So what does it cost to run your business? The list on the right shows the various headings that my accountant uses on our annual accounts. Your profit and loss accounts are important not just as a view of where you have been, but also they provide an indication of where you are going.

Pat Walkington asked me ‘how do you come to the £3.00 per day cost of your racking?’

Totalling the cost of rent, staff, day to day expenses, bank charges, and all the other things you pay out for and then measuring the total amount of display racking you have will give you the figures you need to work out how much each metre of racking costs per year.

expenses ÷ total racking in metres

For us last year that’s £5 per metre of racking per day. That’s how much profit we need to clear each day for each metre of space just to break even.  To drill this down to shelf and product level it’s a matter of dividing by the number of shelves and then by the space a product takes up.

We have an EPoS system that provides a great many reports of sales and profitability of our range. Being able to use this information to check on the performance of particular products is very useful. For instance, we have a triple facing of KitKat costing 15p and delivering 65p profit per day and a single facing of 250g Cadbury’s Dairy Milk costing 9p and delivering 75p a day.

Being able to understand the cost of the space given to any product certainly focuses ones attention on the value of it. We have been able to provide ourselves with an effective tool for deciding the rules for delisting or multi-facing any part of our range.

Powerful.