Inside the P&L of my coffee / cafe supplies business East Coast Roast

If you’ve followed my content you’ll know that last year I purchased a local Gold Coast Coffee Roasting and Cafe Suppliers business (Cre8ive Coffee) and I’m in the process of re-branding it to East Coast Roast. Here are some past posts about it:

Depending on how long you’ve been following me, you may be aware of the type of content I do. Back in 2012 I started posting income reports for my startup. It was a bit of a weird thing to do at the time but doing it was something I enjoyed and the content got traction and I was eventually able to build a business around that, WP Curve, which I sold to GoDaddy in 2016. The phrase “Build in public” didn’t really become a thing till a lot more recently, but companies like mine and Buffer and others at the time were doing this type of marketing over a decade ago.

I then took this approach with my brewery business Black Hops Brewing, building it from scratch to $16m in revenue in 5 or so years before stepping away (that’s a story for another day). For Black Hops the approach of transparency worked pretty well too, I wrote a book, recorded regular podcasts, lots of blog posts, a facebook community and it was our main source of marketing.

However with both of those businesses I had co-founders, and co-owners and I felt a bit restricted in terms of what I could do. With East Coast Roast I don’t, which means I can do whatever I want. So I’m looking forward to doing a bunch of content for the business, part of the strategy will be building the business in public with posts like this.

It won’t be monthly income reports because I think eventually they get a bit boring, and I want to make sure all the content is interesting. But for now, in this week’s post I wanted to share what an average monthly P&L looks like for the business. I believe this level of transparency helps founders a lot when trying to understand different business opportunities. It also helps me get feedback from others. It’s not financial advice, and it’s not the exact P&L from any particular month, but it’s typical of any given month in the business. Also remember the Balance Sheet is just as important as the P&L, and Cash Flow is also just as important. Cash Flow and the balance sheet are very different to the P&L. I haven’t discussed either the Balance Sheet or Cash Flow at all in this post (although in our case the Balance Sheet is very healthy with basically zero debt). I might write about those things down the track.

If this is your first time reading my content, be sure to sign up for free weekly email, or follow East Coast Roast on Instagram to follow the journey. If you have any questions feel free to ask them in the comments at the bottom of this post.

What the business does

First off let’s look at what the business does. We essentially do 4 things:

Resell cafe supplies to local Gold Coast cafe’s. These are things like syrups, plant based milks, powders etc. This is about 65% of the business.
Roast coffee from green bean to roasted coffee and supply local wholesale cafes. Many of these use machines that are owned and maintained by us. This represents about 30% of the business.
We have an onsite cafe that does mainly takeaway coffees which represents about 5% of the business.
We also sell a very small amount of coffee and some powders etc online, at less than 1% of the business.

P&L for a typical month

*Note these numbers include a $70k annual wage paid to me.

High Level P&L

Heading	Amount	Comment
Income	$249,305	Typical monthly income is between $200k and $260k.
COGS	$162,568	Cost of purchased items, green coffee, supplies etc.
Gross Profit	$86,737
Gross Profit (%)	34.79%	I’d like it to be higher, but most of the business is low margin reselling for now.
Overheads	$64,029	All other costs.
Net Profit	$22,708	This is the profit for a typical month and the business has no debt so net profit it no different to EBITDA.
Net Profit (%)	9.11%	Not amazing but having a business that’s profitable and pretty consistent is nice.

Keep in mind, this is a typical P&L but it’s not exactly like this each month. If a bunch of staff quit, you are up for loads of cash. If you have to buy equipment, it won’t break the P&L but it will burn cash. If a bunch of customers don’t pay their invoices (which happens!), it breaks what a typical monthly P&L looks like.

All of that said, let’s get into it.

Broken down P&L

Income

Income type	Amount	Comment
W/sale Coffee	$70,323	This is the part of the business I want to grow, but it’s hard to sell coffee to cafe’s!
W/Sale Tea	$1,089
W/sale Syrup	$8,491
W/sale Milks / Juices	$113,095	This is the biggest part of the business, high turnover, very low margin, no differentiation, bit of a commodity but we do a good job with servicing customers and deliveries and the operation is pretty efficient.
W/sale Consumables	$21,446
W/sale Merchandise	$16,418
W/sale Packaging	$3,748
Website sales	$1,500	We don’t do much online, it’s obviously a good opportunity here once I complete the rebrand, the more we can sell direct, the better.
Machine Rental Income	$1,041	A small amount of customers rent our machines. Bigger ones get them for free if they move enough coffee.
Cafe sales	$12,155	Our little cafe does pretty well but could also definitely be improved, plans are underway for a small facelift.
TOTAL	$249,305	This puts the business at around $3m annual turnover if we have 12 good months.

COGS

This table represents the costs of Goods Sold for all items sold in the business. COGS or Cost of Goods Sold are basically the direct costs associated with having all of our items available for sale. The costs are accounted for at the time of selling (I’ll write a post in the future about how important this is). Note, I don’t have the roaster’s wage included here, nor the equipment maintenance costs. This is something I need to improve, I’m only now really getting around the financials, a few months into owning the business.

COGS will go up directly as revenue goes up, as they are directly associated with earning the revenue.

