This restaurant nailed the experience. I mean as soon as you poked your head in you could feel it. It wasn’t just the friendly staff, the delightful food, or the perfectly coordinated flow, it had just as much to do with the clean and vibrant ambiance. It was truly a special combination.

The owner, Shane, knew exactly what made it special. It didn’t happen out of dumb luck. He had coordinated it all very well and was rewarded with big profits. He was raking in the cash because he was delivering something nobody else in the area was. Sure, there were plenty of “competitors” but none of these restaurants were the “competition” because of the WAY he delivered.

And yet, one year sales started stagnating. This didn’t seem like a huge deal, because it was probably just a marketing hiccup. But changing the marketing didn’t help that much. In fact, the next year sales were flat from the year before. Again, no big deal. It’s probably just the restaurant hitting “maturity.” But then, the next year sales actually decreased.

This made Shane re-evaluate what was working, and then he noticed something crazy. That same environment that had made the restaurant special looked tired, not vibrant. The floor was worn and the chairs and tables lost their bright appearance. It was time for a major overhaul to bring the environment back up to speed. But there was a problem. Over the past several years Shane was taking plenty of money out of the business based on the trajectory from years ago. When he had the monetary flexibility to re-invest in his business, he instead ignored the inevitability of the current situation and spent it on other things.

Unfortunately, Shane’s situation is all too common. Business owners and managers forget to take a long term approach to their business AND their finances. This puts these same owners in a tight spot when things break, things get worn out, or new equipment needs to be bought.

Learn from Shane’s mistake and create a capital investment plan. Here are some points to cover:

  • What are your assets?
  • How long you expect them to last?
  • How much and when will you need to invest in replacing them?
  • When will you need to add additional assets (according to your growth plan)?
  • How much you save every year to make sure you can stay modern and growing?

Answering these questions will be a big help so that when you are hit in the face with big asset costs you will never be caught off guard.

 

– Nino