Mastering Bar Sales Forecasting for Success: Essential Tips for Bar Owners - podcast episode cover

Mastering Bar Sales Forecasting for Success: Essential Tips for Bar Owners

Oct 25, 202339 minSeason 1Ep. 36
--:--
--:--
Listen in podcast apps:
Metacast
Spotify
Youtube
RSS

Episode description

Ready to decode the enigma of sales forecasting for your bar business? Strap in for an in-depth exploration as we,  delve into the complex task of sales forecasting, whether you're running an established business, buying an existing bar, or starting a new venture. It’s no easy task, but we’re here to guide you through it, underlining the importance of this crucial tool in managing labor and orders, and steering your bar business to success.

We'll dissect the key elements of forecasting sales - from using mathematical formulas and past data to making necessary adjustments for variables like the day of the week, holidays, and local events. We’re not promising 100% accuracy, but we’ll help you get close, and discuss why that’s essential for your business. We'll explain how to extract valuable insights from previous tax returns and POS records, and how they can guide your forecasting process.

So tune in, folks! With us, you're not just listening to a podcast - you're charting the course for your business' success. Let's navigate the tricky waters of sales forecasting together!

Learn More:
Schedule a Strategy Session
Bar Business Nation Facebook Group
The Bar Business Podcast Website
Chris' Book 'How to Make Top-Shelf Profits in the Bar Business'

Thank you to our show sponsors, SpotOn and Starfish. SpotOn's modern, cloud-based POS system allows bars to increase team productivity and provides the reporting you need to make smart financial decisions. Starfish works with your bookkeeping software using AI to help you make data-driven decisions and maximize your profits while giving you benchmarking data to understand how you compare to the industry at large.
**We are a SpotOn affiliate and earn commissions from the link above.

A podcast for bar, pub, tavern, nightclub, and restaurant owners, managers, and hospitality professionals, covering essential topics like bar inventory, marketing strategies, restaurant financials, and hospitality profits to help increase bar profits and overall success in the hospitality industry.

Transcript

Bar Business Podcast

Announcer

You're listening to the Bar Business Podcast where every week , your host , chris Schneider , brings you information , strategies and news on the bar industry , giving you the competitive edge you need to start working on your bar rather than in your bar .

Chris Schneider

Hello and welcome to this week's edition of the Bar Business Podcast . Today we are going to be talking about forecasting . So I'm actually working with a guy right now who is developing a bar concept that he's looking to launch and is working on finding a location , trying to get investors , all that sort of good stuff .

And one of the things that I asked him to do as part of that process to get ready to go after investors and to really make sure that his concept actually makes business sense is to forecast his sales .

And I realized that that's a very easy sentence for me to say hey , if you want to have a business , you need to forecast out what your sales will be and prove that you're going to make money , because if you want investors , you have to prove that what you're thinking will actually turn a profit .

And again , easy statement to say , but a very difficult thing to do .

So today I wanted to talk about forecasting sales , and I want to talk about forecasting sales as an existing establishment , if you're purchasing this establishment that already exists so you're buying a bar that's already up and running or if you're looking to do something brand new in your area .

Now , before we get into the nuts and bolts of how to do forecasting . I just want to say that it's really hard . It's actually very difficult and it's doable . There are mathematical formulas that we'll talk about that will help you get there . There are ways to predict sales based upon past data . It's absolutely doable .

But to act like it's an easy task or to act like it's something that you're ever going to get right is not fair , because you're not going to do that . And part of that is that when we're forecasting sales , we're using prior data to try to figure out the future , and you just can't predict the future , so you're never going to get it right .

And even though you're not going to get it right , you should be able to get within the ballpark of where you're going to end up . And when I say in the ballpark , I mean if you forecast $100,000 in sales for next month , you probably are going to end up between 95 and 105 , maybe 90 and 110 .

So you'll be 5 or 10% off , easy , and the chances of you being 20 , 30 , 40% off because something happens that you aren't anticipating whether that's . You know , we're going into winter now . Maybe you have a big early season snowstorm on the weekend that just destroys your business .

Maybe there's some sort of geopolitical event that happens that increases or decreases your sales . Maybe there's a convention coming into your town that you didn't factor in and your sales are actually much higher than they normally would be . All of those things can happen . All of those things do happen .

