The Complete Guide to Buying a Cafe
Practical Advice to Get it Right

What does 'Turnover' mean?

Find out what Turnover means. Turnover is explained by Craig Reid - author of The Complete Guide to Buying a Cafe

Turnover

Turnover is simply the $ amount of sales the business makes in a year. Don’t be blinded by impressive turnover figures (remember “turnover is vanity”!). Also ensure that you find out how many weeks a year the café is open and divide the total turnover by the amount of weeks to get the weekly average.

Search result for 'Turnover' in The Complete Guide to Buying a Cafe

"...Turnoverised café is a café concept that is owned by a company and sold as a reproducible commodity business. You might think of it as the replication of a café concept. The Franchisor sells a café as a business to the franchisee who in turn agrees to run the café ..."

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"...Turnover critical figure in all of this is net profit. The way to think of the financials is quite simple: Turnover – costs = net profit. But remember that brokers will make assumptions to make a business look more attractive than it actually is. For example, you may find an ..."
76.
"... - The Percentage Guide - The percentage guide is a methodology that café owners use to manage the costs of their business. It states that each cost should fall into a category which makes up a particular percentage of Turnover (ex GST), as follows: Category % Staff ..."
88.
"... for each item. We will discuss some of the flaws of the percentage method later when we consider pricing and the menu, but for now use it as a guide (but never a rule). Again, remember that net profit is king – or as they say “Turnover is vanity, profit is sanity”. - Turnover ..."
93.
"... a guide (but never a rule). Again, remember that net profit is king – or as they say “Turnover is vanity, profit is sanity”. - Turnover - Turnover is simply the $ amount of sales the business makes in a year. Don’t be blinded by impressive turnover figures (remember ..."
"...Turnover is simply the $ amount of sales the business makes in a year. Don’t be blinded by impressive Turnover figures (remember “Turnover is vanity”!). Also ensure that you find out how many weeks a year the café is open and divide the total Turnover by the amount of weeks ..."
97.
"... Tip: if you want to compare a café trading 5 days as against one trading 7, take the Turnover for the café that is open 7 days, divide it by 7 and multiply by 5. It may also help you compare different cafés if you divide the weekly Turnover by the number of hours the business is open: ..."
100.
"... you compare different cafés if you divide the weekly turnover by the number of hours the business is open: e.g. • 60 hours per week at $10,000pw Turnover = $167 per hour • 80 hours per week at $10,000pw turnover = $125 per hour Keeping the cafe open for 80 hours per week will, ..."
101.
"... by the number of hours the business is open: e.g. • 60 hours per week at $10,000pw turnover = $167 per hour • 80 hours per week at $10,000pw Turnover = $125 per hour Keeping the cafe open for 80 hours per week will, obviously, cost more than opening for 60 hours per week – in ..."
105.
"... labour etc. Turnover may or may not be displayed as including GST. Be careful with this. If Turnover includes GST you need to take 10% off the Turnover figure provided (tip = divide the Turnover by 11 to find the GST amount). Do not consider GST in Turnover to be yours. In a café, ..."
107.
"... GST in turnover to be yours. In a café, approximately 80% of the GST (included in Turnover) will need to be paid to the government. This is because there aren’t many expenses within a café that are subject to GST (the main exception being rent). - The Cash Dilemma - One of ..."
112.
"... that are subject to GST (the main exception being rent). - The Cash Dilemma - One of the biggest problems you may encounter with buying a café is undeclared Turnover, or in other words “cash”. Some cafés will (illegally) take cash and not declare it as taxable “turnover”. ..."
122.
"... etc. These receipts should then be totalled and divided by the number of weeks during that period. e.g. 6 months = 26 weeks: Turnover (Total) $10,000 Turnover (on paper) $7,000 Turnover (cash) $3,000 COG (6 months) $77,523 Number of weeks 26 COG Per Week $2,982 Estimated ..."
123.
