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:
- East Coast Roast Instagram
- My Instagram @thedannorris
- My weekly email
- My Facebook
- My LinkedIn
- My Twitter
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