Start & Run a Catering Business. George Erdosh

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      The business was seasonal at first. Her small operation was perfectly legal (though I doubt that her income tax form ever showed profits from the fruitcakes), and her reputation spread in the local community. In a few years the demand was so great that she baked fruitcakes five to six months out of the year and froze them for the Christmas season.

      Pretty soon calls started coming in to cater dinner parties, and in no time she was running a full-fledged catering business. The holiday fruitcakes remained a part-time operation. The competition started to notice and called the health inspector. She was told to go legal or close the business.

      She found a commercial, approved kitchen, and in a few weeks her operation continued as if it had never been interrupted — although it now had higher prices, more staff and equipment, substantially expanded space, and a great deal more overhead expenses and headaches.

      Her business soon grew big enough to hire an office manager/receptionist and a kitchen manager/chef. She spent all her time coordinating events, dealing with clients, and marketing her business. She rarely went to functions unless they were exceptionally classy. Instead, she played tennis in the morning, dropped by the kitchen mid-morning to have her coffee and taste a little bit of everything that was on the prep tables, and proceeded to deal with clients for a few hours. By mid-afternoon she left the facility in the capable hands of her staff. This is one of the few successful catering stories I know. It illustrates how catering can start from a small niche — in this case, a great fruitcake.

      You may find a similar niche for yourself. This is indeed an excellent and legally acceptable way of starting a food service from your home. The right product is very difficult to come up with, however. The market is flooded with every conceivable food product, and hundreds of new products come out every month. Only an extremely small percentage survive. If one of them is yours, you are in business.

      Once you have made your decision to be a caterer, work toward your goal with a deliberate plan that includes distinct steps, each of which will give you the required knowledge, skills, and information.

      Many would-be caterers want to slip into the business slowly on a part-time basis while holding down another job. This concept sounds feasible, but rarely works in practice. A full-time commitment is necessary. Catering requires your full attention. Potential clients who call to ask questions (usually about prices) get discouraged by an unanswered telephone, a telephone answering machine, or even an answering service. Very few will leave a message on your answering machine unless they know you personally.

      If you have another occupation that allows you to answer catering calls on your cell phone as they come in, then part-time catering may be feasible. Call forwarding to a cell phone is an excellent solution, provided that you can answer the telephone with your catering business name. Otherwise you lose precious business every time you are unable to answer the phone.

      The widespread use of the Internet and email is also making part-time catering more feasible. If you have your email address and cell phone number on your business cards and brochures, and perhaps even your own website, potential clients will be more likely to approach you with a click of the button and a quick message. Provided that you check your messages regularly and answer promptly, clients will consider you easily accessible. Taking advantage of communication technology may allow you to hold a part-time job to generate the necessary income while you are starting your catering business.

      Another solution that I discuss below is a partnership. If your partner is a friend or a mate, then telephone answering may be divided between the two of you, freeing you up to earn the money you need to support your catering business.

      2. Purchasing an Existing Business

      In order to get into catering by purchasing an existing business, you need the following prerequisites:

      • You must have funds to purchase the business outright or at least secure it with a down payment. You must also have a significant financial cushion left to purchase additional equipment and run the business for many months with a possible negative cash flow.

      • You must be an accomplished caterer with significant skill and knowledge related to every aspect of the business. You must be able to take over, manage, and run the business by yourself, even if the former owner promises to help you during the first three months.

      • You must be able to devote up to 16 hours a day to the running of your business for the first five to six months until you know your clients well and your business intimately. After that initial period, you should be able to slowly relax, reduce your working hours, and resume your social activities.

      2.1 Buying a business directly

      Restaurants and catering services are often available for purchase, which makes it a buyer’s market. In the restaurant business, the hours are very long; in catering, the pressure is extreme. In both industries, the profit margins are low and the rate of burnout is high.

      If you live in a large town or city, chances are you can find a catering business for sale. Along with responding to advertised businesses for sale, write a letter or send an email to every genuine catering establishment in town. Even delis with sideline catering or small restaurants may be possibilities. Unless they are located in high-volume downtown areas where rents are prohibitive, their health department-approved kitchen facilities may be reason enough to consider the purchase. You can always scrap the deli or restaurant part if the purchase price is right. (If you are interested in the restaurant business, have a look at Start & Run a Restaurant Business, another title published by Self-Counsel Press.) However, if catering is a restaurant’s sideline business, its client base may be too small to be of much value to you as a caterer.

      A fair purchase price is tricky to determine. Larger businesses with good record-keeping are easier to assess, but smaller ones are notoriously poor when it comes to bookkeeping. You must know the true annual gross and net of the business for several years back to determine the fair price. The higher the annual gross, the better the business looks in the eye of the buyer, and the more the net profit is, the more the business is going to be worth. Good record-keeping by the current owner is a must, although it is as rare as a new client who pays in full, in advance, for an event three months from now.

      Get a lawyer to help you with the purchase and an accountant to decipher just how true the records are. Income tax returns are not reliable and the seller isn’t likely to show them to a buyer since the reported gross earnings on these returns are often not as high as the true gross earnings.

      There are different formulas to help determine the fair price of a business: one calculates the percentage of the last full year’s gross profits; another is based on the average of the last three years’ net profits. You should discuss this topic with experts, which is why you need a lawyer who can protect your interests and an accountant who will thoroughly check all records, verify their authenticity, and tell you his or her opinion of how realistic those records are. Naturally, you should study the records very carefully yourself. Working with the present owner for a while will likely give you a clue to how good the bookkeeping records are.

      If the books and records have been maintained by professionals, you’ll know they are reasonably accurate. But a bookkeeper can only do as good a job as the records given to him or her allow. You never know if receipts are missing due to neglect or if unrelated receipts have been added. For example, when the owner bought a food processor for her home use, did she include the receipt as a business expense in order to reduce her business’s net income? Always be suspicious.

      Check the client list carefully and see how often each one uses catering services. СКАЧАТЬ