The Real Revenue Formula for Hospitality Businesses

Learn the Real Revenue Formula for restaurants, cafés, and hospitality businesses.

When you ask most hospitality business owners what their “revenue” is, they’ll usually quote their total sales figure. But in the Profit First system, revenue isn’t just about what comes through the till. To run a profitable hospitality business, you need to understand Real Revenue - the money that’s actually available to run your venue.

In this blog, we’ll break down the Real Revenue Formula for hospitality businesses and explain why it’s the key to taking control of your profit.

Traditional revenue figures can be misleading. Your accountant may give you monthly or quarterly management accounts showing total turnover. But here’s the problem:

• That figure includes money that was never truly yours.

• VAT, supplier costs, and pass-through expenses distort the numbers.

• Looking only at top-line sales creates a false sense of profitability.

  
  

This is why many busy restaurants, pubs, and cafés still struggle to pay wages or tax bills, even when sales are high.

So, what is Real Revenue? Put simply as a formula:

Real Revenue = Total Sales – VAT – Direct Supplier Costs

It’s the money left after removing the amounts that don’t belong to you. Real Revenue represents the actual cash you can allocate to staff pay, owner’s pay, operating expenses and profit. By working with Real Revenue instead of turnover, you set targets based on what you really have available, not on inflated figures. Let’s say your restaurant has:

• £100,000 monthly sales (including VAT)

• Minus £16,667 VAT (20%)

• Minus £30,000 supplier costs (food & drink at 30% of sales)

  
  

That leaves £53,333 in Real Revenue.

This is the number you should use when applying Profit First percentages — not the full £100k.

Once you’ve calculated Real Revenue, you can allocate it across your Profit First 5 Accounts:

• Profit (reward for the owner and future growth)

• Owner’s Pay (a fair wage for your work)

• Staff Pay (wages, pensions, PAYE)

• Operating Expenses (rent, utilities, marketing, overheads)

• Tax/VAT (already set aside separately)

  
  

For hospitality businesses, sales alone don’t equal success. The Real Revenue Formula shows you the money that truly matters - the cash you can use to run and grow your business. By working this way, you gain real-time financial clarity and can make proactive adjustments before it’s too late.

At Profit First Hospitality, we help independent restaurants, cafés, and bars apply this system to increase margins, control costs, and put profit first.

Want to calculate your Real Revenue and see how much profit your business could be making? Get in touch and we’ll show you how to take back control of your cash flow.