Operating a business without financial projections would be like a tarot card reader winging it without her cards. According to Entrepreneur, working out projections and taking time to regularly evaluate your company’s position in the market is one of the most effective ways to iron out kinks and identify new opportunities. For projections to be useful, they need to be comprehensive. Advertising, office supplies, and payroll might be your biggest expenses, but remember to include data collected on food spending in your T&E.
Translating Expense Data into Future Costs
There’s a reason that businesses spend on food: revenue. Certify, the expense management platform, calculated that for every dollar spent on T&E, a company can expect an average return of $9.50 in revenue and $2.90 in profit. Of course, simply throwing in a budget line for food spend won’t automatically make money. Be deliberate. When projecting, analyze past T&E expense data and identify areas of proven return. Return in this context means where has food spend contributed to lowered employee turnover, retaining customers, increasing sales numbers, and reducing compliance costs.
Types of Food Spending: Identifying Areas of Return
Here are three types of past food spending data that can help predict areas of return and guide your planning for future costs:
- Employee food spend: Some internal events, like recruiting lunches, are a straight expense. Others that engage employees directly- like lunch-and-learns, general training and company parties- produce a return because they contribute to improved efficiency and reduced employee turnover. As your company grows and you hire more people, expect an increase in employee food costs. Look at the spending for your last several recruiting events. Let’s say you hire an average of 3 new employees at every event, have an average of 75 attendees and spend roughly $5 per head on food. If you want to grow your company next year by 10 percent, which means hiring 9 new people, you can expect to hold 3 recruiting events, spending $375 per event.
- Initial sales call food spend: Look closely for instances where serving food might have boosted sales. For example, Fortune reports that when pharmaceutical reps buy lunch for doctors’ offices as part of a drug promotion campaign, doctors tend to prescribe that drug more frequently. Sales call food spend can also be used to estimate future customer acquisition costs. If your sales reps generally average $250 in food spend per initial sales call, and you want them to begin meeting with 50 more medical offices nationwide, you can easily expect to spend about $12,500 for the added sales calls.
- Customer retention food spend: Scaling a business isn’t just about bringing in new customers; establishing customer loyalty should be a priority. Use the data on customer-focused T&E expenses, like sending gifts for special occasions, to determine future costs of customer retention. For example, if you send an end-of-year “Thank You” basket to all clients, and you plan to grow your client base by 10 percent over the next year, you can add the additional “Thank You” basket costs as well.
Using past food spending data to control expenses and estimate future costs is an import part of T&E expense planning. Leverage that information to understand where sinking more into T&E expenses can yield greater return and help to grow your company.