Hospitality Budget Guide: Part 2 - Start With Revenue

In Part 1 of the Hospitality Budget Guide, we looked at why budgeting matters.

Your P&L tells you what happened. A budget shows what your options are.

But before you can test those options, you need to start with the right first number.

That number is revenue.

Revenue Comes First

A hospitality budget should not start with wages.

It should not start with food costs.

It should not start with rent, insurance or subscriptions.

Those numbers matter, but they come after revenue.

Revenue comes first because it sets the scale for the rest of the budget.

If sales increase, your food cost dollars usually increase. Beverage cost dollars usually increase. Wages may need to increase. Merchant fees, delivery platform costs and other variable costs may move too.

If sales drop, the opposite may happen, but not always at the same pace.

That is why revenue needs to be the first number. It helps you see what should move with trade, what may not move enough, and what stays fixed regardless of sales.

Use the Last 12 Months as Your Starting Point

If you are building a budget at the start of a new financial year, the last 12 months of revenue is usually the best place to start.

It gives you a real trading pattern.

You can see which months were strong, which months were soft, where seasonality appeared, and how the venue actually performed across the year.

From there, you can decide what assumption to apply.

You might keep revenue the same as last year.
You might apply a small uplift.
You might apply a reduction if trade has softened.
You might adjust certain months if you know a busy period, renovation, local event or seasonal change will affect trade.

The value is not just in the total annual number. It is in the monthly shape.

A venue that takes $1.2 million a year does not take $100,000 neatly every month. Some months carry more weight than others.

December may be strong. January may depend on your location. Winter may be softer. School holidays, public holidays, local events, tourism periods and function trade can all change the shape of the year.

A useful budget keeps that pattern visible.

That is why last year’s revenue should be used as a starting point, not copied blindly.

The budget should still reflect what you know now.

Look Back Further, But Keep the Base Current

The last 12 months should usually be your base because it shows the most recent version of the venue.

But it can help to look back further.

If you have two or three years of revenue history, use it as a sense-check. It can help you spot seasonal patterns, unusual months, event-driven trade and changes in customer behaviour.

This is especially useful for venues with strong holiday trade, tourism periods, accommodation, functions, local events or seasonal peaks.

The key is not to average everything together and hope for the best.

Older history should help you ask better questions.

Was last December normal?
Was Easter stronger than usual?
Did a renovation affect winter trade?
Did a local event lift one month?
Has the venue changed since then?

Use older revenue history to understand the pattern.

Use the most recent 12 months to build the base.

Do Not Apply One Blanket Uplift Without Thinking

One of the easiest ways to build a budget is to take last year’s revenue and add a percentage.

For example, you might say:

“We did $1.2 million last year. Let’s budget for a 5 per cent increase.”

That may be fine as a first pass, but it is not always enough.

A blanket uplift assumes the whole venue will move evenly. In hospitality, that is rarely how trade works.

Food might be flat.
Beverage might soften.
Functions might grow.
Accommodation might depend on seasonality.
Gaming may follow its own pattern.
Retail liquor may move differently again.

The better question is not just, “Will revenue go up?”

The better question is:

Where will the revenue come from?

If the extra revenue is expected to come from functions, the staffing, gross profit and timing will look different. If it is expected to come from food, the cost of goods impact will be different. If it is expected to come from beverage, the margin may be stronger.

If it comes from discounting, specials or lower-margin items, the top-line number may grow without improving the bottom line enough.

This is why revenue needs more thought than one annual percentage.

Break Revenue Into Categories

Total revenue is useful, but it does not tell the full story.

A hospitality venue needs to understand where the revenue comes from.

Depending on the venue, that might include:

• Food

• Beverage

• Gaming

• Accommodation

• Functions

• Events

• Retail liquor

• Delivery or platform sales

• Other income

Each category behaves differently.

They have different margins, different staffing needs, different cost structures and different risks.

An extra $20,000 in food sales is not the same as an extra $20,000 in beverage sales, gaming revenue, accommodation or functions.

The top-line number might look the same. The result underneath can be very different.

That matters because the next stage of the budget is built from these revenue categories.

Food revenue will drive food COGS.
Beverage revenue will drive beverage COGS.
Total revenue will help guide wage benchmarks.
Functions may change rostering, purchasing and cash timing.
Accommodation may bring different operating costs.

If the revenue is not split properly, the cost lines become harder to budget properly.

That is why revenue categories matter.

Adjust for What You Know Is Changing

A budget is not just last year copied into a new column.

It should include what you already know.

Before locking in the revenue budget, think about the changes that may affect trade.

That might include new trading hours, menu changes, price increases, renovations, new competition, local events, school holidays, tourism changes, confirmed function bookings, marketing plans or changes in customer behaviour.

Some of these may increase revenue.

Some may reduce it.

Some may only affect certain months.

For example, if you are renovating in August, it may not make sense to copy last August’s revenue exactly. If you already have major functions booked in November, that month may need an uplift. If a local event is not returning this year, last year’s strong result may need to be reduced.

This is where the budget becomes practical.

It takes the historical numbers and adjusts them for the reality of the year ahead.

Write Down the Assumptions

The assumptions are just as important as the numbers.

If you budget a 5 per cent revenue increase, write down why.

If you reduce winter trade by 10 per cent, write down why.

If functions are expected to grow, write down what that is based on.

This does not need to be complicated. It just needs to be clear.

For example:

• Revenue based on last 12 months actuals

• July to September reduced by 5 per cent due to softer winter trade

• November increased due to confirmed function bookings

• Beverage revenue lifted by 3 per cent to reflect price changes

• Food revenue kept flat due to current trading pattern

• Gaming revenue budgeted in line with last year’s monthly pattern

These notes make the budget more useful later.

When actual results come in, you can compare them against the assumption.

If revenue misses budget, was the assumption wrong? Did covers drop? Did average spend fall? Did a planned event underperform? Did the sales mix change?

That is how a budget becomes a management tool, not just a spreadsheet.

Why This Matters

Revenue is the first number in the budget for a reason.

It sets the base for everything that follows.

COGS, wages, GP, labour percentage, break-even and cash flow all depend on the revenue assumptions you choose.

That is why a useful hospitality budget does not start with guessing.

It starts with actual revenue history, the monthly trading pattern, the right revenue categories and clear assumptions about what is likely to change.

Part 1 explained why budgeting matters.

Part 2 starts the build with revenue.

Part 3 will look at the next step: setting COGS and wage benchmarks so the major cost lines move properly with the revenue budget.

If you want help cleaning up your financial data, reviewing your revenue categories or building a budget that reflects how your venue actually trades, Admyn’s hospitality bookkeeping‍ ‍and accounting services can help make sure you have the right numbers to work from.

Book a free consultation with Admyn.