On a warm August evening, there are few places more appealing than a pub garden in the Sussex countryside or the bustling terrace of a town-centre restaurant. 

As an owner, seeing your establishment filled with happy, laughing customers is the ultimate reward for your hard work and passion. You are not just serving food and drink; you are creating experiences and memories.

But passion, unfortunately, does not pay the bills. The hospitality industry operates on notoriously thin margins. A busy service does not always translate to a healthy bank balance. 

The difference between a beloved local that thrives for decades and one that closes its doors after a few years often comes down to a firm understanding of the numbers behind the bar and in the kitchen.

To truly succeed, you need to go beyond just counting the takings at the end of the night. You need to track Key Performance Indicators (KPIs).

These are the critical financial metrics that act as the vital signs of your business. They tell you where you are making money, where you are losing it, and where your opportunities lie.

This guide will break down the most important financial metrics for pub and restaurant owners. We will explain what they are, how to calculate them, and how you can use them to make informed decisions that drive real, sustainable profit. 

Whether you are running a bustling pub in Crawley, a destination restaurant in Horsham's Carfax, or a cosy country inn near Haywards Heath, mastering these numbers is the key to your long-term success.

Cost of Goods Sold (CoGS) and Gross Profit

These two metrics are the absolute bedrock of your financial management. They measure the direct relationship between what you sell and what it costs you to buy the ingredients for those sales.

KPI 1: Cost of Goods Sold (CoGS)

• What it is: CoGS represents the total direct cost of all the food and beverage items you sold over a specific period. For a pub, it is the cost of every keg of beer, bottle of wine, and measure of spirits you have sold. It does not include labour or other overheads.
• How to Calculate It: To calculate CoGS accurately, you need to take stock. The formula is: CoGS = Beginning Inventory + Purchases – Ending Inventory For example, you start the month with £10,000 of food and drink stock (Beginning Inventory). You buy another £15,000 during the month (Purchases). At the end of the month, you count your remaining stock and find you have £9,000 left (Ending Inventory). Your CoGS for the month would be: £10,000 + £15,000 – £9,000 = £16,000.
• Why it Matters: CoGS is your largest variable expense. Tracking it vigilantly helps you identify problems like portion sizes being too large, kitchen wastage, staff theft, or supplier price hikes that you have not accounted for.

KPI 2: Gross Profit & Gross Profit Margin

• What it is: Gross Profit is the money left over from your revenue after you have paid for the direct cost of goods. The Gross Profit Margin expresses this as a percentage, which is crucial for benchmarking.
• How to Calculate It: Gross Profit = Total Revenue – CoGS Gross Profit Margin = (Gross Profit / Total Revenue) x 100 Using the example above, if your revenue for the month was £50,000, your Gross Profit would be £50,000 – £16,000 = £34,000. Your Gross Profit Margin would be (£34,000 / £50,000) x 100 = 68%.
• Why it Matters & Benchmarks: This is your top-level indicator of profitability. It tells you how effective your pricing strategy and cost controls are. You should track this separately for food and beverages, as their margins are very different.
  
  • Food Gross Profit Margin: Typically, this should be between 65% and 75%.
  • Beverage Gross Profit Margin: This is usually higher, often between 75% and 85%. If your margins are below these benchmarks, it is a red flag. You may need to review your menu pricing, renegotiate with suppliers, or investigate wastage. Managing relationships with local West Sussex farms or breweries can be great for your brand, but you must ensure their prices still allow you to protect these vital margins.

Labour Costs

Your team is your most valuable asset, creating the atmosphere and service that brings customers back. They are also your second-largest expense. Managing labour effectively is a constant balancing act.

KPI 3: Total Labour Cost

• What it is: A common mistake is to only look at the gross wages on a payslip. Your Total Labour Cost is much more. It includes every penny you spend on your staff: gross wages, employer’s National Insurance contributions, employer’s pension contributions, holiday pay, sick pay, and even the cost of training.
• How to Calculate It: Simply sum up all the costs listed above for a specific period.