And also , while the bar business is not necessarily as susceptible to the economy as , say , restaurants are , there's a lot more discretionary spending , if you will , for a beer than there is to take the family at dinner . The economy does play a part .

How people are , overall spending in the market is going to play a part , and you cannot always predict when the stock market's going to crash . Matter of fact , if you can predict when the stock market is going to crash and you want to bar , you're in the wrong business . Just short the market and make your money . So it's not possible to be right .

But it is something we need to do because proper forecasting really can help you determine what your labor needs should be , determine what to order , how to adjust your pars on your food . All of those things happen on the basis of forecasting .

Now , to an extent , when you put together everything I just said , it gets kind of scary , because what I just said is let's determine the future of our business .

Let's determine how we're going to manage our business and what we expect our business to do , based upon numbers that we know for a fact , or we're just wrong , and in many ways , that does not seem like the right thing to do .

However , it's the best thing we can do , Because if you don't forecast and you don't adjust your labor and you're ordering in things based upon what you think will happen and you just buy the same amount of food every week , you're going to increase your waste .

If you always schedule the same amount of labor and don't adjust for forecasting or what should happen , you're going to end up at periods of time where you have way too little labor and periods of time where you have way too much labor .

You're either throwing away your money , bending it on employees that aren't needed , or you are giving your customers a terrible experience because they're not getting the service that they deserve .

So you have to do this , but you also have to understand that you're going to be wrong and that all the adjustments you make based upon your forecasting are not necessarily going to be right . It's just the way the business works .

As I mentioned in the beginning , we're going to go through three separate kind of models here , the first one being for the bar that you currently own , where you have POS data , where you have historical data . The second one being if you're buying an existing bar so not a bar that you own yet , but something that you can get some data on .

And then , finally , we're going to talk about how you would forecast for a new establishment , and at the very end we'll get into expenses a little bit , because , really , what we're going to talk about is forecasting revenue , and if you think about an existing operation , you know your cost percentages .

You know what your theoretical food cost should be At least you should know what your theoretical food cost should be . You know how your actual varies from your theoretical . To an extent , you know what your labor cost percentage averages each month .

So really , a lot of your expenses can be forecasted on the basis of percentages , and just by knowing those percentages and being able to adjust to those percentages , it puts you in a position where getting your revenue forecast pretty much correct , or as correct as we can get it , will allow you to forecast everything else .

And when I say everything else , when we're talking about forecasting . If you have enough data , if you have good POS structure , if you've owned your bar for a while and say you know your menu makes percentage , you should be able to take your monthly sales forecast for your total revenue , figure out what percentage of that is , say , food .

So if you normally sell 25% food every month and you forecast $100,000 in sales for the month , you're going to sell 25 grand worth of food . And then you can use that 25 grand and , based on your menu mix percentage , actually forecast out how much of each specific food item on your menu you should sell that month .

Now I know most people are not going to go into that math and frankly I am a huge fan of math . I am a huge fan of data . I believe that you need to use data to drive your decisions . But forecasting to that extent A can be daunting and B always consider the possibility that you're spending more time on something than the value that you gain from it .

But in reality , if you need to know how much fish to order week to week and adjust your parts , you can do that based on this forecasting combined with your menu mix percentage . Now when it comes to forecasting revenue because , again , we're going to focus on revenue for the purpose of this conversation .

When it comes to forecasting revenue on an existing bar , we want to look at a combination of three numbers . So we want to look at what we did last year , what we did last month and what we did last week . And the reason why you want to look at all three is because they tell you trends .

They point out where maybe last month was really good compared to the year prior . So factoring last month is going to raise our forecast for the next month .

Maybe last week was really slow because of weather or events going on in your city and your town , globally , whatever , and you are going to have to forecast a little bit lower this week than you would just looking at last month and last year .

And in order to do that , when I say look at last month and last year , I don't mean that you can forecast your sales for October 25th of this year based on your sales of October 24th of last year , because the thing is the days don't all fall on the same day of the week , so we need to look at days of the week .

