By Jerome Chiaro

The restaurant budget can balloon during the first year or so because of growth. A restaurant may be very profitable during this period, but when the costs of expansion overtakes the profits, then at the end of the financial period expect the young restaurant to declare a loss instead. To help you stay afloat, here are some valuable tips in trimming your restaurant budget:

1. Have at least six months of operating capital in the bank before opening your restaurant business.

When you got the financial power to back you up through a crisis, you withstand losses far longer than an independent operator who is not prepared for the onslaught.

2. Understand cash flow and learn to manage it.

Cash flow in a restaurant business is more volatile and less predictable than in retail or manufacturing. However, knowing where your expenses come from and identifying the averages in your restaurant will help you control costs in your restaurant budget.

During the first year or so, a restaurant owner may find himself spending money on replacing non-performing employees, repairing equipment failures or upgrading them to faster machines to keep up with demand, and tweaking the menu for flavor, presentation or preparation. These unexpected costs can cripple a business when the restaurant budget is insufficient to cover the losses.

3. Start small and simple. Do not splurge.

The location of your restaurant will determine the rent expenses. The prime locations in the city have more foot traffic, which means more customers. However, starting at an out-of-way location is not bad considering you are operating on a minimal restaurant budget. Once your place becomes famous for the excellent food, then that is the time to move on to a better location, and perhaps, finer interiors.

You shouldn’t have to strangle costs for designing your restaurant’s interior design. Some places attract customers because of the ambience inside their restaurant. However, you shouldn’t also splurge on costly interiors. A simple design that exudes comfort and serenity is far better than a glamorous look.

A smaller area is preferred for new restaurants. This means serving a smaller group of diners every few minutes or so, rather than attending to the needs of a large customer base. Less demand means less hassle.

4. Hire a small crew and be willing to do most of the work

A good restaurant owner knows how to work for each position in his or her restaurant. You should know how to work as a server, cashier, a cook and a manager. You should learn how to operate the machines and be humble enough to clean the floors after closing time.

Hire fresh graduates or trainees because they are more enthusiastic to do the job at a lesser compensation. Choose the ones who can do more work in less time. Plan their work schedules so that you always have enough number of people working in the restaurant to get the job done.

If possible, ask friends or family to help you out whenever the need arises, such as when holidays come in or when someone in your staff is sick. This does not mean that they work for you for nothing; offer a good pay rate, but explain that it is the most you can afford presently. They will understand your situation.

5. Keep your promotion expenses cheap.

Because your restaurant is new and few people know about it, your best bet in promoting your business is through the Internet. Rising costs in newspaper, TV and radio ad spots can hurt your restaurant budget. Save money by setting up a small blog about your restaurant and your menu.

Invite food bloggers as well as known food writers to taste your wares, so to speak. Once these media mavens spread the good word either through traditional means or through new media, you can expect an increase in diners.

The flow of traffic may not explode like what you imagine it would. No clamoring crowds or lines of waiting customers will appear on the first few weeks. However, as long as your food remains the best tasting and most innovative cuisine in your town, then you can be assured of a steady flow of customers to your restaurant. Moreover, as long as you keep your restaurant budget expenses down, expect a steady flow of income that will keep you in the black for the first two years or so of business.

About the Author: Jerome Chiaro is a Restaurant Owner & Consultant out of Orange County, CA. Did you know that 95% of restaurant owners and managers spend over 55 hours per week slaving away at their restaurant! He can help you WORK LESS and PROFIT MORE… Claim your copy of his

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