For more than a decade, restaurateurs Joshua Suggs and Coretta King have kept a vigilant eye on the operating budget and overall finances of Delta’s in New Brunswick, New Jersey.
The duo’s upscale bar and restaurant brings a Southern-style cuisine and flair to the professional crowd of the central New Jersey college town that’s home to Rutgers University. Their financial tenacity and business acumen has enabled them to make a bold move: In the spring of 2011, they will open a second restaurant in Charlotte, North Carolina.
A common mistake many small businesses make is commingling their personal and business expenses, which can be a prime target for IRS scrutiny in audits. But Suggs and King are keeping business expenses and personal expenses separate, and have managed budget, credit, and tax obligations so well that revenues for Delta’s will top $2.2 million–about the same as 2009 figures despite a sour economy. Before Suggs, 39, and King, 38, opened the restaurant in December 1999 they made sure that they had little to no debt and were living within their means.
Suggs says he has mostly been thrifty. While he was a student at Rutgers, he worked a part-time job and often looked for the best bargains on items such as books and appliances. King was also conservative when it came to spending early in her life. Even now, “many of our employees drive better cars than we do,†she adds. As it turned out, the duo’s wise spending habits led to establishing the business.
The two were engaged at the time and later married, but are now divorced. Despite the split in their personal lives, the duo remained committed to a 50/50 business partnership. “Neither one of us had any formal training in how to effectively run and operate a small business,†Suggs says. “The original business plan we submitted to the bank for the SBA loan was only four pages long.†But what they did have was a solid financial track record with minimal consumer debt which made it easier for
them to secure a 20% down payment ($180,000) and obtain a loan for the balance ($720,000) from the Small Business Administration (SBA) through Valley National Bank, a subsidiary of Valley National Bancorp.
Despite the lack of entrepreneurial training, Suggs and King were adamant about creating a budget and sticking to it. After they divorced, Suggs saved money by moving in with his family in Highland Park, New Jersey–a short distance from the restaurant. Currently, he has three personal credit cards with the highest credit limit being just $1,000. He seldom uses the cards. In the years leading up to Suggs’s foray into entrepreneurship, he saved money religiously, earned extra cash from part-time jobs, and looked for creative ways to buy things inexpensively.
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King, who has since remarried, says when it comes to spending and managing money, frugality is the buzzword and keeping Delta’s on sound financial ground is a main priority. King observed how her mother managed four rental properties in California and Arizona. The main lesson she took away was how to establish and maintain cash flow.
“By putting money back into a business and reinvesting in the core product, a business owner will always have a steady flow of cash,†she says. “Personal money management works the same way.â€
As co-owners of a business, Suggs and King give themselves modest salaries from their restaurant’s profits. The salaries vary slightly and depend on how well the business does, seasonal expenses, or special events. Occasionally, the two have had to forgo paychecks in order to meet the payroll or pay for an unexpected expense at the restaurant. “Fortunately, that has only happened a few times,†King says. “We pay our employees before we pay ourselves.â€
Delta’s has 15 full-time employees and 30 part-timers. The biweekly payroll averages about $28,000. In 2009, the restaurant implemented Web-based restaurant management software called Restaurant Solutions Inc. The software is designed for restaurateurs and manages virtually everything associated with the business: payroll, inventory, accounts receivable, and accounts payable.
“Our year is comprised of 13 four-week periods,†King says. “We count inventory and enter payroll, sales, and all bills and invoices weekly. This allows us to compare Delta’s operations week to week, period to period, and enables us to accurately track income and expenses.â€
As for the expansion into Charlotte, Suggs and King say the decision to set up shop in North Carolina came after months of research.
The city has an African American population of about 33%, and they found no upscale soul food multiunit venues in the city. “We found a place on the main street in Charlotte and put together a solid business plan, raised capital, and put funds in an escrow account,†Suggs says. They’re scheduled to sign the property lease this month.Although savvy money management has helped make establishing and maintaining a business easier for Suggs and King, the road has had detours.
Delta’s opened with the furniture that belonged to the previous restaurant. About a year later, “we were in dire need of chairs and barstools, but didn’t have all of the funds to purchase them,†King says. Rather than dip into their own pockets, they came up with a fundraising plan. “We had to be creative and started the Delta’s Chair Club,†explains King. Loyal customers were encouraged to purchase a barstool for $250. Once the stools were delivered, brass plaques with the names of donating
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guests engraved on them were affixed. “The promotion was a big hit, and we eventually hosted a dinner for all of the patrons that participated and gave them membership cards that provided them with various perks and amenities,†she says.
In the future, Suggs and King plan to parlay their money management and budgeting skills at the new restaurant. “Utilizing the same strategy and financial resources that made us a success in New Jersey will ultimately make us an even bigger success in North Carolina,†Suggs says.
How They Did It
Suggs and King offer their advice for managing their personal and business finances. Among their tips:
Reinvest in the business. “We constantly put profits from the business back into the business,†Suggs says. Using profits to enhance the décor, add new entrées, and sponsor special promotions helps them keep loyal customers.
Add a unique value above and beyond the core product. By doing more than just the basics for your customers, a business can establish a customer base that regularly patronizes the business.
Make money by being creative. Provide special promotions and giveaways that will attract customers and encourage them to bring others to the business. This should bring a steady cash flow for the business.
Save up cash reserves. Although having good credit is important when applying for a business loan, having free and clear collateral is critical, Suggs says.
Let technology help you. Shop around for software that will track your business expenses and personal expenses separately and accurately. Never commingle business income and expenses with personal resources. This can lead to financial disaster on several levels–especially at tax time and when determining whether the business is making money.
Pay yourself a modest salary. Determine how much you need to live on each month and pay yourself that set amount. Don’t live extravagantly just because the business is doing well. Live below your means and always be prepared for emergencies.