Calculating Profit For Confectionery Store Owners
Your sweet sales are good. At the end of a busy day there is a healthy bag of notes and change in the cash register. But how much of it is actually yours? Here are the factors you need to consider before totalling your profit from the takings:
Fixed Costs (quite simple)
These include rent, business rates, insurance, telephone line rental. If you are trying to calculate a weekly profit, simply divide these yearly costs by 52 and you’ll have a figure for the week.
VAT (Value Added Tax) (not so simple)
The price you charge for confectionery will include VAT. Therefore, for every £1.20 you have taken, 20p of it needs to be kept back for the government.
This is further complicated by the VAT you paid when you purchased your stock. This needs to be claimed back and therefore reduces how much you owe.
There are lots of these:
Card Machine Fees
Keep a record of your ongoing costs from your confectionary store. Without keeping a record, it can be difficult to keep an eye on this.
Cost Of Stock And Profit On Sales (quite complicated)
In the case of an individual item, let’s say a chocolate bar, this could be quite simple.
Pay 10p plus 2p VAT for the bar.
Sell the bar for 20p plus 4p VAT.
Which means 4p - 2p = 2p you owe in VAT.
And 20p - 10p = 10p profit (to pay your fixed and variable costs with)
In the case of weighed sweets, this could get more complicated.
Here we go.
3kg of lovely Tidmans Baby Coloured Gobstoppers from Appleton Sweets
Cost £8.99 plus £1.80 VAT = £10.79 for 3kg
You don’t sell all 3kg in one go though. Here’s where it gets more complicated. You’ll sell whichever weight your customer asks for.
In the good old days, a sweet fanatic might ask for “A quarter of gobstoppers, please.”
Today, though, we’ll sell sweets in grams rather than pounds and ounces. Roughly converted, a quarter equals 113 grams. Let’s sell them 100 grams instead to make the maths easy. And let’s sell that 100g for 50p:
There are 35 100g servings in our 3.5kg jar.
Cost to us per serving = £8.99 / 35 = 26p + 5p VAT = 31p
Sold for 50p which includes 8p VAT, so that is 42p to us.
Are you keeping up?
So each 100g sold gives us 42p - 26p = 16p profit
And we owe the VAT man 8p - 5p = 3p
To know how much profit you are making as a confectioner you need to be continually doing the above calculation.
Simple? We’ve not quite finished yet.
Consider how the following might affect this profit:
Sweets that don’t sell (there’s not many!)
You are a little bit generous with the portions - there’s now only 34 measures in the jar!
Sweets that get dropped onto the floor at busy times.
Theft. Unfortunately, it happens.
You get hungry. It happens.
So, when calculating the profit a confectionery store might be making:
Carefully calculate the profit from your sales and then deduct your variable and fixed costs.
Your sweet sales are good. Are your profits?