How To Let Numbers Run Your Cafe For You

Running a cafe is hard, especially with so many moving parts and a constantly changing landscape of industry trends, consumer preference, and supply chain economics. As a cafe owner or manager, understanding the financial health of your business is crucial for making informed decisions and driving its success. Luckily, by tracking key metrics, you can gain valuable insight on your cafe, your demographic, and begin to make data-driven decisions to improve your cafe.

By tracking important metrics such as sales, average ticket values, and cost of goods sold, you can gain valuable insights into various aspects of your cafe's performance. I’ve outlined specific methods on how to calculate and track your metrics effectively, and I have some free external resources that offer further guidance, helping you optimize your operations and maximize your cafe's profitability.

These 6 key metrics can make or break your cafe in the most critical ways:

Sales - WMQA (Weekly, Monthly, Quarterly, Annual)

Your cafe’s sales is a measure of your cafe’s performance. This metric helps you monitor revenue and tracking sales on a weekly, monthly, quarterly, and annual basis, is critical for several reasons:

1. Performance evaluation: Tracking your WMQA sales allows you to evaluate the performance of your cafe or restaurant over different time periods. Comparing sales data across different intervals can help you identify trends and patterns, understand seasonal variations, and assess the success of new marketing strategies or initiatives.

2. Financial planning and forecasting: By analyzing sales data over different time periods, you can develop more accurate financial plans and forecasts. This helps to set realistic revenue targets, budget your operational expenses for the inevitable change in season, and make well-informed, data-driven business decisions.

3. Identifying growth opportunities: Tracking sales at different intervals helps you pinpoint periods of peak performance and identify growth opportunities. For example, if weekly sales consistently show a surge on Fridays, you may consider introducing special promotions or events to further capitalize on that day.

4. Efficiency and productivity assessment: Regularly monitoring sales allows you to assess the efficiency and productivity of your cafe or restaurant. By analyzing sales data alongside other metrics such as labor cost percentage, you can identify areas where operational improvements can be made to maximize revenue and reduce expenses.

5. Comparing performance to industry benchmarks: By tracking sales over different intervals and comparing them to industry benchmarks or competitors' performance, you can gain insights into how well your cafe or restaurant is performing relative to others in the market. This information can be valuable for identifying areas where you may be underperforming or excelling, and adjusting your strategies accordingly.

Overall, tracking sales on a weekly, monthly, quarterly, and annual basis provides you with a comprehensive view of your cafe or restaurant's performance, enabling better decision-making and overall business success.

If you’re not sure how to best track your cafe’s sales, I’ve created a ‘dashboard’ template that gives you a space to pull your sales data from your Point of Sale (POS) system and record it. There are three tabs - a main dashboard full of visuals that will allow you to SEE your performance over time, a tab for weekly sales, and Monthly/Quarterly/Annual sales tracking. There are also many other metrics included. Feel free to customize this template to fit your reports, or reach out to me and I can help you optimize this template!

Average Ticket Value (ATV) & Average Spent Per Visit (ASV)

Tracking your cafe's average ticket values and average spend per visit is essential for the following reasons:

1. Revenue optimization: By keeping track of average ticket values, you can identify opportunities to increase revenue. Analyzing data on the average amount spent by customers allows you to make strategic decisions regarding pricing, upselling, and cross-selling. You can also identify trends and patterns that can help you better understand customer preferences and tailor your offerings accordingly.

For example, if you notice customers in the mornings frequently order a hot coffee with a croissant, you can use that information to upsell other customers, or offer different pastry options to those same customers. If you notice average ticket values are down during a certain time of day, there’s an opportunity to identify why, and strategize in order to get customers to pair their drink/food with something else.

Lower average ticket values and spend per visit can be indicative of flaws in your overall sales strategy, staff sales training, pricing models or a misalignment between what you’re offering and what your customers really want.

2. Menu optimization: Monitoring average spend per visit helps you evaluate the performance of different menu items and identify the most popular or profitable ones. This information can be used to optimize your menu by highlighting high-margin items, adjusting pricing based on demand, or introducing new items to attract customers and increase spend.

