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Growing a business:
on profits and problem solving

In the catering sector, just like any other business, there really are only two things that you can sell: a product or a service. Smart businesses sell both. But selling products and services isn’t enough – to be successful in business you must make a profit on those sales. Professor Russell Smith from Business Boffins looks at how you can not only ensure your business is sustainable, but also profitable

Growing a businessMore than half of all businesses fail within three years. From this we deduce that it is very tough simply to make a business sustainable, let alone grow. But if the fundamentals are there, especially profitability, then any business can offer a platform for growth.

There are two ways to achieve that growth: do more of the same or do additional things. Henry Ford certainly understood the first option: his production lines enabled quicker manufacture of the ‘Model T’ which, in turn, enabled him to sell more cars per year. Unfortunately at that time only black paint dried fast enough to keep up with the production line, which somewhat limited his product range.

Caterers will be familiar with the concept of a ‘product range’ but will know it by another name: the menu. A varied menu will quite literally cater for a range of tastes. But remember, there should be no variety with respect to the quality of the products on the menu or the standard of service with which they are presented. Extending a product range too far, or too quickly, can lead to a decline in quality and consistency. Little wonder, then, that Gordon Ramsay often starts by simplifying menus when he attempts to turn failing restaurants around in his Channel 4 programme, ‘Ramsay’s Kitchen Nightmares’.

Customer perception

Customer perception is fundamental to business growth since it is reckoned to be ten times easier to make a repeat sale to a satisfied customer than it is to find a new customer. Regular customers can underpin success in the catering sector and so business owners must work hard to ensure that they retain customers and achieve repeat sales.

Customers will be happy if they receive consistency of quality in products and services and perceive their purchase to represent value for money. And happy customers will recommend your business to friends and colleagues, which should lead to increased sales.

So long as the business makes a profit it will be sustainable. However there is often a ‘ceiling’ to business growth that needs to be overcome. For example, a restaurant may have a fixed number of covers such that a ceiling is reached when the restaurant is fully booked. To overcome this ceiling and achieve growth, it is necessary to apply the principles of enterprise. And that starts with recognising that people buy things to solve problems… let’s take Rick Stein as a case study.

Rick SteinRick Stein: problem solver

My wife solved the problem of my birthday present recently with a trip to Rick Stein’s Seafood Restaurant in Padstow, Cornwall. But then she had another problem: where could we stay that night? Luckily Rick solved that issue by offering accommodation in one of the converted rooms above the restaurant. His St Edmunds House hotel, just behind the restaurant, would have solved the problem equally, but the idea of simply staggering upstairs from the restaurant proved irresistible.

Later that summer we planned to have a holiday in Cornwall with the extended family. Our experience at the Seafood Restaurant had been so positive that we thought briefly about returning until we realised the cost involved for our party of nine. However the Rick Stein brand did not let us down and his St Petroc’s Bistro provided us with a delightful family meal at a much friendlier price.

Rick Stein's Seafood RestaurantRick Stein's Seafood Restaurant

The following day, the problem of lunch was solved by Rick Stein’s Café and, later, our two hungry teenage boys enjoyed a takeaway from Stein’s Fish and Chips.

Having eaten at the Seafood Restaurant I was eager to recreate some of Rick’s recipes at home. No problem: Rick has published several recipe books. And if I’d thought that obtaining some of the more exotic ingredients could cause a problem, I was mistaken – the ingredients are available from his deli. Finally, if cooking were a problem, Rick can solve it easily with a course at his Cookery School.

Rick Stein's PatisserieRick Stein's Patisserie

So you see, the flagship of Rick Stein’s empire is the Seafood Restaurant with its first-class reputation. However Rick has been ever mindful of people’s problems and solved them by branching out with a series of related ventures. Fundamental to his business growth has been the Rick Stein brand that he has cleverly promoted with TV appearances.A strong brand is one of the keys to business growth.

Business growth

Business growth happens when a profitable business develops a reputation for quality products and services that customers perceive to be value for money. If, like Rick Stein, you can branch out into related business activities then the reputation of the core business can help make those successful too.

Plan your business growth by thinking like Rick Stein and be a problem solver. Start by thinking how you can extend your range of products and services in order to solve additional customer problems. Focus on profitable lines and drop unprofitable ones ruthlessly. Crucially, always remember that the reputation of your brand overall will suffer if insufficient attention is paid to quality and consistency with new ventures.

Prof Russell Smith teaches at several University Business Schools in England and is the founder of Business Boffins Ltd (www.businessboffins.com; 01844 278448), which works to help new business owners learn the process of enterprise. He writes a monthly business page for The Independent and his new book, How to Start a Successful Business is available from Amazon. Prof Smith has donated the fee for this article to Communities in Business – an organisation that supports disabled people to start a business.

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