Category Archives: crisis management

Why Many Businesses Earn a Paltry Profit, If Any: How to Turn This Dilemma Around

By James D. Roumeliotis   

10 Reasons Your Business Is Not Making Money – InsiderBLM

A business that makes nothing but money is a poor business.” – Henry Ford

Every business launched should be infinite and earn a profit ─ unless, of course it is a non-profit organization. Profitability has an impact on whether a company can secure financing from a bank or attract investors to fund its operations and grow its business. Continuous prosperity is earned most notably by tightly controlled financial management, including cash flow/liquidity, a methodical and lean operation, and a policy with emphasis on employee, vendor, as well as on a customer focused environment.

However, many businesses are not earning a decent profit margin or produced one for some time. Those companies are at a stage where they can be profitable anytime, but they prefer to invest money back into the company to keep the growth steady. However, there are also scores of them where they cannot survive without external debt or they are operating at a highly unsustainable business model such as selling merely on price with no unique selling proposition (USP) and instead, paying more attention at how fast they are growing. 

How much profit should a business be earning?

A decent margin will vary considerably by industry and size of business, but as a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high, and a 5% margin is low. The industries with the highest average profit margins include:

Large Industries

  • Software publishing
  • Pharmaceutical
  • Database, Storage & Backup
  • Semiconductor industry
  • Financial services (non-bank)
  • Healthcare support services

Small to Mid-size Businesses (SMB/SME)

  • Accounting services
  • Lessors of real estate
  • Legal services 
  • Management companies including consulting
  • Orthodontic and dental offices
  • Computer software and hardware technical operations
If You're Only In Business To Make Money… You're Doing It Wrong – Call  Porter

Industries with low profit margins include airlines, grocery stores and automobile dealers as they are typical examples of low-margin businesses. Capital and labor intensive industries usually have low profit margins, due to massive investments with a low return or a long term return (ROI).

For a complete list of industries and average profit margins click here.

Popular newer companies with high values but no profit

Some notable relatively young companies across the tech and lifestyle sectors such as Airbnb, Uber, Wayfair and Peloton, to name a few, have yet to break even since their inception despite the justification for high valuations which are generally around the future prospect of earnings, among other factors. All highly hyped start-ups had great stories of scale, regardless of whether their stories have yet turned-out as predicted. In fact, many are actually losing millions every year during the first decade (think Amazon). Reasons for not making any profit include, in part, a large investment in sales and marketing, product development, technology and operations. Some are less efficient with scale. Consequently, to make money, they will need to re-engineer their business model and manage costs from running far ahead of revenues.

How to restore your business gains

There are several measures to take to make certain your business thrives, and profits are frequent, as well as attractive.

  • Your profit margins ought to be in line with your industry or better. Consider offering a premium product which will yield a better profit and reputation. Avoid markdowns as they are profit-killers. In addition, enhance your brand image and increase the perceived value of what you are selling.
  • Negotiate better pricing agreements with your suppliers to reduce the costs of goods and widen your margins. Negotiate for discounts. You may want to include free shipping or other offers such as receiving extra products for free. This works well when you are purchasing in bulk.
  • Reduce supply chain costs and inefficiencies. One way to accomplish this is by shipping product in less than a full truckload (LCL) as it is more costly when it is full (FCL). Making several deliveries each week is more expensive than just one. 
  • Streamline your operations and reduce operating expenses. Automate specific tasks in your business such as putting repetitive activities on autopilot. This way, you can reduce the time, manpower, and operating expenses required to run your business. Cut overtime and excess staffing as much as it is feasible and control other expenses by implementing rigid budgets and needless expenses. If the purchase does not contribute to the growth and improvement of the business, it should not be made in the first place.
  • Avoid over leveraging as this entails having a significant amount of debt in use along with a debt service strain. While debts used to generate revenue can increase revenue and profit over time, excessive debt can inhibit profitability. Keep your debt on the wise and strategic side of things.

________________________________________


Request your TWO FREE chapters
 of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

Leave a comment

Filed under 1, Business, business development, business management, business model, Business success, business vitality, crisis management, decision making management, launching a business, management, preventing business problems, starting a business success

The Four T’s of Leadership: Truth, Trust, Transparency & Teamwork

By James D. Roumeliotis

Those, like myself, who are drawn to the discipline of “leadership” have read our share of articles, research papers and oodles of third-party opinions on the subject matter. However, most if not all of us, will agree that the definition arrives at the same conclusion: Leadership is a skill and talent, mainly by an individual, to lead, motivate, influence other individuals, teams, and entire organizations to act toward achieving a common goal. In business, this implies directing colleagues and workers with a strategy to meet the company’s attainable goals and objectives.

