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Key takeaways
- Read a bar profit and loss by sorting each line into a decision, a consequence or a fact of life, and focus on the decisions.
- The decision lines are mostly cost of goods and labour, and within those a smaller set still.
- Split cost of goods by category and, if possible, by shift, and pull comps and waste out as separate lines.
- Judge labour against the shape of demand across the night rather than as a percentage of revenue.
- Compare this Friday with the last four Fridays rather than this month with last month.
Most bar owners read their profit and loss the way it was designed to be read, which is as a report. Revenue at the top, costs in the middle, a number at the bottom, compared against last period.
The cost of reading it only that way can be large. In our hotel bar case study, two week revenue sat between $45,000 and $50,000 while the bar ran short at two demand peaks and overstaffed in the trough between them. Guests who saw the queue and skipped a second drink never appeared on any statement. Rebuilding staffing, the menu and training took it to $80,000 to $90,000.
That is the correct format for accounting and a poor format for operating, because it is organised by category rather than by what you can change. Reading it operationally means asking a different question of each line: is this a decision, a consequence, or a fact of life.
The three kinds of line
Facts of life. Rent, insurance, licences. Negotiable occasionally, not weekly. Read them once a year and otherwise ignore them.
Consequences. Revenue is the obvious one. You cannot decide revenue. It is the output of many decisions, and treating it as a lever produces the least useful conversation in hospitality, which is the one where somebody says we need to increase sales.
Decisions. The small set of lines that respond to something you actually control within a month. In a bar this is mostly cost of goods and labour, and within those, a smaller set still.
Where to actually look
Cost of goods, but broken up
A single cost of goods percentage is close to useless operationally. It tells you the size of a problem across every product and every night at once.
The operational version is the same figure split by category and, if you can get it, by shift. Spirits behaving differently from beer is a different problem from everything drifting together. The first is usually pours or recipes; the second is usually pricing or supplier.
Labour, against demand rather than against revenue
Labour as a percentage of revenue is a lagging measure that punishes quiet nights. What you actually want to know is whether you were staffed correctly for the demand you had, which is a question about the shape of the night rather than its total.
Being overstaffed from six to eight and understaffed from ten to midnight can produce a perfectly acceptable labour percentage and two problems.
Comps and waste, separately
These are often buried inside cost of goods, where they are invisible. Separated out, they are among the most controllable lines in the business, and comps in particular tend to respond quickly to being recorded at all.
The comparison that matters
Against last month is the default and is the weakest available comparison, because the months differ in ways nobody has controlled for.
More useful: this Friday against the last four Fridays. Same day of week, similar conditions, and any difference has a cause you can look for. Most of the operational signal in a bar lives in the variation between comparable shifts, and a monthly profit and loss averages exactly that away.
What does the statement not tell you?
It cannot tell you which shift, which product or which section. It arrives after the period it describes has closed. And it is organised for reporting obligations rather than for finding the cause of anything.
None of that is a criticism. It is a different instrument for a different job, and the mistake is expecting it to be an operational tool because it is the financial document everyone already has.
The operational view sits underneath it, in the transaction record, at the level of the shift. CoreTAP reads that from the point of sale you already run.
Frequently asked questions
Which lines on a bar P&L should I focus on?
The small set of lines that respond to something you control within a month. In a bar that is mostly cost of goods and labour, and within those, a smaller set still.
Why isn't a single cost of goods percentage useful?
It tells you the size of a problem across every product and every night at once. Split by category and shift, it shows whether spirits are behaving differently from beer, which usually points to pours or recipes, or whether everything is drifting together, which usually points to pricing or supplier.
Is labour percentage a good measure of staffing?
It is a lagging measure that punishes quiet nights. Being overstaffed from six to eight and understaffed from ten to midnight can produce an acceptable labour percentage and two problems.
Should comps and waste have their own lines?
Yes. Buried inside cost of goods they are invisible, and separated out they are among the most controllable lines in the business. Comps in particular tend to respond quickly to being recorded at all.
What can't a profit and loss statement tell me?
It cannot tell you which shift, which product or which section, and it arrives after the period has closed. The operational view sits underneath it, in the transaction record at the level of the shift.