June 18, 2009

God Help Me I Am Never Going to Shake This Accounting Thing

Q: Why does Martha Stewart insist Andersen auditors help out on her cooking shows?

A: She knows they're the best at shredding.

(I love Martha -- just couldn't resist!)

Okay, I admit it, I am an ex-accountant. There, I said it. I spent some time in the trenches of public accounting (a glorious stint with Evans Porter Bryan in Atlanta). My partner, Jeff Bryan, was a Florida State alum (unfortunate for him) who loved agribusiness. I was the grunt on audits for Seminole Peanut Company, Damascus Peanut Company, Dixie Shooters Taxidermy Clinic, Vidalia onion farms etc.) The firm was small (around 30 accountants at the time) and we would split our time in audit and tax. I was the youngest person (admittedly I should not have even had the job.) Jeff Bryan recruited at Stetson University (DeLand, FL) where I was earning my Accounting degree. He graciously agreed to take me on...(Later he even saw that the firm paid for Georgia State -- and I took waaaaaaaaaaaaaaaaay advantage of his generosity by scoring an English degree on his dime rather than additional amour for my Accounting degree.) I eventually earned a dual Accounting / Marketing BBA as well...but just not in the order Mr. Bryan had intended.)

The managers on the projects would take me around south Georgia where I would count crates, "10-key" and fetch coffee. The best part of my experience took place outside of Thomasville, GA. Basically the southern headquarters for the firm -- a lake house. After a day with clients, dinner at a meat & three / gas station, we would head to the house and play pool. The big guns on the jobs would bring out the brown liquor and I, eager to please, would gladly partake.
It was my first suit job.

Today after working a dozen years or so in accounting (The Coca-Cola Company was my last gig), just shy of 11 years into owning Green Olive Media, I still revert back to my formidable days with Evans Porter Bryan. I bore everyone in the office with my "Stuffing the Olives" programs which include such riveting topics as:

"The Income Statement: Yes, you can make a profit in the restaurant business but you cannot save yourself into profitability but cutting all marketing spend!"

"The Balance Sheet is not about the 4 food groups: Show Us Your Long-Term Liabilities and we will show you how to bring home the Bacon"

When new Green Olive design team employees join the company, they might question why we consider the long term financial outlook of a client. They are, after all, only developing an identity system, embarking on a naming project, or building a website. If the client has the cash now, why not take them on? Our answer is that we are engaged for the life of the client's business. We not only handle design for client restaurants, we handle public relations, media buying consulting, social media, event planning -- many other services which provide for a holistic experience and an overall approach to maintaining the health of the business. It is important that the name, logo, menu design, website, signage not be the end of the overall marketing spend for a restaurant. You cannot simply have a "build it and they will come" mindset in this day -- or ever, for that matter. Great design works hand-in-hand with great public relations, social media, advertising, events...I think you get where I am going.

If a client opens a restaurant under capitalized with large debts, the restaurant may show large profits based on the Income Statement, but the restaurant may not make money because it is paying out the outstanding debt (Long-Term Liabilities).
So yes, I continue to "Stuff the Olives" with the Green Olive Media staff.

I encourage everyone in our office to pose financially-minded questions to clients such as "Is this project intended for multi-unit expansion?" "Does the restaurant have the bandwidth to fully integrate the aesthetic branding elements we are recommending?" "Is the restaurant carefully considering the percentage of projected gross revenue for the restaurant when determining the budget for overall creative and marketing spend?"

For simplicity sake, when I have only a snapshot of a client's business plan financial statements, I look for these percentage ranges -- let me know if you disagree -- I am after all a lapse accountant.
(as a percentage of sales)
Cost of goods sold 28% to 34%
Payroll 28% to 35%
Operating expenses 7% to 10%
Occupancy expenses 5% to 12%
Marketing expenses 3% to 6%

A caveat: Restaurant marketing cannot change behavior; it can however, influence existing behavior. Although measuring a direct link between marketing / PR and sales is tricky, there is an undoubted correlation between raising a brand profile and increasing sales potential. It does not happen in a few months. This takes some time.