How to add $1,000 to your coffee shop's bottom line next month

How is business bottom line increased?

So how do you go about increasing your business's bottom line? There are really only two things you can do to increase income, they are:

  1. Decrease Costs & Expenses
  2. Increase Sales

That's it, it's that simple! Profitability is achieved or increased when sales rise to the level that the gross profit they produce is greater than expenses. As sales rise, gross profit increases. Gross profit is the amount of money that is left over after you have paid for the costs that are directly associated with the creation of your sales. In other words, the dollar value of beverage and food ingredients, paper products, and retail merchandise that you used over a period of time (week, month, year), which produced your sales over that same period.

So, for example, if your business generated $30,000 in sales last month, and you calculate that $10,000 of product was used to produce those sales, you would understand that you had realized a gross profit of $20,000. You would also be able to calculate that your gross profit was 66.6% of sales, ($20K ÷ $30K = 66.666%), and that your cost of goods sold was 33.3% of sales ($10K ÷ $30K = 33.333%); both good numbers!

Then, from your gross profit, all other expenses are subtracted (labor, taxes, rent, utilities, repairs, etc.). If after you subtract all your remaining expenses from your gross profit there is money left over, you were profitable. But, if your gross profit doesn't even represent enough money to pay all your bills, let alone yourself... you're losing money.

What's important to understand, is that as sales keep increasing, bottom line income grows exponentially. In other words, as sales grow, profits grows at a faster rate than sales. This happens because cost of goods maintain the same % relationship to sales as they grow, but many fixed expenses do not increase at all (rent, utilities, insurance, management wages, etc.), therefore a greater percentage of gross profit will end up on your bottom line.

So, building sales will be an essential component of realizing the extra bottom line you are seeking, and we will spend considerable time talking about that subject later in this action plan, but first, let go for the low hanging fruit; cutting costs and expenses.

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