How to reduce business overheads for your hospitality start-up

Starting and running a hospitality business is a dream for many entrepreneurs.

Whether you’re opening a local restaurant, running a café, or managing a bed and breakfast, the challenges are often the same – margins are tight, competition is fierce, and costs can creep up quickly.

Reducing business overheads can be essential to keep your business profitable, but that doesn’t have to mean cutting corners.

With the right approach, you can trim business overhead costs while maintaining – and often improving – the guest experience.

Discover 13 business ideas in the hospitality industry.

Why running a lean hospitality business matters

A lean operation isn’t about doing the bare minimum – it’s about getting the most value from every pound you spend.

Lower business overheads can help build resilience when faced with slow seasons, rising energy prices, or supplier changes.

It may lift profitability by directly transferring savings on utilities, staffing, stock, and services to the bottom line.

It could also improve service quality and consistency by streamlining processes to reduce mistakes, speed up service, and boost sustainability by cutting waste, energy, and water.

All these outcomes can be good news for budgets and brand reputation.

Treat cost control as an ongoing habit rather than a one-off project, because small improvements across energy, labour, bookings, payments, and stock can compound into big results over a year.

Lower overheads and operating expenses

Energy and water are among the most controllable overheads in hospitality.

These costs can quickly add up in the hospitality industry, but you could see savings with a few smart changes.

Switching to LED lighting throughout your site could reduce electricity use as LEDs use less energy and last longer than traditional bulbs.

Install smart timers and occupancy sensors in back-of-house areas, toilets, and corridors so lights are only on when needed.

Consider installing a smart thermostat to control temperature more precisely and only use energy when needed.

Investing in energy-efficient appliances, such as refrigerators, ovens, and dishwashers, might require an initial outlay, but could lower your energy bills over time.

Reducing water usage can also make a big impact.

You might consider installing low-flow taps, toilets, and shower heads in guest rooms, kitchens, and public toilets.

Check for leaks or drips regularly, as even a small leak could waste a surprising amount of water and money over time.

Some local utility companies may offer schemes and incentives to help businesses become more efficient.

You could look into whether you qualify for rebates on energy-saving appliances, special rates for off-peak energy use, or free energy audits to spot potential improvements.

With higher water bills and the energy price cap increasing, these could be areas worth considering.

Every penny saved on energy and water goes straight to your bottom line, helping your hospitality business stay competitive.

Smart staff scheduling

Staff costs are one of the biggest expenses in hospitality, so smarter scheduling can make a real difference.

Your first step might be to look at your busiest and quietest times and plan rotas to match – fewer staff when it’s slow, more when it’s busy.

This helps you avoid overstaffing and paying for hours you don’t need.

Scheduling software may make this easier by helping you plan shifts, track hours, and quickly adjust if things change.

That way, you can save money while maintaining high service standards because you’ve got the right people on at the right time.

Tools such as Deputy, Sage, and Sling can help you make staff scheduling decisions while you focus on growing your business.

Cross-training staff could be another simple way to cut costs.

If team members can handle multiple roles – front of house, kitchen, or bar – they can cover busy periods or unexpected absences.

This flexibility can reduce the need for temp staff and keep your operation running smoothly.

Streamline bookings and payments

Managing bookings and payments efficiently could be important for the health of your hospitality start-up.

A good booking and payment system could save you time and improve the customer experience.

Many software solutions are designed to make this process easier and more accurate.

Modern systems do more than handle reservations and payments – they also track customer data and preferences.

This information could help you tailor your services, build customer loyalty, and create targeted marketing campaigns.

For example, knowing your most popular menu items or special deals could help you offer the most relevant promotions or offers to boost repeat business.

Many cost-effective options for start-ups or smaller businesses don’t require a significant upfront investment.

Many cloud-based platforms are affordable, quick to set up, include support, and have mobile apps so you can manage everything on the go.

Some integrated tools you could consider include:

• ResDiary – a restaurant reservation system with payment integration and marketing features
• Square Appointments– for small hospitality businesses like takeaways, coffee shops and bars, combining online booking, payments, and customer management
• Cloudbeds – a complete hotel management system with booking, payment, and guest data tracking.

Choosing a system that fits your start-up could help you save money and streamline your operations.

Discover six cost-saving technologies for start-ups and small businesses.

Inventory management

Effective inventory management could be vital for all business owners in the hospitality industry.

It helps you avoid waste, cut unnecessary costs, and get more from your budget.

Here are just some of the changes you can consider:

1. Menu engineering

Your menu drives your food costs.

Too many dishes with expensive ingredients or complicated preparation can push up business overhead, especially if those dishes don’t sell.

Aim for a balanced menu with popular, profitable items, and a few specials.

Using seasonal and locally-sourced produce whenever possible may also help keep costs down, as these ingredients are often fresher and more affordable.

Regularly reviewing and updating your menu could help you control costs while responding to changing customer tastes.

Read more about menu engineering and pricing for start-ups.

2. Waste reduction practices and supplier collaboration

Reducing waste is another key way you can lower business overheads.

Use portion control to keep servings consistent and reduce leftovers.

Train staff to reuse trimmings for stocks, soups, or specials.

Consider talking to suppliers about sustainable options like recyclable or compostable packaging, bulk buying, and packaging takeback schemes – these can save money and reduce rubbish.

The SME Climate Hub has a free energy calculator you can use to help you create a more sustainable workplace and identify ways to reduce costs.

Find out more about commercial waste and how to handle it.

3. Inventory management systems

Modern inventory software can help you track stock levels in real time, alerting you when supplies are running low and helping you avoid over-ordering.

It could also show sales trends and ingredient usage, so you can spot waste and quickly fix it.

Keeping a close eye on your inventory can help you make better purchasing decisions, reduce spoilage, and save money.

Cutting business overheads

Lowering your start-up’s overheads isn’t just about saving on energy and wages.

There are other simple ways to cut costs and keep your hospitality business lean and profitable.

1. Negotiate with suppliers

Suppliers can have a significant impact on your costs.

It could be worth taking the time to review and renegotiate contracts regularly to secure better rates or better terms.

It can be helpful to shop around, ask for discounts and compare quotes – especially if you can buy more of the items you use most.

Bulk buying can reduce unit costs.

Building strong relationships with local suppliers may pay off, as they could offer more flexible delivery schedules or help you out at short notice.

Find out more about how to successfully negotiate a supplier contract.

2. Outsource non-core tasks

Not every task needs to be handled in-house.

Outsourcing jobs like cleaning, marketing, and IT support can be more cost-effective than hiring full-time staff.

Consider using specialists to do these tasks while you focus on your core business.

This approach could help reduce payroll expenses and free up time for you and your team.

Read about the low-cost alternatives to hiring permanent employees.

3. Check your finances regularly and use a budget

Regularly reviewing your finances could help you spot unnecessary expenses and identify areas for improvement.

For example, reviewing your financial statements may reveal hidden costs or subscriptions that no longer add value.

Use budgeting tools to help you track spending and set limits for certain areas of the business.

Many tools offer real-time alerts for overdue invoices, overspending and cash-flow changes, helping you plan.

You don’t necessarily need drastic changes to reduce business costs – just smart, steady improvements.

Small savings across different parts of your operation can make a big impact on your bottom line.

For more guidance, read our articles covering all aspects of business planning, from forecasting to effective budgeting and business growth strategies.

Explore our free Learn with Start Up Loans courses, which are offered in partnership with The Open University and include options in accounting, commercial awareness, AI, and business communication.

Read more about how to reduce costs and increase profits.