3. Customer segmentation: Tracking average spend per visit can help you segment your customer base. By understanding the spending habits of different customer groups, you can implement targeted marketing strategies, loyalty programs, or incentives to encourage higher spending from specific segments.

Overall, tracking average ticket values and average spend per visit helps you optimize revenue, understand customer preferences, and make informed decisions to drive profitability and enhance the overall success of your cafe. Most POS systems have this metric built into their sales reports, but if yours doesn’t, you can calculate this by dividing your total gross sales in a given timeframe by the total number of transactions made during the same timeframe. The resulting value is your average ticket value.

Average spend per visit is a similar metric, but will vary slightly because some guests may make two to three transactions during their time in the cafe. A latte in the morning, some food for lunch, and a cookie to-go… all in separate transactions. If that customer spent $22 total over the course of a few hours they may be contributing positively to your average spend per visit, but adversely to your average ticket value because each transaction value was $7, $10, and $3. This is why it’s important to track both of these metrics. Additionally, your average spend per visit allows you to monitor how often customers are coming back up to order more during the same visit.

Labor Percentage

Tracking labor percentage in your cafe is important for several reasons:

1. Cost control: Labor costs can be a significant portion of your overall expenses, if not your largest expense. By tracking labor percentage, you can monitor and control these costs to ensure they are in line with your budget. This is especially important in the cafe industry, where labor expenses can have a direct impact on profitability.

2. Staffing efficiency: Tracking labor percentage allows you to evaluate the efficiency of your staffing levels. If your labor percentage is consistently high, it may indicate that you have more staff scheduled than necessary. On the other hand, if it is too low, it may suggest that you are understaffed, potentially leading to customer dissatisfaction and slower service.

3. Scheduling optimization: Keeping a close eye on labor percentage helps you optimize your staff schedules. By analyzing historical sales data alongside labor percentage, you can identify peak hours and adjust staffing accordingly. This ensures that you have the right number of employees available during busy times to maintain excellent customer service while avoiding overstaffing during slower periods.

4. Performance metrics: Labor percentage serves as a performance metric for your cafe's operational efficiency. By setting target labor percentages based on industry standards or your specific business goals, you can evaluate your overall performance and make adjustments where necessary. Consistently tracking and analyzing labor percentage can highlight potential inefficiencies or areas for improvement in your cafe's operations.

5. Forecasting and budgeting: Labor percentage data can help you forecast and plan your financials more accurately. By analyzing historical labor percentages alongside projected sales, you can estimate your future labor costs and incorporate them into your budget and financial planning processes.

Tracking labor percentage provides insight into your cafe's cost control, staffing efficiency, scheduling optimization, performance evaluation, and financial forecasting. It enables you to make data-driven decisions, maintain profitability, and run a more efficient and successful operation. It’s also pretty easy to do - simply divide your total labor costs for a certain timeframe over your net sales during that same time period.

There can be some debate over whether to use your gross sales or net sales, but I recommend using your net sales. Your net sales metric is more reflective of what your business is KEEPING out of your total sales during that timeframe, and you don’t want to use this metric in part to falsely predict your profitability over the timeframe in question.

It’s also worth that many POS companies such as Square or Toast have relationships with scheduling platforms such as 7Shifts and Homebase, which can integrate with your POS and allow you to see your real-time labor percentage. If you have the ability to do so, monitor your labor percentage throughtout the day, and make staffing decisions like cutting employees and calling in additional help accordingly.

Net Profit

Tracking your cafe’s net profit is important for several reasons:

1. Financial health assessment: Net profit is a key indicator of your cafe's financial health. It represents the amount of money your cafe is generating after deducting all expenses, including operating costs, labor, rent, and taxes. By tracking net profit, you can assess the overall profitability of your business and ensure it remains financially sustainable.

2. Performance evaluation: Monitoring net profit allows you to evaluate the effectiveness of your business strategies and operations. By comparing your net profit over different periods or against industry benchmarks, you can identify trends, measure the success of your initiatives, and make informed decisions to improve profitability.