Item	$	Comment
Wholesale Coffee Cost of Sales	$32,238	Green beans and packaging
Bulk Tea Cost of Sales	$800
Syrup Cost of Sales	$5,007
Cost of Sales – Specialty Products	$90,517	This is mainly plant based milks, high turnover, low margin.
Wholesale Consumables Cost of Sales	$2,219
Merchandise Cost of Sales	$11,902
Packaging Cost of Sales	$3,601
Equipment & Spares Cost of Sales	$683
Retail Bean Coffee Cost of Sales	$3,432
Retail other Cost of Sales	$1,553
Freight	$216
Inventory Adjustments	$400	I’ve started doing stock takes to get on top of making sure inventory is well managed. I will write a post about this in the future – super important.
TOTAL	$162,568

That puts the gross profit at $86,737 or just under 35%. This is not all of the businesses’s costs, it’s only the direct costs associated with products sold. It essentially represents the profit on each additional $ made by the business. It’s critical because if the business grows, you need to know that the underlying fundamentals are sound and profit will grow as turnover grows.

Ideally it would be higher, although the business is quite efficient and customers don’t like price increases (especially after a change in ownership). But this is a critical number for me to keep an eye on to make sure it doesn’t get too low. 35% is about as low as I’d want this to be. That said, the business does 2 every different things.

Selling other people’s low margin product – If you look at the GP on milk, $113,095 revenue, $90,517 COGS makes $22,528 profit which is under 20%.
Buying green bean and roasting coffee – If you look at the GP only on coffee, $70,323 revenue, $32,238 COGS makes $38,085 profit which is 54%. Although with roasters wage and equipment included this would be a bit less.

All of that is to say that all of these numbers are important as the business grows. Coffee is a much better business, as it should be, because we are adding value to the process. But because it’s a great business, it’s super competitive and very difficult to sell. These are things you need to consider all the time when thinking about what things to focus on in the business.

Overheads

Overheads are basically every other cost of doing business. They shouldn’t change dramatically if revenue in any given month goes up. Rent for example, will be the same if we sell $200,00 of product or $250,000 in product. That said, it’s a bit of a trap to think these things don’t go up over time as the business grows, because they certainly do and they can definitely become a big problem if you let them get out of hand. The more fixed costs, the more you are going to get crushed in a bad month. Keeping overheads low is critical for a small business.

General

Item	$	Comment
Accounting	$333
Advertising & Marketing	$2,000	We don’t spend much on marketing currently but I am spending quite a bit on the rebrand.
Bank Fees	$1,465	I need to fix this, fees directly related to sales I think should be in COGS. Might need to fix this oops.
Sales Samples	$5.10	We don’t do that much sample wise, compared to other businesses I’ve had.
CRM	$111.42
Electricity Expenses	$577
Equipment Rental	$2,383	We lease equipment for a few customers, would rather not so if possible I’ll try to buy those assets when the lease is up.
Fridge Rental	$55	As above.
Gas Expenses	$632	Running a 40kg roaster burns a fair bit of gas haha.
Telephone Expenses	$377	We have a super old phone system which is weird but there are other priorities.
Machine Repairs & Maintenance	$4,000	This also should be in COGS, added to my task list to fix.
Insurances	$1,110	Insurance is very expensive!
Internet	$150
Computer Expenses	$300
Training	$200
Stationery	$143
Staff Amenities	$250
Subscriptions	$44
Rent	$9,908	Rent is a lot. But it’s a cafe, office, coffee storage room, roastery / packing room, workshop and warehouse in a good spot in Nerang. Possibly worth it haha, would be good to pay less.
Security	$43
Body Corporate	$156
Waste Removal	$119
Freight Out	$650
Inventory adjustments	$400
Cafe expenses	$220
Warehouse related	$500
TOTAL	$26,131

Payroll

Item	$	Comment
Wages & Salaries Expenses	$30,555	Includes a wage to me.
Work Cover Premiums	$943	Work Cover is a lot!
Super	$3,208
Payroll – Car Allowance	$1,750
Total payroll	$36,456	We have a small and great team!

Motor vehicle expenses

Item	$	Comment
Motor Vehicle Insurance	$80
Motor Vehicle Fuel/Oil	$1,300	Not sure why it says oil that’s weird
Motor Vehicle Maintenance	$62
Total motor vehicle	$1,442	We have one full time van and my car for backups, pretty efficient.

Overheads summary

Item	$	Comment
General	$26,131
Payroll	$36,456
Motor Vehicle	$1,442
TOTAL	$64,029

Profit summary

Net Profit	$22,708
Net Profit %	9.11%

Conclusion

Overall it’s a decent, pretty consistent and profitable business. My goals are to keep it profitable and stable, grow it gradually and create a great brand.

I started doing content like this because I enjoyed it, and it helped other people understand different businesses. I hope it’s been interesting and useful to you. If it has, follow East Coast Roast, I’m giving it a good crack, I’ve put EVERYTHING on the line to make it work and I hope it does. Here are some of the ways you can follow:

If you have any questions, feel free to ask via the comments below or hit me up via the channels above.

Keep creating!

Photo by Carlos Muza on Unsplash

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dan

Serial founder, owner of East Coast Roast, previously founded Black Hops Brewing, WP Curve, 6 books including The 7 Day Startup. I send a weekly email about startups, content marketing and entrepreneurship - join for free here.

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