Simulating a Small Cafe: Product Sales or Traffic Flow

By Dean Zarras

As Black Friday is well underway, it seems appropriate to comment on commerce, and the various ways ClearFactr can be used to model it.

I was recently working with someone on a high-level budget for a small bakery/cafe. When it came time to start simulating the revenue side of things, we jumped right into projecting the sales of various product categories, and the growth thereof. Against a backdrop of some large fixed costs to get the business going, it quickly became apparent that a lot of croissants and danishes would need to be sold.

It later occurred to me that a different, or second (nothing says you need to have a single model), approach was possible: Perhaps modeling the number of customers, and their buying patterns, might be more instructive. If several attributes were devoted to projecting the number of customers per month (or whatever the time unit is), one could then make some rough assumptions about what percentage of them would purchase an item in the various product categories (baked goods, coffee, etc). Then based on some cost per unit numbers, you'd wind up with revenue per product, something like this:

Danish Revenue @ Jan 2014 = Number of Customers * Percent Buying Danishes * Price of Danish

Note that the above formula leaves you with three Attributes that can be changed via the Simulator. You can also begin to think about the Number of Customers being a function of some growth rate, the Percent Buying Danishes being affected by sales promotions, etc. And the Price of Danish is a perfect candidate for experimentation with the Sensitivity Analyzer.

The difference in approach is subtle but important: In a given retail store, it's probably critical to gauge how physically crowded the store is, or needs to be, just to be profitable. Knowing you should sell 1000 danishes a month is interesting, but if the cafe is small, the customer traffic required to produce those sales might not fit without a line always out the door. Of course, that might be exactly the desired effect: See also, Magnolia Bakery. You then start to think about the number of customers that are turned away not wanting to stand in a line in the rain, the Fire Marshall's occupancy rating for your store, questions of seating and table space -- all kinds of related things.

Making the number of customers prominent in your plan yields other important statistics, like Average Revenue Per Customer, and it serves as a key component for your analysis of Variable Expenses.

In this case, seeing the sales numbers and some simple graphs thereof served their purpose -- it stimulated the contemplation of all sorts of issues that were not obvious before we got started. Addressing those issues now instead of later will help ensure the cafe's ultimate success.

Spending too much time worrying about spreadsheets...
and not enough about your business?