November 20, 2014

The Rule of Thumb: The Power of 3

The Rule of Thumb - The Power of 3 | Überbartools™

Our lives are consumed by the number 3!

We win, loose, judge, consider, select, discard, all based on this number!

Some examples:

Gradings and competitions 1st, 2nd and 3rd
Sizes Small, medium and large
Restaurants Starter, main and dessert

3 is also crucial to a bar business as it’s the key to growing, winning and operating profitably!

When one considers the impact of the power of 3, the thought changes to “drinks philosophy”! Don’t worry this is not a conversation about the pros and cons of Pre or Post prohibition style drinks , it’s an understanding based on building a model inclusive of supporting engineering process and metrics.

The Bar Rule of Thumb

There’s a direct relationship between guests spend, individual drinks sold and contribution margin towards a venues costs.

A great guide to understanding in easy terms the impact… consider overhead and expenses in terms of 3 drinks sold to one guest.

Rule of thumb 1 The 1st drink sold pays the wages
Rule of thumb 2 The 2nd drink sold covers the bills
Rule of thumb 3 The 3rd drink sold is your profit

Remember a drink purchased by one customer, and then repeated, may not always mean a bar is making a profit.

Each Rule of Thumb has its own drill down with arising impact:

A one drink philosophy

A One Drink Philosophy | Überbartools™The focus is on SPEED!

Quality, consistency, possibly service may take second or third place as it’s all about VOLUME. Being brilliant at getting it out quick is key as guest churn is high! This business may be characterised by consequences such as rising wastage, lack of care and possibly high staff turnover!

If this game is not won through unbelievable costs controls, process and execution, it’s easy to just tread water! Let’s face it who's in business just to pay wages?

A two drink philosophy

A Two Drink Philosophy | Überbartools™The focus changes from slinging it out to looking at ways to drive profitable revenue opportunity, by encouraging the guest(s) to stay longer/spend more.

Quality, consistency, guest experience becomes something to focus on. Less money can be spent on driving the numbers, more emphasis on customer retention.

As spend per guest rises, the contribution margin required to cover remaining venue costs gets closer and closer to break-even.

A three drink philosophy

A Three Drink Philosophy | Überbartools™The focus here is detail: heightened guest experience, service levels, quality, perception of value, consistency.

Greater investment can be made on the bells and whistles encouraging guest retention, larger spend!

Supporting processes and activities will be built around engineering this business outcome, with rising profits to show for the effort.

Defining what your business is or aspires to be; measure by the Bar Rule of Thumb, it’ll change the way your business runs!

To your success!