The easiest way to reduce COGS and labour.

For most venues, COGS (cost of goods sold) and labour (staff wages) have always been the 2 biggest costs - and it's scary just how much these have increased over the past few years. 

It's not unusual for us to see venues that have COGS or labour sitting at 40%.

In most cases, you have probably already trimmed your roster, squeezed your suppliers and tightened portion control.

So what can you do next?

Book more events.

Example - 100% dining (no events)

Annual revenue = $3M
Dining COGS = 35%
Dining Labour = 35%
Gross Profit % = 30%
Gross Profit = $3M x 30% = $900k

But, as we all know, event revenue comes with benefits. Typically COGS and labour are less than a la carte service. Less waste, higher margins, easier to manage.

Example - Split ($2M dining + $1M events)

Dining revenue = $2M
Dining COGS = 35%
Dining Labour = 35%

Event revenue = $1M
Event COGS = 25%
Event Labour = 25%

Dining gross profit = $2M x 30% = $600k 
Events gross profit = $1M x 50% = $500k 
Combined gross profit = $1.1M 
Blended gross profit % = $1.1M / $3M = 36.7%

In this scenario, even though top line revenue was the same, overall gross profit increased by almost 7%. 

But, getting more events typically means getting more revenue as well.

And, when it comes to your exit strategy, what difference could this make when you advertise your business for sale with attractive COGS and labour percentages?

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