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| What is Gross Profit? How to work out and achieve correct GP% margins on a small bar in Benidorm Spain |
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| Spain Business Guide Gross Profit % On A Spain Bar Business Transfer Agent Benidorm & Costa Blanca Spain FREE advice for everyone |
Find out how much Gross profit you should make
and how to check that the margin is correct.
A minimum of 60% Gross on sales is OK in a bar, 66% is where to aim for!
To attain a sustainable profit on food and drink multiply the cost of purchase by a
minimum of 4 times. A beer will cost 50c to buy so should be sold at a minimum of
know how to do your sums.
For those new to business understanding profitability can be a real headache and
can make or break a business. Here are some tips. You can use this to help work
out how much cash needs to go into the till to make a success of your venture.
What is Gross profit?
This is the balance remaining after removing the cost of your sales from the turnover
of a business. Here are some examples based on annual turnover of an average
small bar with daily sales of 400€.
Example 1
Sales 145,000€
Cost of sales (stock purchase) 49,755
Balance 95,245
Profit margin %
is sales minus cost of sales = balance divided by sales x 100 = GP%
Equals GP of 65.68% perfect for a bar
Example 2
If you are charging VAT (IVA) you need to remove this figure from your Gross sales
figure as this is a tax payable from your sales.
To do this use this sum
Sales 145,000 divided by 116 x 100 = sales after 16% IVA tax - 125,000€
Whatever the current IVA level is add a 1. If it goes up to 17.5% the sum would be sales divided
by 117.5 x 100 = sales after tax
Sales 145,000€
Sales nett of VAT = 125,000€
Cost of sales (stock purchase) 49,755
Balance 75,265
Profit margin %
is sales minus cost of sales = balance divided by sales x 100 = GP%
Equals GP of 60.2% minimum for a bar
Once you know your Gross profit you can then calculate you nett profit before income
taxes. This will tell you how viable your business is.
Looking at example 1 with a Gross profit of 95,245€
You need to deduct all your operating costs such as rent, staff, insurance. This will
be all your fixed costs and variable costs - everything you have to pay out.
Assuming a figure of 48,500€
The sum will be
Gross profit 95,245€
Less costs 48,500€
Nett profit = 46,745€
From this you will have to pay all your taxes and your own income and lifestyle costs.
If these figures look good happiness, if you end up in the red you are not making
enough profit. You can use these sums to work out annual, monthly or weekly
profits. It is a good idea to do a check each month anyway. You should especially
do this if you employ staff as any sudden drop in Gross profit % may indicate
someone dipping in your till or taking your stock home.
We hope the guide was a help to you - good luck - Bars For Sale
and how to check that the margin is correct.
A minimum of 60% Gross on sales is OK in a bar, 66% is where to aim for!
To attain a sustainable profit on food and drink multiply the cost of purchase by a
minimum of 4 times. A beer will cost 50c to buy so should be sold at a minimum of
know how to do your sums.
For those new to business understanding profitability can be a real headache and
can make or break a business. Here are some tips. You can use this to help work
out how much cash needs to go into the till to make a success of your venture.
What is Gross profit?
This is the balance remaining after removing the cost of your sales from the turnover
of a business. Here are some examples based on annual turnover of an average
small bar with daily sales of 400€.
Example 1
Sales 145,000€
Cost of sales (stock purchase) 49,755
Balance 95,245
Profit margin %
is sales minus cost of sales = balance divided by sales x 100 = GP%
Equals GP of 65.68% perfect for a bar
Example 2
If you are charging VAT (IVA) you need to remove this figure from your Gross sales
figure as this is a tax payable from your sales.
To do this use this sum
Sales 145,000 divided by 116 x 100 = sales after 16% IVA tax - 125,000€
Whatever the current IVA level is add a 1. If it goes up to 17.5% the sum would be sales divided
by 117.5 x 100 = sales after tax
Sales 145,000€
Sales nett of VAT = 125,000€
Cost of sales (stock purchase) 49,755
Balance 75,265
Profit margin %
is sales minus cost of sales = balance divided by sales x 100 = GP%
Equals GP of 60.2% minimum for a bar
Once you know your Gross profit you can then calculate you nett profit before income
taxes. This will tell you how viable your business is.
Looking at example 1 with a Gross profit of 95,245€
You need to deduct all your operating costs such as rent, staff, insurance. This will
be all your fixed costs and variable costs - everything you have to pay out.
Assuming a figure of 48,500€
The sum will be
Gross profit 95,245€
Less costs 48,500€
Nett profit = 46,745€
From this you will have to pay all your taxes and your own income and lifestyle costs.
If these figures look good happiness, if you end up in the red you are not making
enough profit. You can use these sums to work out annual, monthly or weekly
profits. It is a good idea to do a check each month anyway. You should especially
do this if you employ staff as any sudden drop in Gross profit % may indicate
someone dipping in your till or taking your stock home.
We hope the guide was a help to you - good luck - Bars For Sale
