I don’t know if it’s really true but the millennials will tell you that bars and restaurants are obliged to provide free tap water by law. Who knows the truth? But it gives a great example of a lesson in pricing.
The headline is that nothing is really free and extreme circumstances can make that tap water very expensive [for the business owner].
So let’s look at the real cost of the glass of water.
A Lesson In Pricing – The Cost of Free Water
The water itself, though low in cost isn’t free. As a business, your water use is metered and so there is an actual cost for the water itself.
Sewerage costs are charged based on the water through the meter so a business is also charged for their water on the way out.
The glass the water is served in has a cost too, it has to be provided and will wear out so there is a cost each time it is used.
The customer expects the glass to be clean so there is more water [and sewerage] to wash it plus the detergent, salt, rinse agent and electricity consumed by the glass wash machine. Then there is the cost of buying and maintaining the glass wash machine.
Next are the wages for the staff member to prepare and serve the water, collect the glass after use and then stack and empty the glass wash machine. No cost for ringing it in the till though.
The thirsty millennial needs somewhere to enjoy their beverage in comfort so we need to include the cost of the chair, and table plus the other furniture that make serving the public possible, like the bar itself, and the sink and taps. All of these things wear out a little bit each time they are used and add up to the cost.
The premises need to be presentable and will include lights, decorative features, and carpets etc.
The place also needs to be clean and so there is a cost for staff to clean plus their cleaning materials, and the cost of any repairs to the fabric of the building, decorating and maintenance.
Then there are the actual premises, rent and rates for a bar are normally in excess of £100,000 per year, on average bars have to sell 800 pints a week just to cover the rent and rates.
Insurance is another big cost to cover against the drinker or the staff that serve them hurting themselves.
The place needs to be heated [or cooled if we’re lucky] and illuminated and so gas and electricity are consumed by the ‘customer’
The list does go on but would get boring but there are already 26 constituent costs outlined above that go into the real cost of a glass of water.
And if the business only ever provided free tap water and never sold anything to paying customers the cost of the water would be huge as all of the business costs would be shared among all the glasses of water.
A Lesson In Pricing Summary
So the message here is, when setting your prices make sure that you cover all the costs that you will incur or you could be heading for a very expensive lesson.
For more help or advice please contact our team for free business consultation.
