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A restaurant profit and loss statement, also known as a restaurant P&L. For example, a coffee shop will likely have a higher profit from coffee sales than food sales, and a steakhouse will probably generate more revenue from food sales than wine sales. Other business ventures. Richard Ottenhof Kingston, Ontario, Canada I established Multatuli Coffee Merchants in 1997, specializing in the roasting and wholesale distribution of Organic Coffee. Most recently, I founded coffeeco, three retail espresso bars in Kingston Ontario.
Coffee shops brought in approximately $25 billion according to the most recent industry report by Dun & Bradstreet. While the largest chains, such as Starbucks and Caribou, command the majority of sales, smaller chains and independent coffee shops also earn a significant share of these revenues. To ensure the success of your business, it's essential to monitor the profit margins for your own business: Doing so can help you set sustainable targets.
Profit Margin and Net Profit
Profit margin is an accounting ratio that shows the amount of after-tax profit per dollar of sales. Because profit margin is calculated by dividing net income by net sales, it takes into account all expenses such as inventory, labor, depreciation, finance charges and taxes. Any profit margin larger than zero indicates that your business generates more money than it consumes. You retain those profits to reinvest at a later date or to return to investors.
If you are paying your own salary from your business, one option is to keep the profit margin as near to zero as possible to decrease business tax expenses. Coffee shops that are owned by non-employee investors, such as publicly traded companies, want larger profit margins to get returns on their investment.
Major Costs Associated with the Business
Before arriving at net income and profit margin, you need to subtract out all the costs associated with running your business from total revenues. Coffee shops tend to be labor-intensive operations, with the cost of inventory representing a relatively small portion of revenue. The cost of labor, rent, marketing, and other operational costs pose the largest demand on revenue. Half life 2 mac. Coffee shop income statements break income and expenses down by source.
To better understand your profit margin, you need to understand two other components: food costs, which impact your gross margin; and operating costs, which impact your operating margin.
Understanding Gross Margin
Gross margin represents the profit brought in from the sale of inventory, such as coffee drinks or bakery goods, compared to overall sales – gross profit divided by net sales, to use the terms found on an income statement. Rather than the generic accounting term 'cost of goods sold,' coffee shop managers typically discuss food costs. Gross margin is the ratio of net sales less food costs to net sales.
Typically food costs take up about 15 to 20 percent of revenues for regular coffee drinks, with specialty drinks taking up about 12 to 18 percent. Depending on the amount or types of food you serve, total costs should remain around 25 percent, leaving your gross margin around 75 percent.
If your food costs are greater than that, consider factors such as waste, sales mix and pricing to increase your gross margin. You may be throwing away too much coffee or food, which increases food costs without increasing revenue. You may be selling too many low-margin products, bringing down the overall gross margin, or you may have your prices too low compared with the cost of your inventory.
Understanding Operating Margin
Operating costs, all the costs associated with selling your coffee drinks and other goodies, eat up the most significant portion of your budget. Rent, wages, insurance, and marketing all fall under the operations classification. The operating margin of 2.5 percent means 2 1/2 pennies from every dollar of sales are left over after you've paid the expenses needed to keep the doors open.
While operating margin is one of the most important indicators of a publicly traded company's health, many independent coffee shops employ their owners and can reduce their tax bill by returning capital in deductible ways, such as paying bonuses rather than dividends. Publicly traded coffee businesses aim for higher operating margins, averaging around 15 percent, to ensure investor returns.
References (5)
About the Author
Sean Butner has been writing news articles, blog entries and feature pieces since 2005. His articles have appeared on the cover of 'The Richland Sandstorm' and 'The Palimpsest Files.' He is completing graduate coursework in accounting through Texas A&M University-Commerce. He currently advises families on their insurance and financial planning needs.
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Download an Income Statement Template for Microsoft Excel®
An income statement or profit and loss statement is an essential financial statement where the key value reported is known as Net Income. The statement summarizes a company's revenues and business expenses to provide the big picture of the financial performance of a company over time. The income statement is typically used in combination with a balance sheet statement.
There are many ways to format an income statement. The two examples provided in the template are meant mainly for small service-oriented businesses or retail companies. (1) The simplified 'single-step' income statement groups all of the revenues and expenses, except the income tax expense. (2) The 'multi-step' income statement example breaks out the Gross Profit and Operating Income as separate lines. It first calculates the Gross Profit by subtracting Cost of Goods Sold from Net Sales. It calculates the Operating Income and then adjusts for interest expense and income tax to give the Income from Continuing Operations.
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Description
This income statement template was designed for the small-business owner and contains two example income statements, each on a separate worksheet tab (see the screenshots). The first is a simple single-step income statement with all revenues and expenses lumped together.
The second worksheet, shown on the right, is a multi-step income statement that calculates Gross Profit and Operating Income.
Income Statement Essentials
Net Income = Total Revenue - Total Expenses
Revenues
The income that is generated by providing a service, selling a product, earning interest on investments, renting extra office space, licensing technologies, selling advertising space, or licensing the use of your brand name. In the income statement template, there are categories for Sales revenue, Service revenue, Interest revenue, and Other revenue. You will likely want to customize the Revenue section to highlight your company's main sources of revenue.
Business Expenses
For a retail company, one of the main expenses is the cost of goods sold. For service businesses, this might not be such a large factor. Some of the other operating expenses may be advertising, salaries, rent, utilities, insurance, legal fees, accounting fees, supplies, taxes, etc.
Operating Income
In the multi-step income statement, the operating income is calculated as the Gross Profit minus the total Operating Expenses. In general, interest expense and income tax expense are not included as operating expenses, which gives rise to the term EBIT or 'earnings before interest and taxes' - another name for Operating Income.
Income from Continuing Operations
This is the 'bottom line', calculated as the Operating Income minus interest expense and income tax (and plus/minus non-operating revenues, expenses, gains, and losses, if there are any). If there are no 'below-the-line' items, then this is the same as the Net Income.
Blank Profit And Loss Template
Below-the-line Items
Some forms of income, such as the sale of a building you are no longer going to be using, are included 'below-the-line' (i.e. below the reported Net Income from Continuing Operations) because they may not be expected to occur in the future. These include the effect of accounting changes, income from discontinued operations, and extraordinary items (gaines or losses that are unusual or highly abnormal).
Income Statement References:
- Financial Accounting: Reporting and Analysis by M.A. Diamond, E. K. Slice, and J.D. Slice., 2000.
- Income Statement, Net Income or 'Bottom Line' at wikipedia.org
Coffee Shop Profit And Loss Template Free
Disclaimer: This spreadsheet and the information on this page is for illustrative and educational purposes only. We do not guarantee the results or the applicability to your financial situation. You should seek the advice of qualified professionals regarding financial decisions.