Thursday, April 10th, 2014
Ever since I wrote on How To Price a Cocktail Menu like a million years ago, I’ve gotten requests from bartenders, bar managers, and bar owners for some guidance on how to perform inventory and calculate pour cost. Which is, like, super surprising to me since there are few tasks more reviled in our business than the dreaded monthly inventory. Regardless, I figured it was high time I shared.
I never would have admitted it at the time, but I feel pretty lucky for the rude awakening I had back in 2001. I’d just come off of working in the clubs, and was immediately thrown into managing a little cocktail program at a new restaurant. It was awesome until about two weeks in, when my bosses informed me that I would be taking inventory every two weeks, and that there would be a sit-down meeting once a month to discuss my numbers. My what, now? I didn’t know the first thing about numbers, other than getting girls’ phone numbers. But I did it, respectfully yet begrudgingly, because it was my job.
Usually performed late at night after the end of a busy service, or early in the morning before service begins, inventory is a necessary chore that allows us to understand how a bar is performing financially, once we calculate pour cost. That pour cost number paints a very real picture of the bar’s financial health and reveals things like theft, poorly-priced menu items, and pouring accuracy. Without it, you have absolutely no idea what is going on in your bar.
But first you’ve got to know a few things:
- How much you spent during some time period
- How much you sold during that time period
- How much booze you started with at the beginning of the period
- How much booze you’ve got on hand at the end of the period
Items 1 and 2 you should either know already, or be able to find easily. If not, stop reading now; there’s no point in doing this if you have no idea how much you bought or sold. Items 3 and 4, I will help you find.
First you’re going to need to put together a list of every single bottle you carry at your bar. I’ve given you a head start by providing you with a simple spreadsheet I created just for this purpose. We’ll pretend this is from an imaginary bar with the world’s worst liquor selection ever.
Get every bottle you carry entered into that spreadsheet, along with each bottle’s price. Note that the size of the bottle isn’t needed here, just the name and the price. Do it now.
Okay. Now we’ve got to get a beginning inventory so that we have a place to start from. Inventory numbers are worthless without a beginning and ending inventory so you’re going to have to go through this shit twice, once at the beginning of the period, and once at the end. The bigger your back bar is, the more you’re going to hate it. Trust me on this one.
The simplest method that doesn’t involve weighing bottles or whatnot is to visually take note of how much liquid is in each bottle. Now, sure. This isn’t the most accurate system in the world, but it’s the quick-and-dirty method that’s used by bars all over the world that aren’t huge corporate establishments. If you want to weigh your bottles and do it that way, be my guest. You’re going to have absolute accuracy, and that’s pretty rad. The rest of you, come this way.
Take a look at your bottle and break it down into tenths in your mind. Decide where the liquid line falls and make an educated guess about the contents. Here’s a picture to illustrate what I’m talking about:
Make your decision and enter that number into your spreadsheet. Repeat until you’ve recorded every single bottle in your bar.
So, over the course of the next, say, month, you’re hopefully going to sell a bunch of booze, and probably buy a few bottles as well. Keep a record of every penny you buy and sell from the moment you finish that initial inventory until the moment you begin your ending inventory. Oh, and don’t buy or sell anything while you’re actually doing that inventory. This should go without saying but doing so will screw up your numbers. Which means you’ll have to do this while the bar is closed. Sorry, sucker! You’re the one who wanted to own or manage a bar in the first place, so don’t blame me.
Do inventory again at the end of the period, and enter those numbers into the spreadsheet I gave you. Now you’re coming to the table armed with all four numbers you need: beginning inventory, ending inventory, total alcohol sold, and total alcohol purchased.
Okay. Now that you’ve got all the numbers you need, it’s time to calculate your pour cost (I’m such a nice guy I’ve even included this in the spreadsheet I’m letting you download, but I’m going to show you how it’s done anyway)
Pour cost is calculated thusly: it’s how much booze you had when you started, plus how much you spent, minus how much you have on hand, divided by how much you sold. Multiply that number by 100 and throw a percent symbol at the end of it, and you’ve got your pour cost. Now keep in mind that this post only tells you how to get that number. What number you’re supposed to be at, what you’re supposed to do with that number, and so on, is the topic of a much lengthier article.
At any rate, I hope this spreadsheet is of some help to at least a few of you out there. If there’s enough interest in this boring topic perhaps we can get a conversation going in the comments section about what to do once you’ve actually figured out what that number is. You know, in the interest of service to our fellow bar managers everywhere. Thanks for reading, as always.