For leadership to possess credibility, it must earn three sacred principles: Truth, Trust and Transparency plus an additional and equally important one ─ Teamwork. These elements will be expounded below.

Leadership styles

Regardless of leadership style applied, the four T’s presence are not to be discounted.

Without going much into detail on the eight leadership styles, as this subject is an article or book unto itself, its effectiveness is summarized in the following table:

Leadership StyleCommonly EffectiveOccasionally EffectiveRarely Effective
DemocraticX  
Autocratic  X
Laissez-Faire X 
StrategicX  
Transformational X 
Transactional X 
Coach-StyleX  
Bureaucratic  X

The four T’s of leadership

The four “T’s” are considered the cornerstone to a leadership’s personality and long-term success. Those skills are all within reach and should be brought to the top of a leadership personality.  

Truth: Lack of truth expressed in any organization can take many forms. It could be departments not sharing information because it might put them in a bad situation with peers or it could be information not reaching a manager because no one wants to pass-on any bad news. Leaders need to know the truth to make intelligent business decisions and the employees at all levels should know the truth to do their jobs effectively. 

Trust: Without trust, a leader will not succeed instigating a productive team culture. Moreover, the most important attribute building trust is transparency. Leaders build up their team members’ trust by communicating transparently and truthfully – in other words, by being trustworthy. In addition to the importance of team members trusting their boss, it is essential that supervisors also trust their direct reports and facilitate their success by creating the conditions for it.

Transparency: A recent Forbes poll revealed that 50% of employees think their organizations were held back by a lack of transparency. When an individual or an organization is transparent, there are no hidden agendas and no information is being kept from people who need to know it. Transparency also promotes recognition of common goals. This is important because you are not stating one thing while covertly trying to achieve something else. Trust and transparency go hand-in-hand because transparency builds trust.

Teamwork: Teamwork is critical to success in any effort. Excellent leadership requires inspiring the people around them by empowering them, by enabling them to contribute their expertise as a collective and cohesive team, and ultimately trusting them.  Teamwork and leadership in tandem are important because they provide clarity for your team and have a direct impact on the vision of the company and its results.

The way these principles need to be applied will vary with each circumstance. However, the principles themselves remain the same. Therefore, leaders can and should apply these principles in an adaptable way.

The takeaway

Leaders must create the conditions in their organization to succeed, as well as trust their colleagues and workers to do so, and verify that they have done so ─ by keeping in consideration the proverb, “Trust but verify.” By applying the principles of trust, truth, transparency and teamwork, leaders will help ensure their teams’ success. I realize that helping others grow brings me fulfillment. I see how being an educator, mentor or coach and an advisor, as well as an employer are rewarding roles for me. 

__________________________

Request your TWO FREE chapters of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

Leave a comment

Leave a comment

Filed under Business, business transparency, crisis management, decision making management, effective leadership, inept management, leadership, management, reputation management

The Inept Organization: Weak Leadership as the Culprit

by James D. Roumeliotis

Embarrasing Moment Photo - Pants down

How often do you come across a company, either as a consumer or at a business relationship level, and realize how frustrating it is to deal with?

To understand and penetrate the corporate governing structure and “culture”, you need look no further than the upper echelon of the hierarchical tree. It is here that procedural decisions are shaped and executed. An entity’s leadership is expected to head the enterprise by governing its long-term growth and sustained wealth.
Moreover, there is a constant search for the “right” human resources. Recruited and fresh talent must resemble the leadership in tone and style. Call it the organization’s DNA. Exceptional organizations are good at these types of corporate strategies, thus strengthening performance effectively.

We notice that in certain types of B2B transactions, there can be scope for unscrupulous behavior. One or both parties are tempted by “disservice” during their business exchange. Shortsightedness might lend itself to make this underhanded approach appear “profitable” on paper. Such relationships inevitably end badly because they are not conceived with trust or respect.

