Quality vs. Cost
For all small businesses, a crucial issue is controlling expenses without compromising quality. Sheila McCann, founder of House of Bread, knows how simple mistakes can eat into profits when it comes to running her bakery.
The main two costs for any small food service business are goods and labor, and the bottom line is those two costs should equal no more than 60 percent of your total sales. Having an awareness of those two numbers and keeping constant control of those expenses is imperative. McCann recommends any small food-related business track goods and labor costs on a weekly basis.
“Often, business owners will realize they aren’t making money, but they don’t know why,” McCann says. All too often, she explains, it is because they are not tracking and controlling their labor or goods costs. “Your rent and utilities typically are going to be the same month to month,” she adds. But even within those more fixed expenses it is imperative to pay attention. For instance, if your water bill has increased since the previous month, it’s a good idea to troubleshoot and figure out why—maybe you have a toilet that’s running or a leaky faucet. Or maybe your phone bill has gone up because your contract has expired. Looking at every invoice, and noting deviations, is one way to ensure you don’t lose money on unexpected expenses.
McCann also advises that even if you have someone else handling your books, small business owners should make time each month to go through everything to spot any discrepancies. Also imperative is doing an inventory as suppliers delivery products to ensure that what is delivered and what your business has been billed for are accurate on the invoice. “Even an honest supplier can make a mistake,” she says.
While you may be tempted to cut corners by buying lesser quality goods or decreasing your staff to cut back on labor expenses, McCann urges caution. “You don’t want to be so tight on costs of goods and labor that it adversely affects your sales,” she says. “You can cut labor and then people will have to wait too long. That affects customer service, and maybe that customer doesn’t come back. There’s a balance in there. I won’t cut costs if it compromises House of Bread’s product quality or customer service—you can’t save yourself to profitability.”
At House of Bread, quality is especially important because as McCann says, “We compete on quality.” Therefore, she feels it is crucial to invest in the best ingredients, as well as ensuring that the staff is never wasteful. “We enter any baked goods that don’t turn out right into our point of sale system,” she explains. The “mis-baked” items are given a price and tracked. “We are all human, and everyone makes mistakes, but this sends employees a message that there are costs associated with mistakes,” McCann explains.
House of Bread stresses the importance of not being wasteful during employee training, as well. That ethos includes how to slice meats so every bit is useable or not cutting off the end of a tomato and throwing it away. “Once they have the training, they understand the House of Bread philosophy—it’s all about balancing.” McCann adds, “We can’t, we won’t skimp on quality, so we use high-end meats and cheeses. And since we can’t compromise on quality, we can’t afford any waste. We don’t want to substitute inferior products because we want people to go out of their way to come here.”,
From utilizing the best ingredients to the most gracious staff, quality is at the heart of all House of Bread items. Visit your local House of Bread today and experience our natural, freshly baked products for yourself.