And when we're looking at last year , really what we're looking at is this month last year in a lot of ways , and the reason why I like to look at last year in addition to last month and last week , is because it's going to help us account for seasonality .

So obviously it depends on where you are , but if you are in a place that is hugely tourism centric , take where I live we have about 100 times more tourists a year than people that live here , and our busy season is right now when the leaves are changing .

So if I try to forecast November sales based on October sales , we're not going to get there because those November sales are going to be way lower because the leaves on the trees have already changed colors , they've fallen off . The beautiful woods that people come to visit are just kind of drab and boring and brown , and so our tourism drops off .

Likewise , if you're in Florida and let's say that you looked at your February and said , okay , february I'm going to use to base March on , well , march is spring break . You're probably going to be a little bit busier than you were in February .

So by adding into our equation what you did the same month last year , you are accounting for some of that seasonality .

Forecasting Sales and Adjusting for Events

Now , to make this super simple and kind of give a real life example of what I'm talking about . Well , a fictional , real life example . Let's say we wanted to forecast for November . So we're going to look at last year's November , we're going to look at October and we're going to look at the week prior to the week we're forecasting .

So , assuming that you're doing your forecasting on a weekly basis , you may only be doing forecasting on a monthly basis . That's perfectly okay , and in that case leave the week part out of it .

But if I want to forecast what I'm going to sell the first Monday , let's say in November , I'm going to look at last year's November , add up all the Mondays and figure out what my average sales was each Monday . Then I'm going to look at October and add up all my Mondays and figure out what my average sales were each Monday .

Then I'm going to look at the week before and look at what I did that Monday . Now the thing is that we probably don't want to just add those three numbers together and weight them . So , as I was talking about with where I live , it's a tourism-centric space where our largest influx of tourists is the month of October .

So I want to have more reliance on November of last year's data than October of this year , because October of this year is probably higher overall than November will be in sales and it could be drastic , it could be a little bit , doesn't really matter . But you have to figure out how much weight you want to give each of these .

And as much as I would like to sit here and tell you well , just last year's average Monday , weight that 30% . This year's last month's average Monday , weight that 50% . Last week , weight that 20% . Multiply each of those numbers , buy that percentage , add them together , boom , you have your forecasted number . And that is how you do it in practice .

You're going to add those numbers together , weight them by some percentage and then , boom , you have your forecast number . The problem is , what are those percentages ? And to a large extent those percentages are based upon where you are , what you're doing . If you're again tourism-centric , last year's going to need more weight .

If you're not tourism-centric , last month's probably going to need more weight . If you're in the middle of a three-week event let's say the Olympics are in town and it's the second week of the Olympics probably last week is going to have the most relevant data to predict what's going on this week .

So those percentages , you're going to have to play with this a little bit , and there is no way that I can sit here on a podcast and say if you run this math , it will work . It's not possible . So what you have to do is a little bit of guess and test . You have to run a couple different models . You have to try different weightings .

You have to see for your establishment what produces the most consistently reliable results . And maybe you run three different models with different weightings on the prior year , prior month and prior week , and then you average those three models together .

There are all sorts of ways to get to the final number , but you're going to have to determine some weighting that exists between the last month's numbers , the last year's numbers and the last week's numbers in order to produce a number that you can rely on .

And so , like I've talked about a lot of times , experimentation and continuous improvement , that's what you have to do here . You have to experiment and you have to continuously improve your model until it's perfect . And just because your model is perfect , it doesn't even mean it'll work for the guy down the street .

It definitely doesn't mean it'll work for the bar the next town over . So you have to find what works perfectly for your establishment and I want you to have that waiting .

Figure it out and you have a good idea of how to do your forecasting for your establishment , then you have to worry about adjusting it , and by adjusting I mean changing your forecast for specific days based on things going on , based on holidays , based on other factors that may influence your sales .

So , as an easy example , say that you are next to an NFL stadium and on Sundays there are football games . As we all know , the home games are not the same or not on the same weekend . Year to year there's the same number , but they fall on different dates .

So using what happened last year , when there was a football game , and then this year there is no football game on the same weekend , it's not really going to be very helpful . So you need to take into account events around you and things that influence your business , and one of the most important things to take into account is holidays .

