Do you understand your break even point? This is a crucial number in your business. The full low down is in the video below.
Your breakeven point is extremely important and people don’t really understand why so I want you understand your breakeven point in your business as it’s going to allow you to not only predict your profit on the good weeks but also know exactly what you need to do in sales each week within your business to make sure you break even.
And the weeks that you don’t hit your sales breakeven point you’re going to know exactly where you’re sitting from a lost point of view so your numbers don’t get out of control. And we all know hospitality is a difficult industry to be in so we need all the help that we can get so when we’re calculating our breakeven point we need to look at what are fixed overhead prices are these are things like accounting fees, bank fees, subscriptions, things like your rent, your gas, your electricity and understanding gas and electricity can change a little bit depending on your opening hours and your sales but it is relatively a fixed portion.
The best way to do this is look over the last couples year at your numbers and what you’ll find is your overhead rates will stay roughly about the same and take that overhead rate over a 12 month period divide it by 52 and that’s exactly how it costs you each and every single week just to open the doors, before you buy the food before you pay staff to turn up or anything else and what I usually do is when calculating this overhead rate is include your advertising budget in there and also include your entertaining budget in there so you need to be set and you need to have that budget set and stick to it and that’s going to make a massive difference with your profitability in your business
Now when it comes to calculating what sales you need so the next thing is if you haven’t costed your menu out, you really need to cost your menu out and once your menu is costed out you’ll understand what your food costs, what is it sitting at, 30% alright so every dollar you turn over 30% of that dollar goes to food okay and then we need to budget out your roster and what is actually costs you to employ staff on a weekly basis in your venue, now if your only just opening up I can understand this can be a little bit harder because you don’t have a historical data to go off but you guys have been open 1, 2 , 3,4 years and you have some historical trending data to go off your going to be able to cost your roster fairly easily and fairly consistently throughout the years, so just say your staff run at let’s call it 30% as well, so you’ve got 30% food and 30% staffing costs so you know that for every dollar you spend 60% of that dollar is going to leave that business for labour and food and then you’re going to have 40c of that dollar to cover your overhead so that’s going to give you a fairly good standard on exactly where you need to be to convert your overheads for your business and know what your breakeven point is.
Alright guys, thank you and have a good day.