Publicans urged to review overheads as recession bites

With recent reports showing that pubs are closing their doors at the alarming rate of 39 per week, there has never been a better time for publicans to review their overheads with a view to improving profitability. The double whammy of falling sales and rising costs might seem insurmountable for hard-pressed publicans. But research shows that there’s still much that pubs can do to ensure survival in times of recession.

Attracting new customers and increasing sales is obviously important. But reducing overheads is perhaps a quicker and easier way to have an impact on the bottom line. A recent survey of 2,675 pubs by the Association of Licensed Multiple Retailers (ALMR) indicated that they spend an average of 53% of turnover on controllable costs. About 27% goes on wages and 11% on premises, excluding rent.

Publicans should take a hard look at where the money goes and see if they are getting good value. The good news is that savings are there to be had. For example, data from pub insurance specialists Alan Boswell Group has shown that pub insurance premiums have dropped by about 8.5% in the past two years. According to the broker, the average premium paid by pubs it insures is now around £1,050. That figure is about 30% lower than it was in 2005.

Jon Preston, who deals with our pub insurance scheme, commented, “There are more insurers fighting for a reducing number of pubs, and the competition in the market is more intense than ever. Publicans with a good track record and a decent claims record can expect to save money if they shop around.”

Publicans should not be tempted to skimp on insurance cover. It’s important to get the balance right; saving money simply by cutting down on your protection is a risky approach. Getting the wrong cover for your pub, or using an insurer with poor claims handling processes could finish off a business that’s been weakened by the poor economic climate. As ever, getting independent advice from a broker seems like the best route. The busy publican can effectively out-source the insurance procurement process to their insurance broker.