So if you think about a holiday like let's use Thanksgiving as an example , because that's one of the few holidays that's always on a Thursday and in fact , I think globally it might be one of the only holidays that's always on the same day of the week . Every year , thanksgiving's always on a Thursday .

You know what that Wednesday looks like , you know what that Friday looks like and it's really easy to predict those days because , as far as they relate to the holiday , they do not change . Now , conversely to that , let's talk about New Year's Eve . New Year's Eve obviously floats .

It can be any day of the week , depending upon the year and depending upon the type of bar you are . New Year's Eve is going to give you more or less business based on the day of the week that it falls on .

Sales and Expenses Forecast for Bar

So I'll tell you from neighborhood bar perspective , most of the stuff I used to do if it fell on a Friday night , we did really well , because it's at the end of the work week .

A lot of people are working that Friday , they're taking the weekend off and so they don't want to get all dressed up and go downtown , they want to go to the neighborhood bar and have a great time . That's also true if it falls on a Tuesday or , you know , a Thursday . But when New Year's Eve fell on a Saturday , it was really kind of rough for me .

Now I still had a great night . I would still do better than you know every other night in January or December , depending on how you want to look at it .

But I didn't have near the volume of people coming in for a Saturday night as a Friday night , because on Saturday night they've been off that whole day , they've gotten ready , they've gone and done something . Maybe they even go on a trip for New Year's Eve rather than just , oh , it's after work , let's change clothes and go to the bar .

So you have to adjust for holidays , you have to adjust for local events . You know street fairs , what have you ? Because those do influence your business .

Now all of this is doable because you're relying on your own POS data and you know your data is solid and you have data that goes back in time where you can look at prior years , prior months , prior weeks and really determine what that is If you're buying an existing bar . That's not the case . It's not the case for a few reasons .

One of them is I always take information on what a bar makes . That's , in a , say , a listing with a grade of salt . Sales listings for bars are meant to sell the bar , so you kind of have to work around .

What you're seeing and a number that you'll see all the time when a business is for sale is cash flow , and cash flow will be described to you as essentially EBITDA plus whatever the owner takes out in payroll or whatever personal expenses the business is hiding in their expenses .

It's essentially a made up number and you can make cash flow really say a lot of different things as that number that you see in business listings and to an extent , you can't trust the sales number on a business listing , so you have no prior data to work from whatsoever .

It's reliable unless you can get access to tax returns or POS records , and I would always encourage people if you're going to go buy an existing bar , ask for the tax returns , ask for the POS records , because those are trustable sources .

If anything , the amount of money on the tax return and the expenses on the tax return expenses may be a little overstated , the revenue might be a little understated , but it's going to give you a real idea to work from . And POS data tends to be very solid . Unless someone's going in and purposely adjusting the POS system , that data is going to work .

But also , you only have access to what you're provided before you buy a bar . So it can be hard to do Now if you just have tax return data that obviously is not breaking down month by month , that's not breaking down week by week . It's giving you none of that information . So in that case , what you can do is try to make some educated guesses .

You can look at you know I live in a tourist area . Most tourism is in October . I probably will do 15% of my total annual revenue in October and I'll probably do 5% in January . Okay , cool , you can start to come up with things like that . Now , obviously , in order to do that , you need demographic information about the area .

If it's a tourism area , you need to know the number of tourists coming in . You need to use all of that information to try to make a good stab at what the numbers could be .

Now , if you can get your hands on something like sales tax returns or POS data that's going to break that up for you more obviously , then you can get a little bit more focused on what you project will happen with this business once you buy it .

Something , though , to always keep in mind , and this is a common trap that people can fall into they say , well , I'm going to buy this bar and I'm going to make it better , and because I'm going to make it better , I'm going to make more money than the prior owner . All right , maybe you are , maybe you aren't . And for a second , let's assume that's true .

If you go into a business that's pre-existing and already has a customer base , and then you change it , changing it is going to cause you to lose customers before you gain customers . So you need to account not just for this increasing customers you're going to get by tweaking the concept .

You also need to account for all of the customers that you're going to make mad , that are not going to come in as much , because I promise you , if you go buy a bar with the regulars that exist when you buy it , you're going to do everything wrong . You suck compared to the old owner and they will tell you that every single day . It's pretty annoying .

