 The worst nightmare that anyone can encounter is going over budget and that's the reason why today we're going to be covering the top five critical expenses for your small business for your restaurant that you should be aware of in order for you not to be blindsided in order for you to stay in budget. So keep watching. Hey guys, it's Wilson here. Make sure you guys subscribe along this whole journey to get more strategy, tactics, and tips in growing a small business and growing a restaurant. I see this again and again where you have your business plan, you have your proposal and forecast, yet after the launch of the project, you're over budget by 50 percent, by 60 percent, by 80 percent, and these are the moments that are unnecessary stress that's adding to your business even before you open and you're going to be hustling to get more money and fundraise and all this before you can even prove your concept. And that's exactly what happened to us when we first started our ice cream shop. We spent more than $30,000 for stupid mistakes and that's the reason why today we're diving into the top five critical expenses that you should be aware of in order for you to start your restaurant. The number one startup expense you should be aware of is the equipment expense. Equipment expense is basically all the equipments that you need in order for you to do your production. Depending on the niche that you're in, you need specific equipments. For example, with an ice cream shop, soft-served in particular, we need a soft-served machine and for us, we need to make sure we identify that right from the beginning and to buy the right model. And that is super crucial to your success is because when we first started our ice cream shop, we neglected the equipment expense. We thought that, hey, know what, starting an ice cream shop, it's simple. We go to the manufacturer, we ask them for a machine and it's good to go. But little did we know about all the specs that are go into the machine. We bought the cheapest version available and in turn, it was not able to withhold the demand that we're having in our place, which is the reason why within two months of operation, we spend more than $30,000 swapping out that machine for a better one. So identifying your specific equipment for your specific production is crucial to your success. So in that way, you don't need to spend extra swapping equipments out. Another thing that you need to be aware of is that whether to buy a new machine or to lease it or to buy an old one, there are definitely a lot of different options available. The pros of buying a new machine is the fact that, hey, you don't need to pay interest on it. But the con is that you're going to have to fork out a lot more investment to buy a brand new machine, which is the reason why a lot of restaurants out there, they decide to lease instead. Why is leasing a better option? It is because it allows them to have more cash flow to play with in order for them to actually have more flexibility to run their business. Now, the cons of that is that you need to pay higher interest for that, which is the reason why I would highly recommend for items that are not directly responsible for producing your offering. I would recommend buying a secondhand option from either auction sites or from secondhand shops that actually warranties these equipments. That would be able to save you a ton of money. Another point to add is that small appliances do add up. We're talking about items such as a POS system, items such as spatulas, containers, and all this can add up to thousands of dollars, which you have not accounted for, which is the reason why identifying these right from the get-go is super, super important. Another note to add is understanding the fact that after you identified all your equipment that you're going to be having in your shop, it actually changes the way your electrical goes and runs within your layout. And that's the reason why identifying it right from the get-go allows your electricians to pull enough power for each of the outlets. So then that way it doesn't jump any of your electricals. A lot of people, first-time restaurateurs, face this problem is the fact that they don't forget the fact that, hey, you know what, a boiler machine would take power from one outlet. But then yet they're just stacking up different outlets and little do they know that's the reason why they're always jumping and they have to get an electrical, electrician to come in and to reroute everything. That could cost thousands of dollars. An actionable tip for you guys is identify and map out all the different equipments that you're going to have and what you're going to need. And actually go through the logistics of you preparing the food. Map it out visually to identify where everything goes because it's crucial for you to understand where each equipment goes because all the power and rerouting would take a ton of money if you don't account for it, if you don't budget for it. For example, with our ice cream machine, because of the fact that we swapped out a smaller ice cream machine for a bigger one, in turn we needed to actually take out part of our counters in order for us to move the machine in and out. Second thing was we need to reroute our electricals in order for us to have enough power for the new machine. And that itself costs us more than $5,000. So if you want to make sure that you have and stay within budget, make sure you map everything out and make sure all your electrical maps are done as well. The second type of expense to look out for is your staff expense. And this is something that is crucial as it accounts for more than a quarter of your overall expenses. So in this video, we talked about the four different restaurant concepts out there and the type of talents that's needed. So make sure you guys check this one out in order for you to identify the talent that you may need for your staffing. Because, for example, if you're running a bubble tea or a cafe, the level of talent is much lower than if you're running a fine dining experience. And in turn, you need to be able to budget accordingly, depending on the concept that you're going for. Once again, check out this video to see the four different types of concept and to actually budget accordingly to the talent that you may need. Another thing that you would want to consider is the shifts and the pods. And what I mean by the pods are how many people and how many staff do you need in order you to facilitate the number of customers that are coming in? For example, if it takes four different talents, for example, a cashier, a bartender and two servers in order to generate and for for you to be able to run your service for 50 people, then you know if you're going to have 100 people walk through the doors, then you need additional waiters. You need additional bartenders in order for you to fulfill that amount of traffic. Vice versa, if you're running at only 20 people, then you may be able to cut down on your bartender. You may need to be able to cut down on additional staff as well. Having the metric to understand how your volume and the traffic comes through allows you to budget and allows you to schedule your staffing accordingly, which will save you tens of thousands of dollars over every single month. And that money, you can actually put it back in your pocket because that's directly the profit that you can possibly take home. An actionable tip for you to budget accordingly is to have tracking, have tracking on your POS system that allows you to see how your traffic is like on every every single day from Monday to Sunday. And what are the times that you have peaks that allows you to actually budget accordingly for your scheduling and allows you to have a really big picture about, hey, you know what, when are your peak hours? When are your slow times? And then you can schedule accordingly. A lot of people don't have this type of tracking and don't have this type of insight, and thus they schedule based upon their gut. And a lot of times gut is just not good enough. If you