In running a restaurant, you have to make a profit. Every restaurateur ought to keep that in mind. But then how do you tell how much you need to sell each day in order to turn a profit? The first thing you need to know when operating a restaurant is how much you need to sell in order to prevent suffering a loss and to turn a profit instead. We have a simple formula we’d like to share with you.
The foremost matter of importance entrepreneurs need to know in order to sell profitably is the break-even point.
Break-Even Point Formula
Fixed costs/ (1-Variable costs)
Example of How to Calculate the Break-Even Point: Fixed Cost Portion
Let’s say rent is 20,000 baht/month.
Owner’s salary: 20,000 baht.
Salary for 1 employee: 12,000 baht.
Average monthly POS expenses + glass washer rent + internet fee: 6,700 baht.
Example on How to Calculate the Break-Even Point: Variable Costs
Let’s say the ingredient and beverage costs are about 31%
Other expenses such as the following:
Ingredient purchase travel expenses
Equipment repair expenses (if any)
Employee uniform expenses, etc.
Example of How to Calculate the Break-Even Point
|Fixed Cost||Variable Cost|
|Rent: 20,000 baht/month|
Labor: 32,000 baht/month
|Average food and beverage cost: 31%|
Other average expenses: 10%
|Total Fixed Costs: 58,700 baht||Variable Costs: 41%|
Formula: Fixed Cost/(1-Variable Costs)
B.E.P. = 58,700 / (1-0.41)
= 58,700 / 0.59
= 99,491.53 baht/month (round up to 100,000 baht)
This means that in a single month it is necessary to sell up to 100,000 baht in order to reach the break-even point. The break-even point means that you do not suffer a loss, but you don’t have a profit either. Basically, it means you’re even. However, it’s an important number that serves as a baseline for entrepreneurs in planning their sales and meeting their sales targets.
Every entrepreneur who opens a restaurant certainly wants to make a profit. It can’t always be just even. So, how much do you need to sell in order to make a profit? We have a simple formula to recommend for you.
Formula for Calculating Sales Based on Profit
“Input desired profit in baht here”/(1-Variable Costs)
Let’s say you want 20,000 baht profit.
= 33,898.30 baht/month (round up to 34,000 baht)
This means that, if you want to make a 20,000-baht profit per month, you need to sell 134,000 baht/month. That’s your projected sales target.
So, how much do you need to sell to meet the 134,000 baht/month projected sales target?
Let’s say the shop is a bubble tea shop, and the leading sales item is priced at 40 baht per cup. You set the projected sales and divide as follows:
134,000 baht/40 baht
= 3,350 cups/month
= 153 cups/day
The calculation results serve as homework for the entrepreneur to plan how to boost sales, figure out peak selling hours, train employees, prepare advertisement media and engage in promotion activities.