KPI 4: Labour Cost Percentage

• What it is: This metric shows your total labour cost as a percentage of your total sales. It is the key measure of your staffing efficiency.
• How to Calculate It: Labour Cost Percentage = (Total Labour Cost / Total Revenue) x 100
• Why it Matters & Benchmarks: This KPI tells you if you are overstaffed or understaffed relative to your sales volume. A general industry benchmark is between 25% and 35% of revenue. This can fluctuate significantly; you will need more staff to handle the crowds during the Goodwood Festival week than on a quiet Tuesday in November. Tracking it allows you to plan your rotas more intelligently, ensuring you have enough staff to provide excellent service during peak times without wasting money during quiet periods. Recruiting skilled staff in the competitive Horsham market means offering good pay, but that needs to be balanced with disciplined rota management to keep this percentage in check.

Prime Cost and Break-Even Point

Once you have a handle on your goods and labour, you can calculate two of the most powerful metrics in hospitality management.

KPI 5: Prime Cost

• What it is: Prime Cost is the combination of your two biggest, most controllable expenses: Cost of Goods Sold and Total Labour Cost.
• How to Calculate It: Prime Cost = CoGS + Total Labour Cost
• Why it Matters & Benchmarks: This is the single most important number for a pub or restaurant owner to control. It represents the bulk of your operational spending. The industry gold standard is to keep your Prime Cost at 60% of your revenue or less. If your Prime Cost is creeping up towards 65% or higher, your business is in danger of being unprofitable, no matter how busy you are. It leaves very little room to cover your rent, rates, utilities, and other fixed costs.

KPI 6: Break-Even Point

• What it is: This is the exact amount of sales you need to make to cover all your costs, both fixed and variable. It is the point where you are not making a profit, but you are not making a loss either.
• How to Calculate It: A simple way to understand it is to calculate how much you need to make per day or week. First, add up all your fixed costs for a period (rent, rates, insurance, salaries for non-hourly staff, utilities). Then, using your Gross Profit Margin, you can work out the sales required. The formula is: Break-Even Point (£) = Total Fixed Costs / Gross Profit Margin % For example, if your fixed costs are £10,000 a month and your overall Gross Profit Margin is 70% (or 0.7), your break-even point is £10,000 / 0.7 = £14,286. You need to make £14,286 in sales that month just to cover your bills.
• Why it Matters: Knowing your break-even point transforms your thinking. Every single pound you take in sales above this point contributes directly to your profit. It gives you a clear, tangible sales target for every week and every month. This knowledge is especially critical when facing high business rates in a prime Crawley town centre location.

The Customer Metrics: Driving Revenue

Controlling costs is only half the battle. You also need to maximise the revenue you generate from every customer who walks through your door.

KPI 7: Average Spend Per Head (or Per Cover)

• What it is: This is simply the average amount of money spent by each customer.
• How to Calculate It: Average Spend Per Head = Total Revenue / Number of Customers
• Why it Matters: This is a direct measure of your team's sales performance and your menu's effectiveness. The easiest way to increase revenue is not always to find more customers, but to encourage existing customers to spend a little more. A small increase of just £1 or £2 per head can have a massive impact on your bottom line over a year. It can be improved through smart menu design and training your team to confidently upsell drinks, side dishes, and desserts.

KPI 8: Table Turnover Rate (or Seat Turnover)

• What it is: This measures how many times a table is occupied by a new party during a service period (e.g., a lunch or dinner service).
• How to Calculate It: Table Turnover Rate = Number of Parties Served / Number of Tables
• Why it Matters: This is a measure of efficiency. It tells you how well you are using your most valuable physical asset: your space. A low turnover rate during a busy period might indicate slow service in the kitchen or front of house, or that customers are lingering for too long after finishing their meals. For a restaurant near Haywards Heath looking to attract walkers from the South Downs for lunch, a quick and efficient service with a high table turnover is essential to maximising revenue.

Your Partner in Profitability

Running a successful pub or restaurant is a constant balancing act. While your focus should rightly be on creating a wonderful atmosphere and serving fantastic food and drink, you must keep a firm grip on the key financial metrics that determine your profitability. 

CoGS, Labour Cost, Prime Cost, and your Break-Even Point are not just numbers for your accountant; they are the vital signs of your business's health.

We know that tracking all this can feel overwhelming when you are also managing staff, dealing with suppliers, and ensuring every customer leaves happy. This is where a specialist accountant who understands the unique pressures of the hospitality industry can make a huge difference.

At Curve Accountancy, we have a passion for helping West Sussex’s hospitality businesses thrive. We go beyond year-end accounts to provide real-time insights, helping you track these critical KPIs, control costs, and turn your hard work into real profit.