I've been through it a few times , but it's just a fact . And because that's a fact , that means that your sales initially , as you start to change things , will probably go down before they go up . And then , when your sales start to go up , how much are they going to go up ?

You know , I see people from time to time they assume hey , I'm going to buy this business that makes 50 grand a year , but I know it can make a million and I'm going to do these 20 changes and we're going to make a million bucks a year . Well , 100% increase year over year is huge . For that matter . 50% is huge .

And there's no way that 100% can be reasonably relied upon 100% increase in sales year to year because you tweak some things .

Now , if you're going to buy the business for the assets and the licenses and all that , shut it down , rebrand and you think your new concept will make a million bucks a year , great , but then nothing that you're forecasting for your business plan , nothing that you're telling your investors or that you expect to bring in , should be based on what the prior business

did . You're running a totally separate business . Yes , you're in the same space , but the two are not related . So just remember to be conservative and remember that if you anticipate changing things that make sales go up , they will probably go down first .

Now , if you're starting a bar from scratch you're not buying anything , you don't have any assets you're taking a hold of , you have nothing , you're just doing this all from zero Then you have no data to rely upon .

So , obviously , everything we've talked about whether that's looking at tax return and POS data , whether it's looking at your own sales none of that works if you're starting from zero .

So you have to go about this essentially a whole different way , and to build a profit and loss statement and a balance sheet , really for a startup bar , you need to go line by line . You need to forecast every single expense and every single part of your revenue .

There are a few ways you can go about this , but my favorite place to start on this because we're really not saying how much money are we going to make ? Obviously , we are in a way , but the bigger question with a new bar is can I make enough money ?

And so I like to start by looking at essentially our cost profit equation , which is we're going to target 55% prime cost plus 10% occupancy cost plus 20% other costs , and that'll give us 85% cost , which leaves us with a 15% profit , because I don't think there's a bar in the world that , properly managed , cannot make a 15% profit . Now what ?

That said , where do you start ? Because determining prime cost when you know nothing , that's difficult . The easiest place to start is to start with the occupancy cost . So if you know your rent is four grand a month and you want your rent expense to be equal or less than 10% of your revenue , four grand a month times 12 , $48,000 for the year , 10% .

So we can multiply that by 10 , that gives us 480 grand which you have to make to have a chance at having a 10% occupancy cost . So rent , it's one of the first numbers you can figure out . That's why I like to start from there .

So , four grand a month , rent , $4800 a year , I need to make at least 480 grand every year in order to keep that rent at 10%

Forecasting Sales Revenue and Expenses

. Now I know these numbers are smaller than a lot of people deal with , but let's just roll with low number examples . Obviously , if your rent was 10 grand , the answer at the end would be you need to make at least 1.2 million . If your rent was 20 grand , it'd be 2.4 million . It's going to all adjust based on that rent figure .

So then the question is I know I have to make essentially 500 grand . Can I do that and the can I do that ? You have to answer from a number of different sources . First of all , how many seats do you have ?

Because if you're going to tell me that you have stupid example , but bear with me here 10 seats in your bar total , and you're going to do 500 grand a year , I'm going to say there's no way in hell . If you're going to tell me that you're going to make 500 grand a year by selling $1 drinks , 500 drinks in a year , that's a lot to sell .

So you have to figure out how you get to that sales number . Can your number of seats support it ? Can the size of your bar support it ? Can the size of your kitchen support the food sales that you're projecting , all of those sorts of things ? And unfortunately that's going to be very , very different from project to project .

There's no way for me again to just give you a simple formula here . But talking over concepts , can you get to that revenue ? Now , once you've figured out , can I get to that revenue ? Then you can back out into your other expenses . At 500 grand a year , if your prime cost is 55% , call that $275,000 in prime cost . Call that $137,000 in labor cost .

Is $137,000 actually going to cover all the labor that you need to pull off your atmosphere , your bar menu , your cocktails , your food , your food menu , all of that Can you afford in that figure , the labor required to get to that number based upon your concept ?

