Cash Margins

MARGINS

There are basically two methods of calculating profit margins - percentage and cash. Traditionally the licensed trade has used percentages.

This helps budgeting and stock control and is very relevant for the faster moving House and Entry Level wines.

But we should never forget that our ultimate aim is the continuing long-term cash profitability of the business.

Encouraging customers to ‘drink up the list’ helps them to enjoy themselves even more.

It improves the chances of obtaining repeat business which is vital.

BENEFITS OF CASH MARGIN

Say your house and entry level wines are priced to give you a 65% return and sell (including VAT) at between £11.95 and £13.95.

Your profit is between £5.50 and £7 a bottle.

Consider using a Cash Margin for the wines on the list that sell for more than £13.95

If you decide to make £8.50 on any of these wines, you will be offering your customers very upmarket wines many for less than £20. They will then be sorely tempted to try these wines and you will make more money.

Be it Chablis, Sauvignon Blanc, Champagne, Claret, Barolo, Rioja Reserva, an encouraged customer will be a happy customer.

HOW IT WORKS

A bottle of Domaine Simon Chablis costs £10.65.

You decide on a cash margin of £9.30. Apply VAT at 20% and have a Selling Price of £23.95 for a top quality Domaine bottled Chablis.

I.E. £23.95 less 20% VAT = £19.95 - £9.30 = £10.65

If your competitors are using percentages, their price will be about £12 more.

Who will sell more bottles?
Do think about it and do not hesitate to ask us if we can help in any way.