I was 8 years old when my mother opened her first restaurant. In hindsight, to say that she was ill-prepared to be a business owner is an understatement. She didn’t thoroughly understanding the time, energy, and risk associated with a start-up – most business owners don’t. I guess that’s what makes them entrepreneurs and why the potential reward is so high.
Having worked in the restaurant from grade school through college, I’m grateful for the lessons learned scrubbing pots and pans, cooking in the hot kitchen, waiting tables, and trying to help the business survive. These experiences have proven to be invaluable to me in my career in finance and I’m hoping that, by outlining a few of them below, you will benefit as well.
Employees – Finding and keeping high-quality employees is one of the most difficult tasks for business owners. While our family restaurants have certainly had their fair share of good and not-so-good employees, I can say that due to my mother, the turnover rate has been very low.
In addition to having an incredible work ethic, she is thoughtful and caring: she remembers and acknowledges birthdays, gives gifts at Christmas and has, on multiple occasions, paid hospital bills for employees, covered car expenses and even sent employees on vacations.
The combination of compassion and commitment created a positive employee environment and I’ve tried to emulate her leadership style within my own business. As the workforce dynamic has changed with Generation Y, many thought leaders on employee training are stressing the importance of prioritizing employee happiness. My mother was ahead of the curve on this one.
Expert advice – In the early years my mother didn’t have enough money to pay for good advice and, consequently, made a number of mistakes. As the business grew, she solicited help from expert accountants, attorneys, and financial advisors who prepared balance sheets and outlined strategies she hadn’t thought of, including asset protection and estate and tax planning.
The trick is finding advisors that have an intimate understanding of the nuances of the business and being willing to pay for their advice. We certainly cut corners in the early years and it cost us much more in mistakes than we saved in payments to advisors.
Marketing/business plan – My mother didn’t have a marketing strategy or business plan. She simply opened the first location in the small town where we lived. It seems obvious now, but we didn’t understand the economic potential of the market. We didn’t consider whether the demographics were able to support the business. And, we didn’t consider why the two previous restaurants in the same location failed. Furthermore, the first restaurant was in a leased building and its eventual sale after years of hard work was for “good will.” My mother worked hard, built a good reputation, paid her bills, but didn’t create any wealth.
Exit planning – After 20 years in the food business, she was able to purchase a building in a better location and opened another restaurant. The restaurant has been tremendously successful and allowed her to pay down the debt on the building.
The building is owned in a separate entity and receives rent payments from the restaurant. If the restaurant is sold, she can either continue to collect rent from the new owners or sell the building – which is now worth much more than the restaurant itself. The point here is that we all need to understand what our business is worth – my mother learned the value of her business the hard way with her first restaurant.
Restaurants generally have little intrinsic value and it’s critical for the owners to start building wealth outside of the business. It doesn’t mean that every business or restaurant owner needs to buy real estate; it simply means that entrepreneurs need to understand whether the eventual sale of their business will be able to fully fund their retirement lifestyle. If it won’t, building wealth outside the business is critical.
I’ve only outlined a few thoughts from my family’s 35-year history in the restaurant business but these are the ones that stand out and, while not an entire list, also seem to challenge other entrepreneurs I’ve met.
Every business owner has their story, but the universal truth seems to be that they have a lot to consider and success doesn’t come easily. It takes hard work, strategic planning, lots of risk, and a little bit of luck.