After using our app for six months, bars, on average, see a 7% pour cost reduction. That’s an increased profit of $35,000/year for bars with annual sales of $500k and $70,000/year
for bars with annual sales of $1 million.
Here’s how we do it:
Lower pour cost means higher profit. For bars with annual sales of $500,000, every 1% reduction in pour cost represents a $5000/year increase in profit. For bars with annual sales of $1 million, every 1% reduction in pour cost represents a $10,000/year increase in profit. Here we’ll show you how to accurately calculate and lower your pour cost.
The equation to calculate pour cost is
Inventory Cost / Total Sales = Pour Cost
Simple enough, but, this calculation doesn’t take shrinkage into account. There is an average 25% shrinkage rate in the bar industry (from over-pours, under-rings, spillage, and blatant theft) and unless you’re recapturing this loss with a good inventory system you need to account for it in your calculation or your numbers will be way off.
To account for loss, increase your inventory cost by 25% prior to calculating pour cost.
Liquor Cost for Jan 1st-15th: $10,000
Actual Liquor Cost (including loss): $12,500
Total Liquor Sales for Jan 1st-15th: $60,000
Liquor Pour Cost = 21% ($12,500/$60,000)
If loss is ignored, you’ll mistakenly think that your pour cost is 16% ($10,000/$60,000) and the difference between a 16% and 21% pour cost is huge.
A good inventory software will lower your pour cost by greatly reducing shrinkage and providing you with detailed analytics to make informed business decisions. Small changes like adding precision pour spouts and slightly increasing the price of your top five selling products can result in huge profit increases.
Contact us, if you’d like assistance lowering your pour cost.