Cost of Coffee
At first glance, the café business may appear to be highly profitable, but many people in this business often find it harder to break even than they expected.
Although the initial analysis showed considerable profit margins, that may be because only the cost of raw materials was considered.
Example Cost Breakdown for an Iced Latte Sold at 85 THB per Cup:
Cost of Raw Materials and Packaging: Total 28.25 THB
While the cost of raw materials for each shop might be similar, the hidden costs can vary depending on the business plan.
Plan From the Start
When starting a profit-oriented business, proper planning is key to ensuring smooth operations, setting a selling price that covers all costs, and achieving the target payback period.
Apart from the cost of raw materials and packaging, there are other hidden costs that occur from the outset of the business, which must be considered:
- Renting a Store/Buying Land
- Investment in Design and Construction
- Usable Lifespan and Depreciation
- Employee Wages
Technique: Calculating Hidden Costs by Averaging Over Target Sales During Service Hours
Example Scenario:
- Investment Amount: 1,300,000 THB
- Rent: 20,000 THB per month
- Payback Period: 5 years
- Daily Sales Target: 100 cups
- Staff: 3 people
- Store Open: 10 hours/day
Open for Sale: 10 hours (600 minutes) Sales Quantity: 100 cups Hidden costs averaged by duration per cup: 600 ÷ 100 = 6 minutes/cup
COGS (Cost of Goods Sold – Raw Materials and Packaging): 29.49 THB
COL (Cost of Labor): 19.07 THB
Cost of Energy Consumption: 5.72 THB
COR (Cost of Rent): 6.57 THB
Depreciation: 7.12 THB
Total Cost: 67.67 THB
Selling Price per Cup: 85 THB Profit per Cup: 17.02 THB
- Rent and depreciation should be calculated based on actual working hours. Averaging costs over the entire day (including closed hours) may lead to underestimating the real cost.
- An air conditioner with a capacity of 24,000 BTU consumes approximately 2,400 watts per hour.
- If the number of cups sold increases, hidden costs will decrease when averaged over the number of sales, resulting in higher profit. Conversely, if sales do not meet the target, the average cost per item (excluding COGS) will increase.
When meeting the sales target consistently for 5 years, depreciation will turn into profit.
Profit Analysis
- Sales Channel Name
- Divided by Number of Serving
- Selling Price
- Selling Price Including Tax and Service Charges (if applicable)
- Cost of Sales: by Type
- Deductions and Service Charges
- Cost Ratio: Profit Summary of the Recipe
Example of Cost Analysis with Different Scenarios
- Takeaway Cup: COGS Only
- Takeaway Cup: Including COGS and Hidden Costs
- Dine-In: Including VAT
- Takeaway Cup: Including VAT
- Delivery at the Same Price as In-Store: Loss
- Delivery with Adjusted Selling Price
There are more flexible ways to calculate costs, including considering multiple menu items to find a detailed daily sales target, even with varying costs.
