We talk a lot about numbers. These are essential details for being successful – & we want you to be.
How well do you know YOUR numbers?
We’ve talked to a lot of restaurant owners and something comes up quite a lot, and that is that they don’t know their numbers. Let me ask you this. Do you know what your average transaction value per customer is? Let me ask you this. Do you know what it costs to acquire a customer? To illustrate this point is a little story as told by Mr. Wonderful.
Mr. Wonderful’s Cut-down
I think what’s appropriate is a very simple story that I think you’ll appreciate. There’s an island right off the coast of South Africa where the largest population of sardines exists. Seals loves sardines. Hundreds of thousands of them sit on an island, just bare rock, nothing to eat. They look at the sardines. After about seven days they start to starve, but they know if they go in the water the great white sharks will eat them alive. One of the seals has to go in the water to sacrifice their life so that the others can live and eat the sardines.
It’s the one that’s starving the most that goes in first, followed by maybe a few thousand more. The ones that sacrificed their lives did it for a purpose, so the DNA of the ones that live can go on. So, Bea, do you know who you are in this story? You’re the first seal that goes in the water. The purpose was that others will never come in here again without their numbers. They will learn from the blood in the waters that you’ve provided. I’m out.
Good luck.
Thank you. Thank you very much.
Don’t go swimming.
~story as seen in video above (clip from Shark Tank)~
Don’t be the 1st Seal, calculate this number now
So it’s critical that you know what your numbers are in your restaurant. You should to know all kinds of numbers, but ones that you NEED to know are your average transaction/value per customer. The way that I’d like you to go find that is for you to take your total sales last year, so from January 1st to December 31st go look at your books and figure out the exact number of sales, the whole gross revenue.
Then, also take a look at your POS system, or however you keep track of how many customers came through, how many transactions happened, and divide the revenue by the amount of transactions that happen. That’s going to give you your gross revenue per transaction, or your average transaction value. Now, if what I’m saying right now is annoying and you’re frustrated, don’t forget your head chef is not the only one who can rage.
Earn your Sardines, #2
Now the second number that you need to get for your restaurant (very important) is to know what it costs to acquire a customer. So you’re getting a lot of referral value, and a lot of walk-in traffic, but you’re also doing some kind of advertising. Maybe it’s some ads that you have out, some paid magazines that you’re doing, maybe some Google marketing, maybe doing some Facebook marketing, as well.
Let’s set all the referral traffic and walk in traffic aside for a second and take a look at how much you spent on marketing last year. So, what is the total amount of dollars that you spend on marketing and what is the total amount of revenue that you brought in? Now you know that in previous years there were customers that had been referred, then came to eat and you’ve got regulars that keep coming in. These things are hard to track and calculate so we’re not going to worry about that for now.
Also, after the 31st of the year there’s going to be customers that continue to come in, but the best way to create this number, the cost to acquire a new customer, is for you to just book end on each end. January 1st to December 31st. So take the gross revenue of the restaurant, how much sales that you did last year and then to divide it by your marketing budget. That’s going to give you a very important number. If you’re going to scale, if you’re going to actually do some digital marketing, if you’re going to do any kind of advertising, you really need to know what you can spend to get a customer.
The two numbers you Need to Know
So, you need to know historically what the cost to acquire a customer is, and you need to know what your average transaction value is.
Two very critical numbers.