BarProfits: Building a Sustainable Bottom Line

In This Issue

Beverage Management

Driving Profits in a Slow Economy

By Robert Plotkin

Even if the conventional wisdom is true that people drink during good economic times and bad, the odds are your customers have less money in their pockets now than they did last year. As the current recession grinds, bars and restaurants are finding themselves competing for a dwindling pool of dollars.

Managing a bar during tough economic times changes how you approach every aspect of the business. Things you used to take for granted—like cash flow and a steady revenue stream—assume greater importance. Looking after every dollar and every ounce of profit becomes second nature, a survival instinct. A large part of your effort needs to focus on reining in costs and clamping shut all internal sources of loss.

To that end, the following initiatives are proven highly successful in promoting the growth of new profit, especially when applied in tough times.

ANALYZING SALES — While there are numerous methods for analyzing revenue, none have more far-reaching implications for the beverage operation than tracking your bartenders’ productivity, or sales per hour. In this instance, productivity is calculated by dividing the gross sales for a shift by the number of hours an employee worked. One benefit of tracking productivity is identifying those on staff with the highest hourly sales. In addition to meriting recognition, your top earners deserve first shot at the busiest, most lucrative shifts.

On the flip side, bartender with chronically low sales per hour warrants close scrutiny, as the explanation of why often indicates a problem. The individual may make lousy drinks, so customers leave without ordering a second or third lousy drink. His attitude could be so off-putting that people don’t stick around for the abuse, or perhaps he works too slowly and can’t physically keep up with demand.

Then again, the explanation could be that the person is ripping off the house. Each dollar of potential sale diverted from the till is another dollar negatively impacting the person’s sales per hour. Every variety of bartender theft will be reflected in productivity ratings.

MAINTAINING CONTROL — Running a bar requires maintaining a significant investment of working capital in product and inventory, liquid assets that can disappear at an alarming rate. Realizing the necessary return on that investment is a question of control. To be profitable, you need to know exactly what inventory you have, what you paid for it, at what rate you use it, and exactly where it is at any point in time. It requires accurately tracking inventory