Food & Beverage - Professional Catering - Realistic Catering Budgets - By Joe Dunbar
If I were preparing a budget for 2011 today, I would take a look at the period from September 1, 2009 to August 31, 2010. Using this full year, I would budget for the exact same baseline sales in 2011. Rather than budgeting 10% growth, my conservative numbers would help me to better allocate the company resources.
Savvy caterers could gain a major advantage by diverting a share of marketing and sales efforts to signing long term contracts. These contracts will typically entail much lower operating margins. The benefits are numerous. At the top of the list would be the ability to employ a stable team. These long term contracts can help you attract and retain talented employees. I would use this activity to meet strategic objectives.
If I were preparing a 5 year plan, the long term contracts would be the major focus of my growth projections.
After the severe change in the direction of the economy, 2010 has been a year where markets continue to seek equilibrium. Many caterers I speak with mentioned 2011 as the year when they expect a return to better business conditions. While I do not own a crystal ball, I see several simple small business related indicators which do not support the optimistic view for 2011.
In the early months of the recession, most small businesses were contacted by their banks and informed their credit lines were terminated and replaced with term loans. Listening to the financial news today we hear a new term - deleverage. As companies make term loan payments, they are reducing their liabilities. Since these companies are not able to borrow against the term loans (only possible with a credit line), the access to cash is constrained.
Many of these companies will continue to rein in expenses and I do not see elaborate holiday parties this year. Year-round events and conferences will continue to be tightly bid with menus considered modest when compared to the years of terrific economic expansion.
Shifting to consumers, the number of low interest credit card offers (with balance transfer options) has not returned to the 2005 level. Access to home equity has been eliminated for the 1/4 of all US households with higher mortgage debt than the fair market value of the property.
Consumers will always celebrate life's big moments. I'd expect a portion of this market to move from self-catering to hiring a professional. In addition, I see a major market opportunity for off-premise caterers. Rather than using a premier catering venue, many families will use their homes to host parties. The companies who are able to add this flexibility (its tough work) will have an early adopter advantage.
Overall, the 2011 budgets should be prepared with care. Flexible staffs and tight control over fixed costs should be the central focus. Marketing efforts should recognize the reality of an economy in gradual recovery.
Joe Dunbar
Dunbar Associates
P.O. Box 579
Fairfax, VA 22038-0579
800-949-3295
http://www.joedunbar.com
jdunbar401@aol.com
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