Success Breeds Success

Companies that foster the right attitudes and strategies put the firm on track for success. Examining their corporate histories, you can witness a trajectory of growth. They have a tendency to dominate their markets and “win” through competent talent, innovation, and an entrepreneurial mindset within the leadership at the executive level. These choices underscore the prosperity and rapid growth of the institution. An examination of Alphabet (Google) or Facebook shows this quite nicely. They are not built like “traditional” corporations nor do they act like them.

Organizational leadership is accountable for creating value for customers, employees and its owners/investors. When Bill Gates conceived Microsoft, he put the firm on track for providing constituent audiences with what nobody else could provide. Understanding “asset” management in an expanded meaning of the term guaranteed that Microsoft would succeed under Gates stewardship.

The opposite is equally true. When top executives lack knowledge or experience for board positions, they should not be promoted to these leadership roles. Some family owned firms run afoul here and this brings up the issues of sustainability and corporate governance. Another weakness in running an organization, in my view, is pushing for short-term profitability at the expense of solid planning. For example, with large organizations, competence is not the primary value but rather connections, politics, and clever tactics. Such “benefits” can usually compensate for incompetence.

No business can continue to prosper unless it attracts fresh and eager talent. Despite the dilemmas within the financial world, top organizations consistently lure new talent with lucrative compensation packages. It is easier for a firm such as Goldman to tap the “best” because of its reputation, size and success than a small local financial player. When Goldman recruits they know where to look, whether it is Harvard or the London Business School. Prospects will already contain the seeds of the corporate culture in their past. Given the “right” conditions, new talent blossoms. Qualifications are never enough. They are a starting point reinforced by attitude and values. The selection and screening process is designed by HR to weed out inappropriate candidates.

Established software companies’ interview process include quizzing candidates with challenging technical questions. This practice not only assesses problem-solving and knowledge ability, but also explores the ability to perform under pressure, which is a key skill required for software engineers to succeed in their intense work environment.

One thing is firmly certain ─ the best-managed companies have “one” factor in common:
They are constant achievers in their respective industries. These companies exude managerial excellence. Financial performance is the result of this style of management. Consider companies such as Amazon, Apple and Cisco, among others, which thrive and ranked in 2019 by the Drucker Institute as America’s largest publicly traded companies according to Peter Drucker’s principles of effectiveness—“doing the right things well.

Deeds Not Slogans

Companies with inept leadership usually fail in the first year or two, but even established companies can stumble badly when they outgrow the capabilities of the founding team. Research by the U.S. Bureau of Labor Statistics demonstrates that nearly 6/10 businesses shut down within the first 4 years of operation.

To be a successful entrepreneur is not an effortless task. It takes plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Not everyone will become Jeff Bezos. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges daily to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.

Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies:
Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit.
No Unique Selling/Value Proposition – Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage.
Operational deficiencies – various ailments and no structure
Absence of or very little communication among staff and management – Divisions aren’t well-coordinated and do not function as a team.
No transparency – There is hardly any openness from management.
Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents.
Lack of proper execution of decisions and with new products/services.
Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient.
Creativity is practically non-existent – An absence of innovation and employee empowerment will hurt progress and stifle new ideas.
No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable.
A weak sales force along with an unattractive compensation plan.
Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.
Poor hiring practices – should hire for attitude and train for skills.
Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure.
High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity.
Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo
No specific and/or stable channel strategy – Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners.
The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company.
Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand.
Weak financial controls – cash flow dilemmas – over leveraged/undercapitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth.
Absence of sound marketing program(s) and/or brand strategy – A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works.
Growing too fast and not staying on course as the company grows.
Lack or very little employee training & development.
Deficient in control systems – reactive rather than pro-active.
Lack of continuous improvements or complacent.

Top executives need to be accountable to the ownership or Board of Directors – whichever applies, or at least to an outside arm’s length and neutral party such as an adviser who can also play “devil’s advocate” when necessary.

Good Organizations Matter

The way to solve an organizational problem is to confront the structural issues with a moral sense of purpose and ethics. For its clients to receive stellar service, the firm must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.

Seth Godin, a renowned marketing strategist, stated succinctly: “If you want to build a caring organization, you need to fill it with caring people and then get out of their way. When your organization punishes people for caring, don’t be surprised when people stop caring. When you free your employees to act like people (as opposed to cogs in a profit-maximizing efficient machine) then the caring can’t help but happen.”

Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. A company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.

Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.

In a nutshell: Well-run companies thrive no matter what by hiring the right people, taking good care of them, listening to customers and never ceasing to innovate and improve.

