Gross Profit
Mark S. Elliott has spent 25 years working in various management roles within the tenanted and leased divisions of the UK's largest breweries and pub companies. His extensive knowledge and day-to-day involvement with pubs and publicans make him well qualified to know what is required to run a successful pub. He shares his knowledge and many 'insider tips' with you in this book. Mark is based in Cockermouth, Cumbria.
GROSS PROFIT
Gross profit is calculated as follows: sales revenue less the cost of sales = gross profit.
Calculating gross profit margin (GP £) on specific products
Calculating gross profit margin (GP £) on turnover
Gross Profit Percentage (GP%)
Gross profit is often quoted as a percentage of sales revenue/turnover. Using the second example, if we divide the gross profit margin into the wet turnover, the result is 45%. This tells us that 45% of our turnover converts to gross profit. (Cost of sales amount to 55% of turnover.)
Factors affecting GP percentages
The main factors affecting GP percentages on products are:
- The price you are able to charge.
- What they cost to buy.
Additional factors affecting GP percentages on overall turnover are:
- The types and quantities of product you sell: some products can be sold at higher GP percentages than others.
- Wastage and theft: if you lose stock items due to wastage or theft, you cannot sell them, so make no profit at all on these.
Industry averages for GP percentages
Typical overall GP percentages on wet turnover (based on normal, brewery or pub company list prices, excluding any discounts) are as follows:
|
38–40% |
|
40–47% |
|
46–52% |
|
45–55% |
Freehold properties, earning discounts on their drinks purchases, can make over 60%.
Typical overall GP percentages on food turnover:
|
30–40% |
|
40–55% |
|
60–70% |
Controlling wastage is critical in achieving your food gross profit percentages.
