We at Profitwise Accounting have worked with a lot of restaurant owners in San Diego, California. In our experience with these entrepreneurs, we found trends among those who succeed in their businesses and those who fail. If you plan to open a restaurant, you want to be sure that all the investments you make in starting your business are going to bear fruits of success. The best way to do that is to learn from those who are already in the industry.
Common Reasons Why Restaurant Businesses in San Diego Fail
Restaurants are one of the most challenging small businesses to start in San Diego. In our experience with clients that are in this kind of industry, most of them close down their businesses after a year or less. After some time, we have observed that there are trends among the restaurants that fail. We found that that there are four common mistakes that led to their failure. If you plan to venture into this type of enterprise, learn to avoid the following blunders:
1. Absence of a Clear Marketing Strategy
We have observed that many restaurant owners do not have a concrete plan on how they’re going to increase or maintain their flow of customers. It’s important to understand that most restaurants will have a good amount of traffic in their first year, because a lot of people are drawn to the newness of the small business. But after a year, the excitement that was present when these restaurants opened is usually gone and the number of customers has declined.
There was an entrepreneur who opened a restaurant on a food strip in San Diego. He invested a lot of money during the start of his business. Everything was very attractive to customers because he hired a professional to design and decorate his store. He also had a well-known chef prepare his dishes, so that all the food on his menu would be delicious and draw people in. He thought that setting up an extravagant restaurant was enough to keep his customers interested.
Unfortunately, this did not happen. After a year, the number of people going to his restaurant radically declined. To save his company, the owner had to think of a marketing strategy that would regain his customers. He gradually gained people’s interest back after he added new dishes to his menu and offered discounts on certain items.
Creating a good marketing strategy is a key factor to the success of a small business in San Diego. If you plan to open a restaurant, the challenge is to construct a plan on how to keep customers coming in, even after a year.
2. Poorly Selected Location
“Location, location, location!” is one of the most popular phrases in business. Indeed, finding a proper location for your restaurant is the key to its success. Customers need to be aware of your small business before they can patronize it. If you plan to open a restaurant in San Diego, you need to look for a place where customers can easily find your enterprise. Start your company in a busy area that has a lot of potential clients walking by every day.
Experts say that it is also very important to consider the cost of your location. At ProfitWise Accounting, we had a client who opened his business in a mall. Although the area had a lot of people passing by, the rent for their space was very expensive and their income was not able to support it. After some time, the client had to go out of business because they could not pay the lease anymore.
3. Inadequate Capital
Restaurants are among the most capital-intensive businesses in San Diego. If you are planning to open one, you need to make sure that you have enough capital to back you up.
In our experience with restaurant businesses, we have seen a higher failure rate among those who are first timers in the industry. Those who have an experience of opening an enterprise with a similar concept have a better chance of succeeding compared to those who have no idea how to run a restaurant. This is probably because businesspeople who opened this kind of company before are already aware of the amount of money that is needed for running a food enterprise.
There is a case of a business owner who opened a restaurant in California with a large amount of money. It was his first time to venture into the food industry and he thought that his capital was enough to catapult him to success. Unfortunately, he had to close his enterprise a few months after opening because he ran of money to operate the company. He underestimated the capital needed for running a small food business.
You need to be aware of the capital that you need to run a successful restaurant. It is best to seek advice from businesspeople who have tried opening similar enterprises in your area. You may also ask experts who have worked with successful small businesses, like an accountant here at Profitwise Accounting.
4. No Proper Accounting System Setup
Compared to other types of companies in San Diego, restaurants need to have their finances more tightly balanced. This is why they should hire an accountant who specializes in their kind of small business. Hire a specialist business accountant to be sure that your restaurant will succeed.
We have had many clients who came to us to help them save their business from bankruptcy, because they did not have a good record-keeping process in place. Our team of specialist accountants had to assist them in creating a dependable accounting system, so that the owners could properly balance the money they spend with the income they earn.