___________________________________________________

Request your TWO FREE chapters of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

Leave a comment

Filed under 1, Business, business management, Business success, business transparency, business vitality, crisis management, decision making management, effective leadership, entrepreneurship success, inept leadership, leadership, poor leadership, starting a business success

The Notorious Cruise Industry: A Glorified and Reckless Offshore Business

By James D. Roumeliotis

Hiding from the Cruise ship

According to the Cruise Lines International Association (CLIA), the world’s largest cruise industry trade organization, the industry transported and hosted 30 million passengers in 2019 worth upwards of $117 billion in 2017. Traffic, since 2009, grew from 17.8 million with an annual growth rate of 5.4%.

Cruise ships, prior to the recent coronavirus pandemic, maintained a degree of glamour and opulence. Slick advertising and marketing projected images of fun and carefree times with a glorified onboard experience ─ a floating and carefree hotel resort. However, the dark side is best described as an industry which is rogue, careless along with insensitive behavior in international waters. According to a Conde Nast Traveler article, despite a relatively good safety record, the four most common cruise ship mishaps (icebergs is not one of them) are: Rough waves, storms, fires and collisions.

For the record, as a former yacht and passenger ship broker, who chartered entire ships to VIPs and for corporate events, this author possesses first-hand experience in the industry.

The Good…

To be fair, the safety aspect of passenger ships (specifically for those carrying more than 12  passengers) is regulated by the IMO (International Maritime Organization) and its convention known as SOLAS (Safety of Life at Sea). It regulates basic safety aspects for ships on international voyages such as stability, machinery, electrical installations, fire protection and lifesaving appliances. The main objective of the SOLAS Convention is to specify minimum standards for the construction, equipment and operation of ships. In addition, cruise ships are required to adhere to:

  • MARPOL (short for Maritime Pollution): It is the main international convention aimed at the prevention of pollution from ships caused by operational or accidental causes. It was also adopted at the IMO (International Maritime Organization). For cruise ships it includes pollution by sewage pollution by garbage.
  • Classification Society:  It is a non-governmental organization that establishes and maintains technical standards for the construction and operation of all categories of ships, as well as offshore structures such as an oil platform and offshore platform… in accordance with the published standards. Classification Societies certify that the construction of a ship complies with pertinent standards and perform regular surveys in service to ensure continuing compliance with the mandatory standards. A classification society’s workforce comprises of ship surveyors, mechanical engineers, material engineers, piping engineers, and electrical engineers.

Cruise ship good-ugly montage clips

…The Bad and the Ugly

The best way to describe the typical cruise experience is: cruise ship passengers (or guests as they are normally referred to) get ferried from port-to-port on a floating amusement park. However, as recent events have indicated, cruise ships with their confined spaces and close living quarters are ideal for various diseases including novel viruses such as Covid-19 as they may increase the amount of group contact. In addition, people joining the ship may bring the virus to other passengers and crew. ‘Stranded at sea’: cruise ships around the world are adrift as ports turn them away, read the unflattering headline (March 27, 2020) at The Guardian, an established British daily newspaper.

Passenger ships can also be categorized as high-risk, with excessive sexual assault rates, frequent poisonings, and the ever-present possibility of falling overboard. Cruise ships are also infamous for the environment through their deliberate and/or careless disposal of sewage ─ and air pollution caused by their engines and generators burning away tons of heavy diesel fuel.

Although their head-offices are based in countries such as the U.S., the U.K. and other countries in Europe, cruise lines typically register their ships under so-called “flags of convenience.” The most popular countries with shipping registries include the Bahamas, Panama, Bermuda, Liberia and Malta. Those are chosen for their cheap registration fees, low wages, loose regulations and to take advantage of a taxation loophole that essentially shields them from paying any income tax in the countries the cruise liners are actually based and operate. Although the IMO (International Maritime Organization) makes the international rules that govern shipping, including the sea cruising sector, it has no enforcement power.

As for wages, the stark reality for many cruise ship workers is far from glamour work and pay to match. While the working conditions for officers such as the captain and his lower ranking bridge staff, as well as those working in the shops and casinos are adequate, if not better, the experience of those working in the dining room, in the galley, cleaning rooms, and below deck describes a different story. Those workers are often paid substandard wages, survive on inadequate food, have marginal accommodations ─ and basic medical care for injuries can be scant. Those employees also live under a system that is widespread with abuse and uncertainty. Cruise lines can get away with treating their lowest-paid workers poorly because they recruit them from countries with limited economic opportunities. In other words, people who either don’t know any better and/or see a cruise ship job as a better employment opportunity than what is available in their country.