"... should then be totalled and divided by the number of weeks during that period. e.g. 6 months = 26 weeks: Turnover (Total) $10,000 Turnover (on paper) $7,000 Turnover (cash) $3,000 COG (6 months) $77,523 Number of weeks 26 COG Per Week $2,982 Estimated Turnover $9,939 Note: to ..."
124.
"... and divided by the number of weeks during that period. e.g. 6 months = 26 weeks: Turnover (Total) $10,000 Turnover (on paper) $7,000 Turnover (cash) $3,000 COG (6 months) $77,523 Number of weeks 26 COG Per Week $2,982 Estimated Turnover $9,939 Note: to calculate estimated ..."
130.
"... (on paper) $7,000 Turnover (cash) $3,000 COG (6 months) $77,523 Number of weeks 26 COG Per Week $2,982 Estimated Turnover $9,939 Note: to calculate estimated turnover, divide the COG figure by three then multiply this by 10. If the vendor refuses to provide ..."
132.
"... (6 months) $77,523 Number of weeks 26 COG Per Week $2,982 Estimated Turnover $9,939 Note: to calculate estimated Turnover, divide the COG figure by three then multiply this by 10. If the vendor refuses to provide you with the receipts for cost of goods then you should take only ..."
134.
"... multiply this by 10. If the vendor refuses to provide you with the receipts for cost of goods then you should take only the “on paper” Turnover as the basis of your analysis. To do anything other than this would be to submit yourself to an unacceptable level of risk. - Gross Profit - ..."
"...Turnoverofit is Turnover minus the cost of goods. It is useful to know the Gross Profit Margin as a guide to business performance. Gross Margin = Sales (100%) less the Cost of Goods. A Gross Margin of 70% is considered to be the industry average. A Gross Margin ..."
"...Turnovert, as stated before, should be approximately 25-35% of sales, but this will vary according to the type of café. For example, if you are selling lots of seafood your % cost may be more towards the 35% mark. If you are selling just toast and soup it might be ..."
145.
"... High cost seafood should command a higher price. This will push down the food cost percentage of sales. e.g. Food Cost $2,000 per Week, Turnover $6,000 per week = 33% Cost of Goods. Food cost is the cost of the food items required to produce your menu items. It is important to note that ..."
184.
"... rates • Rental costs for equipment, etc. Fixed costs are important to consider as they are independent of Turnover, i.e. no matter how much - or how little - the business is taking in, you still have to pay them. All other costs are known as variable costs, and they will ..."
"...Turnoverr costs are known as variable costs, and they will tend to vary in direct relation to Turnover. This makes sense when you consider that if you get busier you will need to buy more food to meet demand and more staff to serve more customers. The opposite is also ..."
"...Turnoverre managing the business properly, your café’s variable costs will drop if the Turnover starts to drop – however the fixed costs will remain and these will start to represent a bigger percentage of your overall costs. This is where a business can get into trouble. So the bottom line ..."
190.
"... to ensure they will not represent too much of a burden if times get tough. On the contrary, as Turnover increases, profitability can increase by a proportionately larger amount, as the following example shows: If you bought the café with a turnover of $6,000 and profits of $500 (8%) ..."
192.
"... following example shows: If you bought the café with a Turnover of $6,000 and profits of $500 (8%) and you can increase the Turnover to $7,000, the profit margin increases to $1,000 (14%). At a Turnover of $8,000 the profit margin increases to $1,500 (19%). The profit margin has more ..."
194.
"... (19%). The profit margin has more than doubled even though Turnover has only increased by one third. The limit on your growth is simply the capacity of the café. If you can outgrow the capacity, it is time to find a bigger, better café or, perhaps, to open a second one. - Rent - ..."
198.
"... or, perhaps, to open a second one. - Rent - Rent is a critical (fixed) cost and should represent 10-15% of Turnover. Rent is subject to GST so be careful to check whether the rent stated in the business summary includes or excludes GST. Rent will usually be based on a lease which runs ..."
"...Turnoverl usually be based on a lease which runs for a certain period of time. Depending on the café you may purchase an existing lease e.g. one that was initiated by someone else and which has some time to run. Usually leases have an inbuilt yearly percentage increase. This is ..."

