How to Work Out the Breakeven Point for a Cafe or Restaurant
You’ve seen it many times – a new cafe or bar opens, trades for a while, then suddenly closes its doors. Or they sell out, blaming everyone else for their problems. Why the failure? Usually, it’s because their sales didn’t reach Breakeven Point, which is the amount of sales a business needs each week to pay for all their fixed and variable expenses. If you’re struggling to make a profit, let alone a good profit, understanding Breakeven will highlight where your problems lie and how to prioritise solutions. It’s usually more than just buying cheaper cuts of meat or adding 20c to the price of a coffee.
Breakeven Point is the amount of sales you need to move from making a loss to making a profit. Reaching Breakeven is like getting your nose above water when floating in a pool – now you can breathe!
To work out the Breakeven Point, you need to know 3 key pieces of information: 1. Your Operating Expenses ie your labour, utilities, rent; items that you pay every week or month. Some of these vary up or down, depending on how busy you are (eg wages and electricity) and others are fixed eg rent. 2. Your Cost of Goods Percentage – the cost of food, beverages and packaging divided by the sales of those items. 3. Monthly expenses that aren’t on your P&L but are on your balance sheet: items like loan repayments, maybe ATO debts, and car repayments.
If you’d like to work out your own Breakeven Point for your business, we’ve got a simple calculator tool that you can use with your own figures. It works out the result automatically and is completely confidential – we don’t see the results.
You’ve seen it many times – a new cafe or bar opens, trades for a while, then suddenly closes its doors. Or they sell out, blaming everyone else for their problems. Why the failure? Usually, it’s because their sales didn’t reach Breakeven Point, which is the amount of sales a business needs each week to pay for all their fixed and variable expenses. If you’re struggling to make a profit, let alone a good profit, understanding Breakeven will highlight where your problems lie and how to prioritise solutions. It’s usually more than just buying cheaper cuts of meat or adding 20c to the price of a coffee.
For your Breakeven Calculator: click here
Breakeven Point is the amount of sales you need to move from making a loss to making a profit. Reaching Breakeven is like getting your nose above water when floating in a pool – now you can breathe!
To work out the Breakeven Point, you need to know 3 key pieces of information:
1. Your Operating Expenses ie your labour, utilities, rent; items that you pay every week or month. Some of these vary up or down, depending on how busy you are (eg wages and electricity) and others are fixed eg rent.
2. Your Cost of Goods Percentage – the cost of food, beverages and packaging divided by the sales of those items.
3. Monthly expenses that aren’t on your P&L but are on your balance sheet: items like loan repayments, maybe ATO debts, and car repayments.
If you’d like to work out your own Breakeven Point for your business, we’ve got a simple calculator tool that you can use with your own figures. It works out the result automatically and is completely confidential – we don’t see the results.
For your Breakeven Calculator: click here
Check the other useful blog posts on the Foodie Coaches website…
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