How to create a profit and loss forecast for running a pub
Keeping watch on the bottom line and making a profit is crucial to the success of any business. Pubs are no exception. Expenditure should never be greater than your income, and your business model must be capable of making a profit at every point.
Drawing up a profit and loss statement may seem daunting if you’ve never done it before, not least when you need to forecast your profits and losses for a new business that you’ve yet to run.
Fortunately pub operators like Greene King have all the information you need, and provide great support to get it right. If you decide to run a pub with Greene King, your Business Development Manager will work with you to create a business plan that meets your objectives and creates the profits you deserve.
As soon as you have found the right pub, Greene King will provide all the background figures you need including trading volumes for the past three years. This enables you to judge sales levels for the difference services and drinks sold in your pub.
Knowing Your Profit Margins
Watch any reality TV programme about a struggling restaurant or hotel and the first question that is always asked is – what are your profit and loss margins per product? Almost inevitably, they say they do not know and have to take a quick lesson in learning how to calculate those figures then spend an evening working it out for every product or service they provide. The answers invariably surprise them, usually because they haven’t been making anywhere near the type of profits they should have been.
It doesn’t have to be like this! With the right support you can go into the pub business knowing your profit margins so well that you can recite them in your sleep!
Every product you sell in a pub has a profit margin and you need to know what this is and where the highest profits are being generated. Is it food, wine, beer, accommodation, services? You need to be able to compare individual products as well as each sector on a like for like basis.
Profit margins are not the same as turnover or revenue. They refer specifically to the money you make on each product you sell, rather than overall sales figures. The trick is recognising which activities bring in the most customers, and what are the activities that bring in the profits. Keeping these two needs balanced is extremely important, likewise being aware of the dangers posed if one part of the business grows more rapidly than the other for example customer numbers rise, but not the profits!
Identifying profit and loss margins is very easy, once you have the background information. In fact, it becomes a simple administrative task that will not take long to do on a regular basis, thus allowing you to check your profit and loss margins frequently.
Greene King Profit Calculators
Greene King has a very simple, easy to use drinks profit margin calculator that can be accessed instantly online. So for example if you are working out your profit margins per pint of beer, all you have to do is go to the relevant page. You then insert your figures, VAT rate, cost price per container excluding VAT, the container size, selling price per pint. The calculator immediately indicates the results based on the information you have inserted.
We also have similar calculators for every type of product sold in the pub such as wines, spirits and food. Insert your anticipated purchase price, planned selling price, press and find your profit margin. Greene King also has specific Drinks Margin templates that can be downloaded for use with Microsoft Office or Open Office. All these resources can be found in the business planning section of the website here.
Regular Checks Essential
Keeping watch over those profit margins doesn’t have to be hard work. With the templates and calculators above you can do this painlessly on a regular basis ensuring that you are fully aware of all that is happening to your bottom line.
Ideally, you should aim to set aside some time each week to check your profit margins. Create a list of all the products and services that you are selling or are proposing to sell. Make a note of the purchase price against each name. Decide what you would like to sell that product at, taking account of any taxes involved, input the information, press enter and your margins can be clearly identified. With practice, you can do this on a daily or weekly basis to take account of any purchase price changes. It is very important to do this regular check as it can make a tremendous difference to the success of your pub.
This information also allows you to recognise potential opportunities. You can encourage your customers to try drinks which offer higher profit margins, or use add on services such as buying snacks with a drink. You can also take advantage of emerging trends that can offer higher margins because they involve premium products. Recent years have seen a lot of attention being devoted to gin, with the creation of gin distilleries within pubs and a much wider range of tastes. Rum has now begun to emerge as another contender, with the launch of a traveling Rum Festival around the UK in which consumers can choose from around 100 different types of rum while enjoying Caribbean culture, steel bands, and Caribbean food.
If you could do with more support, Greene King has some excellent training courses designed to help you every step of the way, such as Go For Growth: Planning for Success. This workshop helps you to create realistic targets when compiling your business plan. Participants learn:
- How to access the current cost base of the business and conduct an analysis
- How to develop an active pricing policy
- How to identify profit margins and products that can be upsold
With accurate profit & loss forecasts you can relax and concentrate on running your business effectively.