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"...Turnoverl period is a set period, e.g. 1 week that gives you an opportunity to view the business on a daily basis and to confirm the Turnover as specified in the business summary. The trial period takes place after you have agreed a price to buy the business, but before ..."
"...Turnovering capacity will ultimately limit your capacity to make money so is a very important number. In this case the café has 40 seats – small, but not tiny. It is useful to look at the average customer spend (you can ask the owner for this) and multiply this by ..."
"...Turnoveropened café had a problem - they were packed! Why was this a problem? On weekends they were full at peak periods - so much so that they had to turn customers away. The reason? – they only had 20 seats. They were very popular but their Turnover ceiling was ..."
"...Turnoverl of this is $1,760. That represents 25% of Turnover (Turnover excluding GST). This is a good percentage according to our percentage guide. You can double check this total by looking at the percentage cost of goods, which comes in at about 24%. So it is likely that these figures ..."
"...Turnover to the 4%. The following table shows the effect that a % increase in rent can have on the % of Turnover. At the start of the lease the Turnover amount is towards the higher end of the scale (10-15%), but if we make the assumption that Turnover stays ..."
229.
"... back of cupboards and drystores. In this case $2,000 is a fairly typical amount for a small café such as this one. Financial Projections based on a weekly Turnover of $7,700 In this section the turnover will be stated. This will be the figure that the café will have to achieve in the trial ..."
230.
"... Projections based on a weekly turnover of $7,700 In this section the Turnover will be stated. This will be the figure that the café will have to achieve in the trial period if the sale is to progress. We’ll talk about the trial period later. Be thorough with your analysis when dealing with ..."

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7.
"... in trade throughout the year due to seasonality, e.g. winter may be busier than summer. GST on Sales or GST Instalment This is the standard 10% payable upon sales. This should equal 10% of Turnover. Capital Purchases This represents purchases of items of a capital nature not related to the ..."
9.
"... the cost of goods, e.g. equipment Non-capital Purchases This represents the cost of goods and should be approximately 30% of Turnover. This figure should not vary significantly throughout the year. Any large variances throughout the year should be questioned. GST on Purchases This is the amount ..."
10.
"... variances throughout the year should be questioned. GST on Purchases This is the amount that can be claimed back (deducted) from the GST payable. This amount should be approximately 2-3% of Turnover and includes GST on purchases such as rent. Total Salary Wages and other payments This is a ..."
11.
"... Total Salary Wages and other payments This is a useful figure as it shows the total wages paid per quarter. Again, this should tie up with the wages figures reported in the financials. Also the % figure for wages should be roughly consistent across each quarter, e.g. approx 25-35% of Turnover. ..."
"...Turnover Café has a Turnover of $300K per annum and “John’s Catering” has a Turnover of $200K per annum. On the company accounts for “John’s Holdings Ltd” it displays a Turnover of $500K per annum. So when you come along looking to buy “John’s Café”, you look at the figures ..."
"...Turnoveral occasions I have discovered businesses advertised for sale as “Five day a week businesses”, but after looking at review sites on the internet I have found that they have been trading several nights a week or one or two days on a weekend. Averaging the Turnover over 5 days ..."

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Chapter 8: Meeting The Owner
37.
"... Questions - Question What to look for What is the average Turnover per week? Compare the response to the business summary. Ask about variations of Turnover throughout the year (seasonality). Ask if this does or does not include any cash not declared. What are your food costs per ..."
"...Turnover20oz basket? This can be a useful way to verify Turnover. An average café will be able to get 80 cups of coffee out of a kilo of coffee beans. Multiply the amount of kilos by 80 cups per kilo then multiply this by the price of an average cup of ..."
69.
"... What effect does seasonality have on the business – summer versus winter This will help you to get a feel for when Turnover is at its highest. Compare this to when the café is being sold – are they selling it at the highest revenue period to make it easier to get through the trial period? ..."
175.
"... / closing times? Breakfast / Lunch / Dinner 7 days? Financial Questions Question What to look for What is the average Turnover per week? What are your food costs per week? What are your staff costs per week? What is the rent per ..."

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"...Turnoverntioned earlier the trial period occurs after you have agreed to buy the business and have paid a deposit. In this period you are not actively involved with running the business. You should be present for at least a full week, attending in the same hours as the owner ..."
5.
"... summary). When watching the business during the trial period, try to look out for the following: • Family or friends of the owners coming to the café that week to bolster the Turnover • The owner putting transactions through the till and paying for them using his own money It’s ..."

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Percentage Guide
Turnover
Gross Profit
Variable costs
Rent
Non-capital Purchases
The Trial
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