90% of the 10% rule?

[Victoria]

So I am looking at opening a nightclub. I have so many questions...I know about the 10% rule which says your rent should be 10% of your gross income but what about the other 90%. How is that broken down on a monthly basis?

[The Event Guy]

Very simple. What are your other expenses? i.e. electric, gas, food costs, liquor, etc. etc. It will vary depending on your supply and demand... after a few months you'll get a grip on what you need each week and so you can order no excessively.

[Victoria]

Thanks for your help! My club is a new build and there is no data to base the utliities on yet. So how do I figure this out for my business plan? How do I figure all of these costs for my business plan when there is no previous data? :

[Victoria]

Hi,

Let me try this again! I'm wondering if there is such a thing as a simple rule of thumb as to how the books work in a nightclub?

Such as: based on gross sales per month: if rent is 10%, product is 10%, utilities are 10%, profit @10%, entertainment @ 10%, payroll @ 10%......

I am looking for a general rule of thumb here. Any help would be much appreciated.

[The Event Guy]

http://www.nightclub-business.com/newplans.shtml

It was offered up by one of the moderators as a tool. Use the sample plan.

[Flynnt Maverick]

Hello,
Newbie here with not alot to offer but an investigating mind. But I saw another post referencing this one and this "10%" rule.
Anyways the link above didn't help me at all but I do know of one site providing industry benchmarks: http://www.bizstats.com/ Basically you enter your (projected) income and it displays an estimate of costs according to these "industry benchmarks"
The reason for adding to the post is twofold;
1. To help in answering the quistion above
2. To verify these percentages with people actually in the business. Do these percentages sound correct?

Average profitability & expense percentages for U.S. small businesses*
Retailing - Restaurants & Drinking Places %
Benchmarks
Total Revenue (Sales) 100.00
Total Expenses as % of Revenue 89.2
Net Income to Owner as % of Revenue 10.8
--------------------------------------------------------
Detail of Expenses (as % of Revenue)
Cost of Goods Sold 42.5
Salaries & Wages 15.4
Advertising 1.6
Auto & Truck Expenses 1.2
Depreciation 2.3
Employee Benefits 0.1
Home Office Business Expenses 0.1
Insurance 1.3
Interest Expense 1.2
Legal & Professional Services 0.6
Meals & Entertainment 0.1
Office Expense 0.3
Retirement Plans 0
Rent - Equipment 0.8
Rent - Office & Business Property 5.6
Repairs 1.2
Supplies 1.6
Taxes - Business & Payroll 3.7
Travel 0.2
Utilities 4.1
Other Expenses 5.3
------------------------------------------
Total Expenses as % of Revenue 89.2

I have to wonder how accurate this is because 42% for costs of goods is 10-20% higher than what I have been taught is optimal, and the rent is not at 10% as stated earlier in the thread.
Soooo.....Do these percentages sound correct?

[BarSim]

There's so many variables that could play into the figures they provided. I would say one biggie, that's affecting the cost of goods percentage you see, is that the restaurant/bar industry is still pretty cash driven. Most indepently owned establishments don't report 100% of their cash sales, which would drive that number higher. Also, food costs are generally higher overall than liquor/beverage costs, making the average higher still.

As for the rent, when they took their survey, or compiled the information to come up with these stats, there were probably a handful of respondents that own their property outright, effectively making their rent zero. Add in enough of these folks and the average will go down sharply.

Just my 2 cents.

Cheers!

Josh @ BarSim
http://www.barsim.com