Profit Forecast

In such situations, you will have to gather whatever information is available to put together your own profit forecast. This information can consist of:

• Sales information from the brewery or pub company, ie what products they have purchased in the last 12 months.
• Machine income, which can be provided by the brewery, pub company or machine supplier.
• Rent details, which will be provided by the brewery or pub company.
• Overheads – sometimes outgoing tenants are willing to disclose the main costs such as energy, rates, staffing.
• Business rates – see www.voa.gov.uk/ business_rates to find the rateable value of any pub (searchable by postcode).
• Energy costs – suppliers can provide estimated usage figures.
• Profit and loss estimates are calculated by the brewery or pub company and they may be willing to disclose this information to you.

Sales Information From The Brewery Or Pub Company

Breweries and pub companies maintain large amounts of sales information on each of their pubs. These are provided to their management teams on a weekly or monthly basis. The information usually comprises sales data for broad product categories and is often converted to ‘barrels’, this being a standard brewery measurement of 36 gallons (288 pints). Sometimes they use the term ‘composite barrels’ where all products have been converted into an equivalent barrelage.

Estimating Income

Estimating Drinks Sales

In the absence of more detailed information, you can use ale and lager sales figures provided by the brewery or pub company to give an estimate of annual drinks sales of the pub, also known as ‘wet turnover’. It provides a rough guide when you have little else to go on.

To do this, you require two pieces of information:

• The quantity of ales and lager purchased from the brewery or pub company over the last 12 months.
• The selling price of ales and lager (ie the price a customer pays for a pint in the pub).

Step 1 – How Many Pints Of Ale And Lager Have Been Sold?

We know that there are 288 pints in a barrel, therefore:

Ale sales:	100 barrels × 288 pints	= 28,800 pints sold
Lager sales:	90 barrels × 288 pints	= 25,920 pints sold

Step 2 – How Much Revenue Do We Make From These?

Ale sales:	28,800 × £ 2.00	= £ 57,600
Lager sales:	25,920 × £ 2.50	= £ 64,800
Total ale and lager sales:	= £ 122,400

This tells us that we make £ 122,400 from selling 100 barrels of ale at £ 2.00 and 90 barrels of lager at £ 2.50, over a 12-month period.

Step 3 – How Can We Use This To Estimate Wet Turnover?

Steps 1 and 2 estimate revenue for ales and lagers only. However, we can use this figure as a guide to total wet turnover that includes cider, stout, wine, spirits, soft drinks and other drinks.

Ale and lager sales account for approximately 65–75% of total wet turnover in an average traditional pub. Food pubs tend to sell a lower proportion of ales and lagers as a percentage of all drinks sold. This is because they sell large quantities of wine and soft drinks. Traditional local pubs tend to sell mainly ales and lagers, so these form a large proportion of their overall drinks sales.

Estimating Machine Income

Machine income is your earnings from amusement machines, pool table and jukebox. In the case of many tenancy and lease agreements, machine income is split between the brewery or pub company and the licensee. Income varies greatly from pub to pub. Amusement machines are often played by a very small core of a pub’s clientele and income fluctuates with their use. An approximate guide would be 1–5% of wet turnover.

Estimating Total Food Sales

Food turnover can be notoriously difficult to estimate. If details of food sales are unavailable, then an estimate is the best you can do. Some ways to try to do this are as follows:

• Speak to local food suppliers for guidance.
• Count the number of available covers (place settings) in the pub.
• Count the number of customers having food at different times of the week.
• Check the menu for average meal prices (don’t forget to include starters and sweets).
• Estimate the weekly number of customers eating meals.

• Multiply the number of customers by the average meal price.
• Ask the brewery or pub company for their assessment.