Get Rich Early in the Year! Plan Now, Today, with Sales Projections
One important thing that restaurant owners must always do at the beginning of a new year is plan sales projections. Why do you need to do it? Well, it’s so that you can set your sales targets. Every successful restaurateur pays great attention to sales projections. That’s because sales projections lead to work plans and strategies such as monthly promotional offers for boosting sales in line with targets. However, in projecting sales, it is not that you set whatever figure you want. Instead, you need to follow a formula, such as the one that we will describe to you today.
In projecting your sales, you need to have the following objectives:
- Do not fall below the break-even point.
- Aim for 3-5% growth in sales (this is in response to employee salary adjustments, increased rent and higher ingredient costs). At the very least, your profits must not be below the national GDP.
- Keep net profit at a minimum of 10%.
- Figure out how many years are required to reach the break-even point on your investment.
Establish sales projections as follows:
- Set Your Own Break-even Point
For any restaurant that has always suffered a loss in the past year, try setting sales targets for each month this year by first finding out your restaurant’s break-even point. Do so by finding out how much you need to sell in order to cover various costs and investments in your business.
Break-even Point Formula
To find a break-even point, begin by identifying the restaurant’s expenses, which are divided into two categories as follows:
Fixed costs, which are constant and do not fluctuate in line with sales, and costs you have to pay, regardless of how much you sell. These include employee salaries (F/T), rent (for cases with fixed rates) and depreciation.
Variable costs, which are expenses that fluctuate along with sales. These include employee salaries (P/T) and costs for ingredients, water, electricity, gas and others.
For example: Yaya has opened up a Japanese-style restaurant in Sam Yan for over two months, and these are her sales and expenses:
> The average sales for the two months is 300,000 baht.
> Her average monthly ingredient cost is 32% (of sales).
> The salaries for five of her fulltime employees and one business owner total 80,000 baht.
> The average monthly salaries for her part-time employees are 10,000 baht.
> Her average monthly water, electricity and gas fees total 27,000 baht.
> Her monthly rent is 55,000 baht.
> Her depreciation cost for the restaurant’s construction investment is 30,000 baht per month.
> Her miscellaneous expenses such as for stationery, forms, flyers, menu media, repairs, procurement travel expenses average monthly at no more than 15,000 baht.
All of these numbers have to be used to calculate the break-even point and determine how much the restaurant has to sell each month in order to survive.
This is the formula:
300,000 sales – 32% food costs (which is 96,000 baht) = 204,000 baht)
Then 204,000 – costs for employee salaries, water, electricity, gas, rent, depreciation, and miscellaneous expenses or 204,000 – 217,000 = -13,000 baht.
After all of the numbers have been calculated, you can see that, if Yaya’s restaurant sells 300,000 baht per month, the restaurant will suffer a loss of 13,000 baht each month.
- If you did not suffer a loss in the past year, begin by calculating sales for each month of the previous year and then incrementing your sales target by at least 3-5%. That’s because your main expenses, such as the following, will increase:
– Employee salaries due to raises.
– Ingredient costs; any person who has operated a restaurant for many years will know right away that ingredients will cost more with each passing year to one degree or another.
– Rent; anybody who has rented a facility with rent increments in steps will have to pay more rent with each passing year.
- Analyzing Sales Trends
For anyone who uses a POS or records sales information, sales statistics will be available by hour, day and month. These pieces of information can be used to analyze sales totals and determine, from the beginning to the end of the past year, whether or not there is sales growth. If sales are increasing, then compare the growth percentage in order to use that in setting your sales projection for the current year.
Once you have your sales projection, you then need to create strategies to increase sales in line with your target. You can divide that into daily or monthly targets and use promotions, sales activities and employee training to have employees learn about the targets and plan their sales cheering, or you can engage in some R&D and invent new menu items to meet your sales targets.