Now , obviously , when we're talking about $137,000 worth of labor for all year , that's kind of small and for a $500,000 a year bar you probably can make that actually work . But what happens if you want to do a more complex concept ? Well , we started with rent , but it doesn't necessarily mean that rent has told us the absolute number we must hit .

The concept says well , no , for a concept we need 200 grand in labor . Now let's say 225 grand in labor and we were predicting that our costs were going to do mostly higher end stuff . So 225 grand in food and liquor cost . Well , that's 550 , 55% . Now I need to do a million to cover those costs .

But I need to do a million in a place where I have 5% occupancy because my rent's still $4,000 a month . Hey , that's freaking awesome , you're killing it . But you have to go back and forth with all these numbers and say , okay , based on this , can I do reasonably do this ? Do I have enough seats to serve enough people to hit these numbers ?

And another thing you have to keep in mind is when you do all this , if you tell me you are going to have a small bar that has a four grand a month rent , that four grand a month rent , you seat a total of 60 people in your establishment and you're going to serve 120 guests every Monday , I might laugh at you .

So make sure that , as you do your projections , that you're adjusting , just like we do for forecasting . When we know the numbers . You're adjusting for holidays , you're adjusting for days of the week that you actually have a plan that says , hey , I'm going to sell less on Monday than I do on Saturday , than I do on Friday , because that's true .

So when starting from scratch , this is back and forth of start with the rent number . What do my sales have to be ? Can I get there based on my space ? Cool . What are my labor requirements ? Does that fit under the same ? Can I get my 55% prime cost ? No , I don't need to sell 500 . I need to sell 600 . How does that adjust ?

And you just kind of do this nebulous back and forth movement of numbers until it all falls in the line . And I will tell you right now . A lot of people don't enjoy doing this process , but you have to do it because it's a lot better to waste 20 hours working numbers back and forth only to realize that you know it's plausible .

I could do this , but it doesn't seem very likely than to throw hundreds of thousands of dollars into a project that isn't going to work . So always do your math , always play with your numbers . Understand that , especially when we're talking about projections for a new business , when we're forecasting sales for a new business , everything's made up right .

The dollars that you're putting down there , they have no relation to what's going to happen in reality . Probably you might get pretty close , but probably you're going to be off by a lot more than 5% or 10% and you're going to make some wrong assumptions and you're going to guess wrong on some things . That's all going to happen .

But you need to prove logically whether it's to a bank or investors or whomever that you're going to share these financial projections with . You need to prove logically that you can do what you say you can do . And again , you need to err on the more conservative side .

If , say , I was going to open a bar where I live , I wish I could , but I can't find a good space to do it in . But let's say I was going to open a bar where I live and I say look , there are 1.5 million tourists a year and I think I am going to serve 500,000 different people a year . That's a 30% market capture rate .

I don't even know how I would get there . That's just over . That's assuming that we're going to be the most popular bar ever to exist , the most popular restaurant , the most popular place ever to exist where I live . It ain't going to happen . Now if I said there are 1.5 million tourists a year and I think that I can get 50,000 up , okay , that's reasonable .

I can make that argument . I might even be able to say I think I can get 150,000 up , I think I might be able to get 10% of what comes through . Okay , cool . But if you're going to do things based particularly on tourist data , look at the tourist information available from your local tourism board so they can probably tell you .

Okay , on average , people come here and they eat at four restaurants while they're here . So we know that 1.5 million people actually represents 6 million meals that folks are purchasing . But now let's say , because where I am in Indiana , miners can't go into bars . If you're under 21 , you cannot go into a bar . Now there's some ways to make a bar not a bar .

That's a whole different conversation that isn't relevant to anyone that doesn't live here . But let's say that you live in a place that's like that , where a miner cannot go into a bar . If I have 1.5 million tourists come in every year and 1 million of those are families with children under the age of 21 , then really my pool is only 500,000 .

So make sure you get the best data you can , especially if what you're doing is based on tourism or the local demographics who lives around you , what those households look like , what the actual potential is , and again , you're going to use all of that to just adjust these numbers around as you go through and say , here's where I'm starting , is this number

reasonable ? Can I hit this ? Awesome ? What does that mean ? Based upon my cost revenue equation , our 55% prime plus 10% occupancy plus 20% other equals 15% profit . How does that fit in ? And for most investors , for most banks , if you have logical arguments , if what you predict can happen makes sense , that'll work .

