Recipe for Success: Get Creative

Many small businesses are struggling to survive in this difficult economy. Restaurants have been particularly hard hit by rising raw material costs. Prices for staples like butter have increased significantly over the past year. And most small restaurants can't really buy in bulk due to lack of adequate storage space or food spoilage issues. So how do they survive without passing on higher menu prices, which many owners fear will drive away customers in a fragile market environment? They get creative.

Sourcing food products from local sources allows owners to buy just what they need. While the price may be slightly higher on a per unit basis, you only buy what you need. Buying from the large restaurant supply firms means you buy most products by the case, even if you can only use half that much. For example, a raw material is available from the national vendor at $2.00/lb. but must be bought in 8 pound cases. A local provider will sell any amount of the same raw material, but at a price of $2.25/lb. The unit price for the national seller is 12.5% less.  However, the restaurant can only use 5 pounds before the product goes bad. The total cost of the raw material from the national seller is $16.00, versus only $11.25 for the same usable quantity from the local provider, an almost 30% reduction in actual cost.

What ways have you found in your business to save money? If you have some interesting tips for other small businesses, please share them here. 

For a more complete discussion, view my white paper: Weathering the Economic Storm.