How to find your feet in the challenging hospitality market

By Adam Lawton, Growth Hub Business Adviser

The hospitality industry has changed significantly since I ran my own café and deli business. I think the recent implosion of big chains marks a sea change in the sector; it appears they may have expanded too quickly and potentially lost their focus on delivering a quality service.

Despite this, I think it’s still a good time to get into the trade. Margins are typically small, but if you’ve got a really defined offer and know exactly what the business is all about, you can develop a robust understanding of the market that will really set you in good stead.

For those worrying about a lack of experience, I think you can come into the hospitality industry relatively cold; it means you’ll have no baggage or pre-conceived ideas about how such a business should run.

It’s the planning that’s important!

The importance of mind mapping and business planning

Chances are, if you’re thinking about setting up a business in this sector, you’ve probably already done a fair bit of homework, whether that be the early formation of a business plan or simply by heading out and experiencing the businesses that are already operating within your niche.

To take that further, I’d recommend sitting down and mind mapping what it is you think you can add to the sector, what the competition’s getting wrong and starting to form a rudimental version of what will become your proper business plan.

Market research and business planning tend to go hand-in-hand. When I first started out, I literally walked the streets, talking to people and sat in my car near potential locations to measure footfall. I’d also spend time in cafes and delis to get a feel for how they operated, before starting the process of talking to potential suppliers and investors.

Defining your target market is challenging. You need to start by finding your niche or speciality, and then work backwards to find out who that appeals to and where you need to be to capture that market. For instance, if you want to open a premium hotel, do you need to be in the city centre or countryside? Cafe owners need to think about times of the day; do they want to capture early morning pre-office businesspeople or the mid-morning ‘coffee mum’ market?

Once you’re ready to get cracking with your formal business plan, there’s some great templates online, including the one which can be found on the Prince’s Trust website. There’s also some great websites aimed at start-up businesses, such as startups.co.uk that offer business plan templates and loads of really good advice.

Finding funding

Funding a hospitality business can be particularly difficult, because unless your plans are particularly ambitious, you’re probably not going to attract the attention of angel investment. There aren’t that many grants available for these kinds of operation, but crowd funding is sometimes an option if your business idea is really unique or meets a specific need within the community.

Banks are still a little twitchy when it comes to loans for new businesses, too, but there are some great government startup loans which range from £500 to £25,000 that are worth exploring – that’s what I used when I opened my deli business before my role at the Growth Hub. These work like personal loans and can be secured against yourself at a fairly decent interest rate. ‘Friends, family and fools’, as it’s affectionately known, is another common option for start-up hospitality businesses.

Just make sure any debt with which you saddle yourself is manageable and repayable; being in debt as a business isn’t a bad thing – it’s often the only way to achieve growth during those early years and create a sustainable operation.

Building an audience before you open your doors

Working your social media presence before you open is also vital and will enable you to build a following before you so much as produce your first menu. The Growth Hub recently worked with a vegan cafe who did this to great effect and built a huge audience on Facebook by tapping into organisations like the Vegan Society.

The only thing to keep in mind is the importance of managing your reputation online; reviews, criticism and praise all happen in real time, and dealing with mentions of your hospitality business on social media is something you’ll need to learn to get to grips with early on. The trick is to not take things personally and treat positive and negative commentary in exactly the same way. Responding to incoming messages and mentions fairly and compassionately shows you care about your business and provides a brilliant advertising opportunity.

We tried various forms of print media when I started my business, but we found it difficult to get a quantifiable response. Response rates with traditional media are generally pretty low these days, but many will say persistence is key. As a start-up business, those costs mount up, which is why social media is a great, low-cost alternative that can be measured thanks to the analytics available.

If you can gain some media courage by getting the mayor to make an appearance at the grand opening, or grab your own spot on local radio, those kind of free PR opportunities can be very powerful indeed, as can associations with local clubs and businesses.

Mistakes? I made a few…

I made plenty of mistakes when I ran my business, but I don’t regret any of them, because it’s a great way to learn.
In hindsight, we probably overcomplicated things and tried to do too much with very little budget. I think we should have focused on just one or two elements rather than attempting to cram lots of specialities into one venue.

The biggest mistake we made, however, was overlooking the fact that as a hospitality business, you’re selling yourself as much as the product. Due to staffing issues, I spent far too much time in the kitchen, rather than being a face of the business – I think we suffered because of that.

Finding the right staff

Moving from running the business entirely on your own to having a bunch of staff is crucial for growth, but it’s tough finding quality, reliable staff in the hospitality industry. They’re out there, but you have to accept that it’s going to be a challenge finding them, and you’ll probably go through some tough times as a result. We don’t value service staff enough in this country, which hampers operators.

This is where the recruitment process becomes very important. Allow yourself time to find the right people and be rigorous when you’re interviewing, but make sure the business is attractive to the best talent, too. And that doesn’t mean blowing your budget on large wages – rather presenting a well-rounded package; why would someone want to work for your business? What does it offer above the other options out there?

This industry is often referred to as a lifestyle business, but the reality is quite different. Delivering a quality hospitality product is really challenging, whether it be making a cup of coffee or welcoming a new guest into your hotel. People often have the grand idea that they can relax behind the bar while they chat to their friends, but ultimately, it’s still a business.

You need to enter this industry appreciating it’s one of the hardest in which to survive, but if you work hard from the start, the rewards are more than worth it.

The key lies in refreshing your product regularly and developing services that keep people coming back for more. If you stand still in hospitality, you’re effectively travelling backwards!

At the Growth Hub, we have workshops that can help you get your hospitality business off the ground. We also have access to a significant amount of market data and specialists in hospitality who will help you find the business skills you need to build a successful hospitality operation. Contact us today to find out more.