But definitely run it past somebody that has some industry experience to double check you just to make sure that they look at it and go yeah , I see this math , I see these numbers . This makes sense to me . And that pretty much covers a really quick conversation on the principles of how to forecast your sales revenue .

Now , obviously expenses have to be factored in as well and for the most part those expenses are going to be percentages . But always keep in mind that expenses sometimes change throughout the year . So say you're electrical for your AC to cool your building in the summer versus the gas for the heater to warm the building in the winter .

Those are going to have different costs and your cost percentages on utilities may change depending upon the season . And if you have that data , if you're in an existing establishment . You should take that into account . Also , your labor is obviously going to fluctuate in absolute terms .

On a percentage basis , say , relatively the same throughout the year , but in absolute terms , especially if you're in a place that has high seasonality , your labor is going to fluctuate a lot . And with labor at some points , even if you're in a tourist town and there are no tourists in January , you open the door , it requires X number of people .

So there's a floor to your labor and even in the busiest peaks , the busiest times of year for you , where everything is crazy and everybody's running balls , the wall there will be ceilings to your labor because only so many people can work in a place at one time If you think about behind a bar or behind a kitchen line that only fits so many people .

Only so many people can fit back there and be productive . So your labor has both a floor and a ceiling to keep into account . The other stuff you can should consider adding in that are not necessarily month to month costs , but if we're looking at whole year projections are going to be impactful on your business .

Things like taxes , whether that's paying your businesses taxes , whether that's property taxes , excise taxes , whatever taxes may be applicable to you . Obviously , some of those that you're going to pay every month , so it's consistent , it's reliable .

Some of those are going to hit once or twice a year and any other sort of big once a year costs things like insurance if you're not paying it monthly , can influence your cash flow within an individual month . So I really hope that's given you guys kind of a broad idea of how to do forecasting .

I wish I could give you all a much more prescriptive do this and it works every time . But unfortunately this is really something you have to play with in an existing business . You have to massage those numbers and figure out what kind of formula can I create that's going to produce the most reliable results month over month ?

And again , if you're buying an existing or buying a new bar , you're guessing a lot . So there's no real formula there . It's just playing with those numbers and saying can I actually achieve what I need to achieve to make money ? But always , always , always .

If you're going to do forecasting in your , especially when you're looking at a P&L top to bottom , make sure you're forecasting in enough profit for yourself . There's absolutely reasons to do breakeven forecasting to know , hey , I have to make 40 grand this month or otherwise I can't pay my bills .

But it's also really nice to know hey , I'm projecting 100 grand in sales this month . I'm going to put 15% in my pocket . I will make 15 grand this month I project . Keep all that in mind . Make sure that you have a blueprint on how to get there .

If you're buying an existing bar or starting a bar from scratch , it's really important to understand those numbers and to keep your profit in mind . Now , I am sure , to some extent , this conversation has actually caused you to have more questions than answers . So if you're looking for answers , check out the show notes . Go join Bar Business Nation on Facebook .

We have a rapidly growing community there of bar owners . The whole idea is for everyone to interact and help each other . No one , no individual , is an expert in everything , so the more we can learn from each other , the better we can all make our businesses .

Joining Bar Business Nation Tips

Just as a note , when you go on Facebook to join Bar Business Nation , make sure you answer the questions that it asks to join . I just have those there to screen out spam folks and things like that . So answer the questions , we'll get you right in . Additionally , if you have not had a chance .

Check out my book how to make top shelf profits in the bar business . I link for that in the show notes as well . And if you're listening to this whole thing and you go , oh my god , I still have a huge number of questions and I don't get this . You want to talk to me ?

There's also a link in the show notes to schedule a free 30 minute strategy session . We can talk about your business , where you want to go , things you want to do , and have a conversation about whether or not I can help you achieve what you're trying to achieve . And with that I will let you guys go .

Have a great rest of your week and we will talk again later .

Transcript source: Provided by creator in RSS feed: download file
For the best experience, listen in Metacast app for iOS or Android
Open in Metacast