3. Cost management: Net profit gives you insights into your cafe's cost management. By regularly reviewing your expenses in relation to your revenue and analyzing how they impact your net profit margin, you can identify areas where costs can be reduced or optimized to maximize your bottom line.

4. Financial planning and forecasting: Tracking net profit helps you with financial planning and budgeting. By understanding the profitability of your cafe, you can set realistic revenue and expense targets, forecast future net profit, and make adjustments to your operations and strategies accordingly.

5. Decision-making: Net profit serves as a vital factor in assessing the feasibility and viability of various business decisions. It helps you evaluate the potential return on investment of new initiatives, such as menu changes, pricing adjustments, or expansion plans. By considering the impact on net profit, you can make informed decisions that align with your financial goals.

6. Investor and shareholder insights: Net profit is of interest to investors and shareholders as it represents the profitability and return on their investments. By tracking net profit and demonstrating a consistent or improving trend, you can attract potential investors, build investor confidence, and maintain positive relationships with shareholders.

Tracking net profit provides a comprehensive understanding of your cafe's financial performance. It enables you to assess financial health, evaluate performance, manage costs, plan for the future, make informed decisions, and attract investment. Ultimately, monitoring net profit helps you achieve sustainable profitability and long-term success for your cafe.

Alarmingly, there are many (and I really mean most) cafes which may have never put together a financial statement in the history of their business. It can be daunting, but the information to be uncovered is priceless. I’ve created a free resource to help track basic business expenses, mileage, and it includes a basic profit and loss template. This can be completely customized to fit your business if you’re sheet-savvy, but if not, reach out to me and I’m happy to help!

Inventory Turnover

Tracking inventory turnover is important for several reasons:

1. Efficient inventory management: Inventory turnover reflects how quickly your cafe's inventory is being sold and replenished. By tracking this metric, you can assess the efficiency of your inventory management practices. A high inventory turnover indicates that you are effectively utilizing your resources and minimizing the risk of wastage or obsolescence. Conversely, a low turnover may indicate potential issues such as overstocking or slow-moving items that need to be addressed.

2. Cash flow management: Monitoring inventory turnover is crucial for effective cash flow management. Slow-moving or stale inventory takes up valuable storage space and ties up capital that could be put to better use. By analyzing inventory turnover, you can identify items that are taking longer to sell and take appropriate actions such as adjusting pricing, implementing promotional activities, or considering liquidation strategies to free up cash flow.

3. Stock control and optimization: Inventory turnover provides insights into stock control and optimization. By observing the frequency with which your inventory is sold and replenished, you can adapt your ordering patterns, adjust stock levels, and align your inventory management practices with customer demand. This can help improve overall efficiency and minimize the risk of stockouts or excess inventory.

4. Profitability assessment: Tracking inventory turnover is essential for assessing profitability. Through inventory turnover, you can determine how quickly you are generating revenue and converting inventory into sales. This information allows you to evaluate the profitability of particular items or categories, identify high-demand products, and make informed decisions regarding pricing, promotions, and product mix optimization.

5. Forecasting and planning: Inventory turnover data can be utilized for forecasting and planning purposes. By analyzing past trends and considering factors such as seasonality, events, or changing consumer preferences, you can project future demand and adjust your inventory levels accordingly. This helps in ensuring you have the right amount of stock available without excessive overstocking or stockouts.

6. Supplier relationships and negotiations: Monitoring inventory turnover can also be beneficial when negotiating with suppliers. By demonstrating a fast inventory turnover and regular demand, you may be able to negotiate better pricing, terms, or discounts with your suppliers. Suppliers are often more willing to provide favorable conditions to businesses that can demonstrate efficient inventory management and consistent sales.

Tracking inventory turnover allows you to optimize your inventory management, improve cash flow, control costs, assess profitability, facilitate forecasting and planning, and leverage supplier relationships. By effectively managing your inventory, you can enhance operational efficiency, increase profitability, and ensure customer satisfaction by meeting demand promptly.