guys find any value whatsoever in this video, make sure you smash the like button. So then that way I know this is the type of content you are looking for. Let's get back to regular programming. The third startup expense you should be aware of is the build out expense. Build out expense is crucial to determine how much money you need to start the whole project. And that really comes back down to the space that you're looking at. And it varies tremendously. We're talking about it could vary from a space that is completely empty and completely gutted. You need to build your own washroom. You need to build your own grease trap, your own piping, your own electrical and all this type of stuff. And that could cost tens of thousands of dollars versus a location that has their washroom built out, the counters built out already, all the electrical is already all done and all you have to do is just go in and put in a layer of paint and you're good to go. These two different build out expense and renovation expenses are night and day difference, which is the reason why you need to understand the budget that you have to play along with the location that you choose. If you have a big budget, you want to create an additional experience for your customers, then you may want to redo the whole thing and start from scratch. Whereas if you have a small budget and you just want to try out and improve your concept, then you may want to look out at stores or locations that already have the infrastructure that you're looking for to begin. So identifying the type of business model that you're going for is crucial to the location that you're looking out. Is it are you trying to tailor to a grab and go experience or are you trying to tailor to a dining experience that, you know, a couple will come in. The men is trying to like impress the other half with like a dazzling experience. You really need to identify the concept that you're going for in order to identify the experience you want to provide your customers. An actual tip for you is that every time you scout for a new location, bring your general contractor, bring someone that is going to be doing this whole renovation process for you to look at the location. Ask them if the concept that you're going for, how much would it cost for this build out of the whole place? And they're going to give you a rough estimate of how much it would cost. They're going to tell you, hey, you know what, they don't have piping here. They don't have the regulation. They don't have the items to fulfill the regulations. They need this counter here. They need this electrical here. And in turn, they'll tell you how much additional you need to pay in order for you to be at that space. And that would allow you to actually budget much closer to what you have accounted for. The fourth startup expense that you should be aware of is the marketing expense. And this is something that people don't talk about too much. You need to identify how you're going to market your restaurant. And that is crucial because are you spending money on Facebook ads? Are you spending money on PR, Google ads, Yelp reviews, Instagram, word of mouth, or even like a grand opening launch campaign just to create some noise and buzz to let people know you're open. How much are you accounting for these type of marketing expenses? A lot of people don't account for it because they need to build up their restaurant and then they start looking at ways of bringing traffic in. But then we need to actually account for that right from the beginning to understand what is the strategy we want to employ in order for us to bring people in our doors. That is crucial in understanding how much we want to budget and how much we need to budget for marketing expenses. An actionable tip for you is to actually allocate a percentage of your revenue that goes directly to marketing. OK, and why do we want to allocate a budget specifically for it? It is because, first of all, if you are the type of owners that tend to overspend, this will allow you to know, hey, you know what? You only have a budget of $2,000 that you can spend on marketing. Now, with that $2,000, it's up to you to be creative with how you want to allocate it, whether it is hiring a social media expert for $800 that does all your social media and $1,200 for running ads on radio stations or running ads on Facebook. Facebook, this would allow you to work within a certain budget and not spend $4,000, $5,000, because everything is so nice and shiny on the other side. On vice versa, if you are a little bit more frugal, if you don't like spending on marketing, this allows you to and pushes you to actually invest in marketing dollars. So, for example, if you're already committed with 5% of your revenue every month that goes into marketing, you know every month that you need to spend, let's say $1,200, then it really pushes you to test different areas out and to actually bring in even more sales instead of playing defense. And you're now learning to play offense, which is the reason why, regardless of where you are on the spectrum, having an allocation for a marketing budget is crucial to your success. Last startup expense you should be accounting for is the tech expense. Tech expense is crucial in today's age, especially if you're building a new restaurant. It is because with the world now today is shifting a lot more with delivery as an option, with understanding the statistics in order for us to budget accordingly for our labor and all this can be can be actually collaborated into a few different items that can help you out to make it more efficient. For example, it's very difficult for you to actually go through your receipts to track down, hey, you know what? How many people came in at what time, how much money they spend. And in turn, it's very, very difficult, which is a reason why having a POS system that you're investing money in and this type of technology is so, so important. Because with a few clicks, you're going to be able to see everything graphed out for you that allows you to make educated decisions that would allow you to actually save some costs. It sounds counterintuitive by spending money in order to save money, but it is truly the case if you know what you're doing, which is the reason why investing in tech, investing in like delivery as an option is also super crucial for your success. Because as we can see amidst this whole crisis, this whole COVID-19 thing, everyone is having and trying to build delivery as an option and as a core in their restaurant business. Because who knows, there could be another virus that hits next year. But if you don't have these things in place, it becomes very difficult for you to pivot and for you to adapt into that ever changing world that we're living in today. An actionable tip for tech is to understand the outcome of each technology and not subscribing just because of a shiny object syndrome, not subscribing because of whatever salesmen are selling you. For example, subscribing to a POS system is crucial for your success because it would allow you to save money in the future, allows you to see basically what's happening within your own business. That is something that you should subscribe to. So depending on the needs of your business, subscribe to technology that allows you to save money in the long run. So there you go, guys, the five sort of expenses that you should be very, very clear on right from the get go because it's going to save you a ton of money. I really hope you enjoyed this video. If you guys have any more questions in learning how to start up your restaurant or your small business, make sure you guys check in the description below. We have tons of resources to help you out. We even created a course that marks from A to Z, from location scouting to actually developing a team to actually being profitable and getting acquired in the future. Once again, it is in the description below. Leave me a comment and let me know what you thought about this and any questions that you may have. Otherwise, I'll see you guys in the next video.