Tips on How to Grow Your Profits

Small business owners in cafes, coffee shops, sandwich bars and take away food outlets all struggle with the same concept: how to increase their profits and decrease their workload. It might seem like an age old dilemma for which there is no solution, but the truth is there are plenty of techniques you can employ to grow your profits without doing any extra work.

Accountants for coffee shops and the like are experts at dealing with that very thing. They understand the high pressure situation of the hospitality industry and the need for owners to maximise profitability while still being able to compete in the market. However you look at the figures, though, it all comes down to 5 important factors:

1. An effective pricing strategy – if you want to grow your profits, you might have to raise your prices. If you sell a sandwich at $5.00 that costs you $3.00 to make, your gross profit will be $2.00. If you sell 50 sandwiches a week, that earns you $100.00 gross profit. However, if you raised the price of the sandwiches to $6.00, your profit per sandwich would be $3.00, meaning you would only have to sell 34 sandwiches a week to generate the same gross profit. That means more money from less work using fewer ingredients: a winning formula.

Now consider the competition. The coffee shop down the street is selling similar sandwiches for $4.50. Should you reduce your prices to $4.00 to make them more competitive? If you do, remember that each sandwich now brings in only $1.00 gross profit, so you need to sell twice as many just to stay level – and that means twice as much work as well.

2. Lowering direct costs – secure the best deals from your suppliers by leveraging your loyalty and continued support. Stay alert to changing trends, however, and be brave enough to change suppliers if it makes sense to your bottom line.

3. Maximising performance – if something is not working, consider doing without it. Nothing sucks life and profit out of a business quicker than an underperforming product. You may have a fondness for it, or it may be the catalyst that got your business started in the first place; but if it is not making a profit it has to go.

4. Increasing volume – it might be that you have the time and staff available to produce 200 sandwiches a week. Provided they all sell, that could increase your gross profit margin by 400%.

5. Lowering overheads – try to renegotiate leasing terms on your premises and any equipment hired out, perhaps at reduced rates over longer periods. Make sure you are getting the best rates for services such as electricity and water, and discuss ways to reduce the expense with providers. Find out if there might be a more efficient way of using your staff team, and train staff to contribute to the overall running of the business to ensure there is minimum wastage and maximum customer satisfaction.

Accountants for coffee shops and hospitality based businesses can help you seamlessly integrate these kinds of strategies into your business plan. Contact the small business specialists at Nexus Accountants today for more information.


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