For smaller cafes, I recommend building out a basic sheet that includes all of your ingredients, and anything that needs to be ordered on a regular, or semi-regular basis. Include columns for the date last ordered, how much you ordered, where it comes from, etc. and make it a point to update this on a weekly basis. Larger cafes, or businesses with access to food distributors may be able to see a lot of this information on their distributor accounts, but it’s still good to have an in-house sheet with ALL of your vendors and distributors accounted for. A master inventory list. You can then add different tabs with your menu items and have them pull the cost of goods sold directly from your inventory list. This will automatically update your cost of goods sold on each menu item whenever you make changes to your inventory list, or when you reorder. This requires a bit of advanced excel/sheets knowledge, but can easily be done to fit your cafe… free resources for this coming soon!

Cost of Goods Sold (COGS)

Tracking the cost of goods sold (COGS) for your cafe is important for several reasons:

1. Profitability analysis: Monitoring COGS helps you analyze the direct costs associated with producing or purchasing the goods you sell. By comparing the COGS to your sales revenue, you can calculate your gross profit margin, which is a key indicator of your cafe's profitability. Tracking this metric allows you to evaluate the impact of factors such as pricing, ingredient costs, and efficiency of production on your profitability.

2. Menu pricing decisions: Understanding the COGS of individual menu items helps you make informed pricing decisions. By calculating the cost per serving of each dish or beverage, you can set appropriate selling prices that not only cover your expenses but also ensure a reasonable profit margin. This ensures that your menu prices align with your desired profitability goals while remaining competitive in the market.

3. Cost control and waste reduction: Monitoring COGS helps you identify areas where costs can be controlled and waste can be reduced. By analyzing the cost of each ingredient or product, you can assess their contribution to overall COGS. This enables you to identify cost-effective alternatives, negotiate better prices with suppliers, or implement portion control measures to reduce waste and minimize financial losses.

Pro tip - take this one a step further and analyze the profit on each menu item against the sales of those items and determine which items are contributing highly to your overall profit margin, and which ones are barely moving the needle. Then, make data-driven menu decisions and optimize your menu to maximize your overall profit. Toast has a great template built for this!

4. Supplier management and negotiations: Tracking COGS enables you to evaluate the performance and pricing of your suppliers. By comparing the cost and quality of ingredients or products from different suppliers, you can make informed decisions about supplier relationships. Regularly tracking COGS allows you to negotiate favorable terms and pricing with suppliers to ensure optimal cost management.

5. Forecasting and budgeting: Historical COGS data facilitates accurate forecasting and budgeting processes. By reviewing past COGS trends and patterns, you can forecast future cost trends and estimate the financial impact on your cafe's operations. This helps you plan inventory levels, set budgetary targets, and make strategic decisions about cost management.

6. Identifying cost drivers and inefficiencies: Tracking COGS provides insights into the factors affecting your cafe's costs. By analyzing cost variances and fluctuations, you can identify the drivers behind these changes. This allows you to pinpoint inefficiencies, such as excessive portion sizes, inefficient production methods, or price fluctuations in ingredients. By addressing these issues, you can streamline operations, optimize costs, and improve profitability.

In summary, tracking COGS is crucial for assessing profitability, making informed pricing decisions, controlling costs, reducing waste, managing supplier relationships, forecasting and budgeting accurately, and identifying efficiencies. By monitoring and managing COGS effectively, you can optimize your cafe's profitability and financial performance.

Moreover, tracking key metrics is essential for ensuring the success and profitability of your cafe. By regularly monitoring metrics such as sales, average ticket values, labor percentage, net profit, inventory turnover, and cost of goods sold, you can gain insights into the overall health of your business and make informed decisions. Calculating and tracking these metrics may initially require some effort, but the benefits far outweigh the time invested. By understanding and managing these metrics effectively, you can optimize your operations, control costs, increase profitability, and ultimately, pave the way for long-term success. Feel free to utilize the methods I’ve mentioned and refer to the resources I’ve linked for additional guidance. Reach out to me if you have different methods, or any other tools you think business owners might benefit from!

Embrace the power of numbers and elevate your cafe. Go lean.