Budgeting for stock loss in a pub business plan: the line nobody writes in

Every pub business plan has a line for rent, wages and electric. Almost none has a line for stock that gets bought and never gets sold. Then the first stocktake lands, the GP% comes in three points under the plan, and the plan gets blamed for being optimistic when really it was just incomplete.

If you're writing a plan now, for a bank, a brewery application or just for yourself before you take a pub on, this is the line nobody tells you to write and how to build it properly.

First, the uncomfortable bit: there is no official number

There is no published UK benchmark for total pub stock loss. Nobody audits the whole trade and prints "pubs lose X% of stock". Anyone who hands you a tidy industry average is usually quoting an American bar blog, and US liquor figures don't survive the trip across the Atlantic, different measures, different till culture, different drinks mix. Our acceptable variance guide goes through what numbers do exist and what they're worth.

What does exist is meter data on the pieces. Vianet's flow meters across 11,000 UK pubs found 61% of pubs missing their target pouring yield, 2% of drinks poured never reaching the till, and 27% of beer served through lines overdue a clean. The loss is not a horror story that happens to badly run pubs. It's routine physics and routine friction, and that's exactly why it belongs in a budget.

Build the line from parts

A plucked percentage is indefensible in a bank meeting. A line built from sourced parts is the opposite. These are the parts for a wet-led pub, each with its source:

The stock-loss line, built from parts. Costs are at cost price, not retail.

Part	Planning figure	Where it comes from
Beer line cleaning	Around 20 pints a week thrown with the weekly clean	Trade estimate via the Morning Advertiser; arithmetic in our line cleaning guide
Cask yield	A 72-pint firkin sells through in the mid-60s in practice, roughly 10% gone	Trade container sizes; our draught wastage guide
Drinks that never reach the till	2% of drinks poured	Vianet Insight Report, 11,000 pubs
Comps and freebies	Whatever your written policy allows, priced at cost	Your policy; the asymmetry is in the comps guide
Kitchen, if you do food	WRAP's old but only figure: over 20% of food purchased by weight is wasted	WRAP, 2012, flagged as dated; food runs as its own budget

A worked example you can copy the method from

All my arithmetic, shown so you can swap your own numbers in. Say the plan is a wet-led pub doing £5,000 a week ex VAT on drink at a target 65% GP, so £1,750 a week of stock bought at cost.

• Line cleaning: 20 pints at about £1.56 cost each is £31 a week. The cost figure is 35% of the ex-VAT price of the £5.34 average pint.
• Cask: two firkins a week with 7 or 8 pints a firkin unsold is roughly 15 pints, £23 a week.
• Till gap: 2% of £5,000 is £100 a week at retail, call it £35 a week at cost.

That's about £90 a week at cost, £4,600 a year, before comps and before anything you'd call an incident, and it is sitting at roughly 5% of the stock budget. Your parts will come out differently, smaller cask range, bigger spirits trade, whatever. The method is the point: show the parts, not a plucked percentage.

What it does to the GP% in your plan

This is the practical consequence. If your plan promises the benchmark GP% for your category, you've planned the price list, not the pub. The GP% you achieve sits under the GP% you price for, always, because the parts above eat the difference. Our GP report guide shows the same pint producing a 64.9% list GP and 63.4% achieved at a realistic yield. Write the achieved number into the plan and let the list number be the stretch, not the other way round.

Two more lines while you have the spreadsheet open. Your opening stock is working capital, not scenery: the ingoing valuation ranges in the taking-over guide are real money that leaves your account in week one. And insure stock at its peak, not its average, Christmas stockholding is not July stockholding; the insurance guide covers it.

Why this line earns its place

Wetherspoon's results, published this morning, show the country's biggest operator keeping 5.37p of every £1 at operating level, with 39.8% of sales going in tax. Rent, rates, duty and VAT arrive whatever you do. The stock-loss line is one of the very few lines in the whole plan that you control from behind the bar, which is exactly why it deserves a number, a method and a weekly check instead of silence.

And when the bank or the BDM asks what your shrinkage assumption is, the winning answer isn't a percentage. It's "built from these parts, and measured weekly from week one", with the counting cadence to back it up.

Common questions

What percentage should I just put in?

If a template field forces one number out of you, build the parts above for your pub and divide by your stock budget, in the worked example it lands near 5% of wet stock at cost. But carry the parts with you. The number without the parts is exactly as defensible as no number.

Is stock loss the same as wastage?

Wastage is one part of it. Stock loss in the planning sense is everything between stock bought and stock sold at full price: cleaning losses, yield, spillage, the till gap, counting error. The three-fingerprints guide shows how to tell the causes apart once you're trading.

Do banks actually ask about this?

Rarely, and that's the trap. A plan can sail through approval with no stock-loss line and then spend year one mystified by its own GP%. The line is for you, it sets the baseline your weekly counts get judged against from the first week.

How do I check the number once I'm trading?

Count weekly, compare counted usage against till sales, and watch the variance against your planned line. If the real number runs past the planned one, the unexplained loss guide is the fortnight plan for chasing it down.