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How to Run a Successful Pub

Profit And Loss

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.

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PROFIT AND LOSS

Making a profit

When assessing various pubs you will need to consider whether you can operate the pub at a profit and whether the profit it generates is sufficient to meet your obligations and expectations. To do this you should draw up a profit and loss forecast.

TIP

Ask to see the estimated profit and loss forecast drawn up by the brewery or pub company which is normally prepared to calculate rent for a new agreement.

Excluding VAT from calculations

When drawing up a profit forecast we exclude VAT from all figures. This is because we ‘collect’ VAT on behalf of HM Revenue and Customs and it does not directly affect the profitability of a business. See more details in Chapter 13, Book-keeping and Accounts.

In practical terms, this means we have to remove the VAT element from many of the figures we use (if VAT has been charged on the figures in the first place).

EXAMPLE

Using the example of The Barking Dog pub, we have estimated that wet turnover is £163,200. This figure includes VAT, which we need to remove to obtain our ‘ex VAT’ turnover figure.

An easy way of doing this is to divide the figure by 117.5%. This gives us an ex VAT turnover of £138,894.

To check this, multiply £138,894 by 17.5% (VAT rate) which gives £24,306 (VAT). Adding the two figures together gives £163,200. We use the ex VAT turnover figure in any profit and loss forecasts.

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