Of all the performance measurements that a small hospitality or manufacturing business can use, Gross Profit %age is the most useful. It is calculated as follows: 

Sales less Direct Costs as a percentage of Sales 

Direct costs are those expenses which vary with sales. In a bar, for example, it would be beverage purchases. If the bar has a kitchen, then a separate KPI for food would be calculated: Food sales less food purchases as a percentage of food sales. 

In pubs and restaurants, GP %age should be between 65% and 75%. Things which affect this important KPI are: 

  • Selling prices 
  • Buying prices 
  • Wastage 
  • Pilferage 
  • Product mix 
  • Recipes 

If you have the benefit of monthly management accounts, then this measurement can be monitored, and changes made to improve it. An improvement of 5% over a period in a typical pub will generate an extra £30,000 per annum. 

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