In March 2019 the cruise ship Viking Sky, with More than 890 people onboard, experienced a loss of engine power off the coast of Norway near Molde. Unable to steer without power, the ship kept getting slammed by extreme waves. Consequently, passengers’ belongings were scattered everywhere in their cabins. The captain declared an emergency. Passengers put on life jackets and went to the muster stations. Eventually, evacuation began. Rescuers worked all night to airlift more than 400 passengers (about half the total) to shore by a fleet of five helicopters flying in the dark, slowly winching people up one-by-one from the heaving ship as the waves crashed and the winds shrieked.  The ship, aided by tow vessels, eventually wobbled into the Norwegian port of Molde freeing the remaining 436 passengers and crew of 458.

In 2013, an engine fire aboard the “Carnival Triumph” left its 4,000 passengers adrift with neither any power, nor running water and scarce food. A year later, Royal Caribbean International was bestowed with the unflattering distinction of breaking the record for the largest number of passengers ill onboard its ship from a norovirus plague — nearly 700 people.

In 2019, the behemoth cruise line Carnival Corporation and its Princess Cruise Lines subsidiary agreed to pay a criminal penalty of $20 million for environmental violations such as dumping plastic waste into the ocean. Princess had previously paid $40 million over other deliberate acts of pollution. Royal Caribbean Cruises, the world’s second largest cruise line, has paid an $18 million fine for illegally dumping a great deal of waste oil and chemicals into U.S. waters from its dry cleaning shops and its printing and photo processing equipment.  Moreover, the crew lied to the U.S. coast guard when asked about the slicks trailing its ships. Other companies have also paid high fines for causing environmental damage.

ONE TIME USE - DO NOT USE

Cruise ships also leave a tremendous amount of environmental footprint. In a year, 100 million gallons of petroleum products from the ships seep into the oceans. Then there’s the air pollution they create. They burn as much fuel as entire small towns and operate on low Sulphur fuel which is 100 times worse than road vehicle diesel.

In June 2019, the 13-deck MSC Opera cruise ship with over 2600 passengers onboard, crashed into a tourist boat and then into a dock in Venice, Italy, due to an engine failure. Video posted to social media showed passengers escaping from the tourist boat and frantically rushing down the dock as the cruise ship swiftly approached them.

Bailout Expectations

Sadly, cruise liners with no obvious plan in place were taken by surprise (reactive vs. proactive). As a result, they mishandled the coronavirus onboard their ships ─ beginning with the outbreak on the Diamond Princess in Yokohama, Japan. Seven hundred people on board were infected with COVID-19 spreading through the ship’s corridors during its two weeks of quarantine, leading to seven deaths. According to passengers aboard the vessels, as well as outcry from health experts, in the weeks following the outbreak major cruise lines missed several opportunities to mitigate the crisis. Furthermore, according to one cruise line spokesperson, to avoid a panic that might collapse the industry, the cruise lines continued to mislead their passengers.

As expected, the news of the Covid-19, especially with many more cruise ships involved, caused a wave of cancellations and stock prices dropped significantly. Shares in Carnival, the world’s largest cruise line with several subsidiary brands in its portfolio, as well as its major competitors Royal Caribbean and Norwegian, have lost more than half of their value thus far this year. To reassure passengers, the Cruise Lines International Association (CLIA), which represents 90 percent of cruise liners worldwide, has issued sweeping restrictions and safety measures to be followed on ships. That reactive approach is too little too late and won’t make much of a difference in terms of reassuring booked passengers and potential ones.

The mere talk to inject billions to prop-up the cruise sector devastated by the pandemic, governments need to take this opportunity to come with strings attached such as implementing provisions, and by creating and enforcing legislation on the cruise ship industry to change its intolerable practices. If the industry along with its annoying lobbyists and greedy executives begin to balk, it will be time to take a hatchet and push the repulsive cruise line operators out to sea. Peter DeFazio, a Democrat in the State of Oregon and chairman of the Transportation Committee, firmly declared that he has no desire to bail-out the cruise industry. “They aren’t American,” he said. “They don’t pay taxes in the United States of America. If they want to re-flag their ships and pay U.S. wages and pay U.S. taxes, then maybe.” Other U.S. House Representatives echoed similar sentiments.

