Pizza Today - April 2022 - 35

Forecasting
First-year forecasting is entirely blind;
it's like playing a bad game of pin the
tail on the donkey. In a COVID year,
forecasting was horrible. But in a regular
year, your forecasting should be based
upon the previous year's sales, events,
trends and promotions. Don't stop there
though. Beyond forecasting revenue alone,
Also forecast what you'll need to spend
in payables and when. If your forecasting
doesn't include equipment replacements,
store updates, signage transitions, then
you'll probably end up needing to spend
unexpectedly every month of the year.
These things will happen, and expecting
everything to never age is the quickest
way to have a big bill at an inopportune
time. This unexpected expense could be
utterly debilitating if you haven't been
ahead on payments or created a nest egg.
The Nest Egg
There's a lot of debate on how big your
nest egg should be. I've heard that there
should be three payrolls' liquid cash,
or three months of operating expense
and as many as six months. Indeed as
much money you can put aside so that if
everything falls apart, you don't, is a smart
move. To be set up for success, you have
to be prepared to endure failure because
one day it will rain, and you'll need a fiscal
umbrella.
Credit Cards
I'll make this easy, avoid them. Credit
cards are like packing a wound with dirt;
sure, it works in a jam, but how many
emergency rooms do you know that would
stock dirt? None, wound dirt is not a
thing. Just like " We'll just buy it on credit,
and I'm sure next month will be better " is
not a phrase of the fiscally gifted.
Credit is only a friend to the highly
fiscally disciplined few who can use the
card with vendors willing to accept credit
payments. The proactive ideal goal is to
earn points then parlay those points into
the perks like cashback and travel rewards.
Credit Cards are like a casino; sure, someone
wins in the game, but not many, and
credit card companies live off the debtor,
not the on-time payer.
Suppose you can use a credit card payment
and pay it every week like clockwork
and never deviate from that, then and only
then should you even remotely consider
using credit cards. If you're in the worst
jam imaginable and you rack up an Amex
bill, you are dancing with destruction. At
the same time, I and every other business
I've met at some point have done that
dance. But if you're newer or debating it
or don't need to go down that road, avoid
it at all costs.
Profit & Loss Statements
A P&L, have one. Have a profit and
loss statement that you can control and
get with your bookkeeper and your CPA
on creating one that is useful and easy
to understand. Have a second operating
cash P&L. An operating P&L understands
that a business works in four-week
periods as opposed to monthly periods. I
mean that February has fewer days than
March, so you will have fewer Saturdays
in a typical February than in March. If
you compare February to March, you
will have a bad comparison. But if you
compare four, seven-day periods to the
following four, seven-day periods, you
could see what your flow and trends are
developing. Operating in a 13-month
calendar achieves this significantly better
than going off your classic monthly P&L,
the kind you would give to an accountant
to pay taxes from.
Taxes
Pay your taxes. All of them. To achieve
this, you must be ethical. The IRS can
make a mistake, and it's no harm, no foul.
You cannot. So pay your taxes not only on
time but exceptionally meticulously. Pay
ahead of time, ensure every charity's taxfree
code is documented, every purchase
is accounted for, and every payment is
reported. Your local jurisdiction might
look the other way if you pay a vendor in
cash off the books; the IRS won't.
Inventory and Vendor Pricing
Whatever you buy from a vendor, verify
the cost, understand whether it's coming
or going, rising or falling, and why.
It's incredible to see how many pizzeria
owners have no awareness of the mercantile
exchange and the price of mozzarella
blocks. These people freely buy mozzarella
at the whim of their distributor, never
noting when the price drops $0.50, and
their price has yet to change. Keep tight
awareness of pricing and negotiate sixmonth
or year-long deals with a dedicated
vendor. A reliable vendor is your business
partner, not an adversary waiting to
get one over on you. If you feel that way,
change your vendor or re-assess how you
have approached the relationship.
Keep your inventory tight, not so low
that everything runs out, but not so heavy
that people are going through boxes of
pasta like it's macaroni necklace day in
kindergarten.
Payroll
Create solid payroll projections and
check them not biweekly or weekly but
daily. See if your hours matched up to
your expected labor by having a payroll
that matches your scheduler. This works
best when your POS is connected to your
scheduling program. Doing all that will
help ensure your projected payroll matches
your actual payroll.
The Big Swings
Payroll, your primary vendor and
tax payments lead to massive cash flow
swings. That week we went negative,
which I mentioned earlier, resulting from
these three landing on the same day. So,
at a minimum, for your nest egg, you need
to be aware of what it would take to pay
payroll, your big vendor payment and your
taxes all on the same day and ensure you
have that at a minimum in the bank.
Widen the Tight Rope
The easiest way to fix your cash problems
is to make more money and sell
more pizza at higher yields. If you can't
get newer customers, you need to get more
yield from current customers and save on
expenses without sacrificing the product
or your good name.
The best way to survive this all is
to be ethical. It can be tempting to do
otherwise, but you keep your head above
water by being honest and timely in your
payments to staff, the government and
vendors. An honorably run business is a
successful one. I genuinely believe that.
Any deviation from ethical is wrought
with failure and leads to insufficient cash
flow. n
MIKE BAUSCH is the owner of Andolini's
Pizzeria in Tulsa, Oklahoma.
Instagram: @mikeybausch
Pizza Today - April 2022

Table of Contents for the Digital Edition of Pizza Today - April 2022
