Question

For my entrepreneurship course, I am preparing a business plan for the first year with the idea of opening a cafe.

I sell different types of coffee and tea + each item has different prices

How can I calculate the break-even point? and it is hard to find the cost of each item since buying paper cups and liquid materials are in total

WHAT to do?

Answer 1

The Breakeven Point:A company's breakeven point is the point at which its sales exactly cover its expenses. One of the most important things to know when learning how to run a successful coffee /tea shop business plan is how many coffees / tea the business needs to sell each day in order to reach break even.

When people discuss break even or break even point, they are simply referring to the level of revenue needed to cover the costs of operating the coffee / tea shop business.

To calculate the break even revenue for a coffee / tea shop business, the coffee / tea shop formula is used as follows: Break even revenue= Fixed cost ÷ gross margin%

To Calculate the Gross Margin Percentage
Suppose the coffee shop sells coffee at 2.00 (excluding sales tax), and the variable cost of the materials (coffee, milk, sugar, cups etc.) used to make the coffee is 0.70, then the gross margin from each coffee sold is given by:

Gross margin = Sales price – Cost = 2.00 – 0.70 = 1.30
The gross margin percentage is then calculated by dividing the gross margin by the selling price

Gross margin % = Gross margin / Selling price = 1.30 / 2.00 = 65%
So each time a coffee is sold 65% of the selling price is gross profit. To carry out the coffee /tea shop break even analysis and to calculate break even, the business now needs to calculate the total fixed costs of operating the coffee / tea shop. The total fixed costs are basically any operating costs, including wages, salaries, rent, utilities etc. which were not included in the variable material costs used above.

Suppose for example the total fixed costs are 200 per day, then the coffee / tea shop break even analysis at a 65% gross margin shows that:

Break even revenue = Fixed costs / Gross margin percentage = 200 / 65% = 308
This means that at 2.00 per coffee / tea the shop must sell 308 / 2.00 = 154 coffees / tea.