Alas, the mischievous cruise industry (the major ones are Royal CaribbeanCarnival Cruise Lines, and Norwegian Cruise Line Holdings) which insists on self-policing yet retains many holes in regulation and insulates itself by registering its ships in foreign countries (i.e. “Flags of convenience”).  Add to that its powerful lobby (spend approximately $3 M annually on lobbying) in the nation’s capital along with strong influence mainly in the tourism-dependent state of Florida.

In the End

The cruise industry has few fans at this time with many more losing interest. In addition, the elderly, are especially steering away of such voyages ─ perhaps for good. According to the Cruise Lines International Association (CLIA) Global Passenger Report, the median age has been between 60 and 69-year-olds, with a full 19% of cruisers falling under this demographic.

The only exception to the cruise industry worth applauding, with its premium ships, sustainable and exceptional consistent experiences, are the small luxury cruise vessels or boutique ships ─ many which resemble a yacht-like intimate atmosphere with accommodations for between 50 and 600 or so passengers along with a one-to-one ratio of crew members to passengers. Some top rated examples include Ponant Yacht Cruises & Expeditions, Variety Cruises, Seadream Yacht Club, Windstar Cruises, Silversea, Seabourn, and the recent newcomer RitzCarlton with its first-ever yacht christened Evrima accommodating up to 289 guests.

Disappointing pictures of what the mainstream massive cruise ships actually look like in the real world (glamour vs. reality) can be viewed at this link.

For all known illness outbreaks and additional unique news on cruise ships, refer to Cruise Junkie, an online information resource which tracks disasters at sea on the website based on news, passenger, and official accounts.

A full documentary of the cruise ship industry gone awry is linked here.

Finally, for some satire about the cruise industry by HBO comedian Bill Maher, click here for the link to the segment.

______________________________________________

Request your TWO FREE chapters of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

 

Leave a comment

Filed under 1, Business, business management, crisis management, cruise liners, cruise ship industry, cruise ships, Global business, preventing business problems

Operating a Restaurant: How to Tackle the Challenges Effectively

By James D. Roumeliotis

Restauarant Operations Image

Whether you are considering starting or purchasing an existing restaurant or a turn-key national banner version known as a franchise, regardless whether a fast food, casual dining or fine dining, food service is a brutal business to get involved with which also requires long hours at the helm. There are many variables to contend with, let alone the primary one…staffing. What will make the operation additionally challenging is the lack of food service and/or hospitality experience. The food service business is quite competitive as you have to attract customers to dine and enjoy at your place more than they do in others restaurants so as to retain them.

From concept to reality and beyond

First and foremost, no one should consider embarking in the food service business, unless the person is a passionate about the business and a foodie. Once immersed, what is the business’s raison d’etre…its mission? The number one goal shouldn’t be profit. There are various types of restaurant concepts to consider. These include: 

  • Fast food;
  • Fast casual dining such as a café and a pub or a family style dining;
  • An upscale dining establishment;
  • Food trucks;
  • Open diverse portfolio of restaurants and/or bars in several strategic partnerships with hotels/resorts including event spaces.

Launching a restaurant methodically is crucial if it’s to succeed and survive in the long run. A study by Cornell University estimates that 60% of restaurants are closed in the first year.

One important factor is choosing the location wisely. This plays a pivotal role in your restaurant’s traffic and revenue achievements. An easily accessible area that is visible to the customers helps draw in customers with less effort. However, it begins with proper market research prior to finalizing the choice of location. The location should not only rely on the local community for diners. It should become a destination. That will be accomplished more by excellent reviews and word-of-mouth, with great food and commitment to service.

Operating a restaurant is difficult physically and emotionally, but especially in the beginning. It is also financially challenging. In a start-up, a good chunk of capital goes most into leasehold improvements, as well as equipment and furnishing. On-going expenses incurred include various fixed (rent, staff salary) and variable costs such as utilities, food ingredients, beverages, supplies and much more. Watching yields and food costs optimize margins to reduce these costs, though, without compromising on the quality of the food service offered. Strict fiscal discipline should be practiced and staff well trained to assist in this all important endeavor. Along with food cost, payroll costs should be carefully scrutinized with timely adjustments in staffing made taking into consideration the days and times of traffic patterns (peak and non-peak hours) but without compromising service. It’s a delicate balance to deal with. With inventory, a list of fast and slow moving food items should be well noted so as not to overstock any rarely used ingredients and other stocked items. Supplier payment terms or COD, with attractive discounts, should be taken into account for additional savings.

