Follow through to your plan and do what every restaurant owner would do, thrive to survive and achieve the success you’re aiming for despite being in the middle of a pandemic crisis. Having a plan is one thing, but making an action out of it is on another level and this mentality could help you and your restaurant to avoid restaurant bankruptcy.
Having a business check-up and determining how healthy your restaurant is doing is a must if you want to start with these actionable steps. Preventing Restaurant Bankruptcy during this pandemic crisis is a huge challenge for everyone, especially to the Restaurant Industry. Safety protocols and guidelines had limited the business and workflow for the industry thus making them test new waters in order to continue operating.
Staying in a business in the middle of this crisis is demanding and taxing, but let this inspire you as a Restaurant owner and keep in preventing your restaurant from filing a restaurant bankruptcy by taking control of your own course and business. Study and know your way with the new normal and start operating around it.