In hospitality, profitability often hinges on understanding the finer details of financial performance. However, diving straight into granular data can be overwhelming. That’s why tools like the Profitability Matrix are so essential, they provide a macro view of financial performance, offering a clear snapshot of key metrics such as revenue, COGS, wages, variable overheads, rent, and operating profit.
This high-level view helps pinpoint where problems might lie, creating a roadmap for further analysis. Managers and chefs can then break down the numbers into actionable insightsto address specific challenges and improve the venue’s overall performance.
Here’s why simplifying financial data through a step-by-step approach is critical for managers and chefs, and how it impacts a venue’s profitability.
1. Start With the Profitability Matrix for a Macro View
The Profitability Matrix simplifies complex financial reports into clear, concise percentages, providing an instant snapshot of overall performance.
- Focus on Key Metrics: Revenue, COGS, wages, variable overheads, rent, and operating profit are presented side-by-side, allowing managers and chefs to quickly see how each area contributes to (or detracts from) profitability.
- Identify Trends: A high-level view highlights areas that deviate from benchmarks, signaling where deeper analysis is needed.
Example: A venue with strong revenue but low operating profit might see wages or COGS exceeding industry standards, revealing potential problem areas.
2. Drill Down Into Problem Areas
Once the Profitability Matrix identifies where issues lie, managers and chefs can focus their efforts on solving specific problems.
- Wages: If wage percentages are high, daily tracking can reveal whether overstaffing, inefficient rostering, or unexpected overtime is the root cause.
- COGS: High food or beverage costs might point to waste, poor portion control, or unfavorable supplier agreements.
- Variable Overheads: Anomalies here can indicate unnecessary expenses or inefficiencies in utilities or consumables.
Breaking down data into actionable components ensures resources are directed where they’re needed most.
3. Empowering Chefs and Managers With Financial Ownership
The Profitability Matrix isn’t just a tool for owners, it’s a framework that empowers managers and chefs to take ownership of their areas.
- Chefs: By monitoring food COGS and kitchen wage percentages, chefs can align their purchasing, portioning, and rostering decisions with financial goals.
- Managers: Daily tracking of wage percentages and sales helps managers adjust rosters and focus promotional efforts where they’ll have the greatest impact.
When leaders understand the numbers behind their decisions, they’re better equipped to drive profitability.
4. Encouraging Accountability and Improvement
The Profitability Matrix fosters accountability by tying individual actions to measurable outcomes.
- Weekly Reviews: Use the matrix in weekly coaching sessions to highlight successes, address challenges, and set goals.
- Goal Setting: Clear benchmarks for COGS, wages, and operating profit ensure everyone is working toward the same objectives.
- Celebrating Wins: Highlighting improvements motivates teams and reinforces the importance of financial focus.
Accountability ensures that every decision contributes to the venue’s overall success.
5. Real-Life Impact: Macro Insights Lead to Big Improvements
One client, a pub manager, thought their venue was performing well based on revenue alone. However, when we applied the Profitability Matrix, it revealed an operating profit of just 0.3%, well below industry benchmarks.
- Wages: At 38%, labor costs were unsustainable. By implementing daily wage monitoring and smarter rostering, they reduced this to 30%.
- Food COGS: Regular stocktakes and theoretical COGS tracking helped the chef bring food costs down from 40% to 30%.
- Outcome: Within months, the venue’s operating profit rose to 10%, transforming a struggling business into a profitable one.
6. Bridging the Gap Between Macro and Micro Insights
The combination of macro and micro views is what makes the Profitability Matrix so effective.
- Macro View: Start with the big picture to identify trends and problem areas.
- Micro Analysis: Drill down into specific metrics like food waste, daily wage percentages, or menu performance to find actionable solutions.
- Unified Focus: Aligning teams around shared financial goals ensures that every action supports profitability.
This two-step approach keeps teams focused on both immediate challenges and long-term objectives.
Breaking Down Data for Better Results
The Profitability Matrix provides a powerful starting point for understanding financial performance, offering a macro view that simplifies complex data. By breaking down problem areas into actionable insights, it empowers managers and chefs to address challenges, make smarter decisions, and drive long-term success.
When financial data is clear and meaningful, it stops being overwhelming and starts being actionable, turning numbers into a roadmap for profitability.