Expectations should be clearly communicated, following through and being organized are additional restaurant secrets to success. In addition, having systems in place for everything and continually enforcing them. Most importantly, adequate cash flow, the lifeblood of any business.

Management/Ownership and Staffing: Culture and value

A multi-talented ownership is imperative. If, for example, there are solely two partners, one should complement the other with one looking after the kitchen, while the other works in the dining room, acting as the Maître D and making certain food is properly and timely served. If there is no partner with much kitchen experience, one ought to be hired, paid well (perhaps offer some shares for loyalty). The menu should be creative and frequently updated.

Regardless if the food, decor and seating arrangement are impressive, it’s the staff that complete the entire dining experience. Hire for attitude and train for additional skills necessary to make a positive impact on the customers and colleagues alike. Front-line staff, must be courteous and dressed, as well as look impressive. Moreover, proper onboarding and frequent training of staff is a worthwhile investment. This should include a clear list of duties and instructions for each activity, educating staff to make the guests feel welcome through a polite behavior, neat dressing, and to know how to handle minor customer complaints, such as a soiled napkin or dirty glass, without always seeking management intervention.

Management should intervene when a customer is not happy with his or her dining experience. Displeasure may have been made on the spot, through a feedback form, or a negative review posted on social media. In those instances, addressing the issue(s) promptly can be done by actually speaking with the customer and getting to the bottom of his or her grievance(s) including apologizing and rectifying the missteps immediately. Compensation may include waiving off the bill, offering a free meal on the next visit, and/or sending a bouquet of roses or a box of chocolates.

Embracing Technology and Social Media

At this day and age, food service owners/managers should integrate their restaurant with technology if to remain on the top and run a successful operation. Expected by many clientele, this includes online reservations, available and complimentary Wi-Fi, and online/mobile ordering and payment or at least accepting orders via food delivery app services such as Uber Eats and Grubhub.

Today, every restaurant and bar should possess and fully utilize a POS (Restaurant Management System). It’s the hub of the business as it handles orders, tracks payments and cash flow, manages inventory, and provides robust reporting to assist in making decisions for front and back of house (i.e. kitchen). The POS is packed with data such as sales metrics, reports on the hours your staff have worked, and inventory counts. Knowing how to interpret this POS data, along with the powerful insights within it, can help make better, more informed business decisions for the restaurant. Furthermore, the system can and should integrated with accounting software, such as Quickbooks, a merchant payment system like Chase, and reservations systems such as OpenTable to name a few.

Along with a memorable name and attractive logo, a strong social media presence is more important than ever before. Prospective and existing guests use it before they decide where to dine as they want to see the food and much more before.  The look and ambiance of the restaurant should be “Instagrammable,” whether it’s a piece of decor or a place setting. It should catch the eye and look interesting.

Restaurants Highest Costs

In the final analysis

Be your own best critic. Never take anything for granted. Just step into the shoes of customers. Due to possible bias, invite mystery customers to do incognito visits and have a trusting third party do occasional audits of your books. You never know what may be uncovered.

To operate a business successfully, strategic and methodical steps should be in place. Rather than view and approach it merely as a family business, the food establishment should be run professionally like a lean corporate business entity.

A good and busy location, preferably with available parking should be well thought-out, as should well trained staff with a pleasant attitude and dress code. A talented chef and a creative menu will undoubtedly satisfy diners’ taste buds.

Finally, cash flow is king. Without it, financial issues can arise affecting the overall business achievements, but most importantly, its survival.

_____________________________________________________

Request your TWO FREE chapters of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

 

 

Leave a comment

Filed under 1, Business, business management, crisis management, decision making management, management, restaurant challenges, restaurant management, restaurant operations

Business Vitality presentation: Preventing adversities before they occur

Business Vitality Presentation

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to Yahoo BuzzAdd to Newsvine

Business Vitality - presentation cover

Request your TWO FREE chapters of this popular book with no obligation.

EntrepreneurialEssentials - FrontCover Final

Leave a comment

Filed under 1, Business, business management, crisis management, decision making management, entrepreneurship, entrepreneurship success, management