In a past video post, I’ve talked about the big AH-HA moments, discoveries + breakthroughs that Food biz owners have when they look at their Food Costs as a % of revenue, rather than as a simple dollar amount. 

It’s a small change in HOW you look at your business that can have a BIG impact. 

If that has you wondering...

• Why is my Food Cost PERCENTAGE so important? 

• What Food Cost % should I be aiming for? 

• HOW do I lower my food costs? 

You’re not alone!
Here are the answers to these very common questions.

1. Why is Your Food Cost percentage So important? 

Your Food Cost percentage tells you how much of every revenue dollar gets spent on making and selling your product.  

It should be steady month to month and NOT change based on how much or how little you produce and sell.  

It is a KEY factor in building a financially sustainable and profitable food business. 

2. What Food Cost % Should You Be Aiming for? 

As always, there is no one-size-fits-all answer.  

Finding the Food Cost % that will help you price your products right and create long-term financial sustainability + profitability takes an hour or so to iron out and requires looking at your whole business. I’ll touch on that more on that in a future blog post, BUT here are the basics:

Your Food Cost % + Labor Cost % + Operating Cost % MUST consistently total less than 100% to have a profitable business.  

If it totals 100% or more, even if it only happens some of the time…  You need to set and achieve new, lower cost targets to bring that total down.

What do You need to lower your Food Cost % to, to be profitable or improve profitability?  Start there! 

3. How Do You Lower Your Food Costs? 

The first step is to identify the cause(s) of your high food costs:

• Do you have products that are priced too low?

• Ingredient costs that are too high?

• Is there over-purchasing / inefficient ordering happening in your biz?

Once you’ve identified this, you can get to work fixing it and start seeing financial shifts. 

Remember, your sales are never the cause of high food costs, it’s your job to get and keep your food costs under control.

Not sure what your food cost percentage is? Need some helping understanding the numbers of our business?

Download the free Profitability Roadmap!

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About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program as well as the host of The Good Food CFO Podcast. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.

You don’t need to recipe cost to build a profitable food business,
but you should…

I know recipe costing takes time... 
that your food costs may be “fine”... 
and that you can be profitable without taking this step. 

Like I said… You don’t NEED to Recipe Cost.  
BUT YOU SHOULD.

The reason is simple: You can ONLY achieve maximum profitability if ALL of your products are priced right.

that means that your products are not just priced for product profitability, but for business profitability. 

Need a reminder on how to price your products for business profitability?

Step 1: Calculate the true ingredient costs to produce your products 
Step 2: Know Your target Food Cost %
Step 3: Bring these two values together to find your perfect price! 

(Step 4: throw away any info you have that tells you to include labor, rent, or ANYTHING else. It doesn’t have to be so complicated!)

True pricing Story...

Early on in my career as a Buyer, we were hitting our target of 30% food costs consistently, and were profitable most months. So my boss didn’t think recipe costing was necessary…

I did it anyway and found that our top-selling items were COSTING US MONEY every time we sold them.  

Getting the products priced right saved us thousands, lowered our overall food cost % and helped us become more profitable.

If you struggle with cash flow or are unsure how to improve your profitability and haven’t done recipe costing, I strongly suggest it. 

There is a lot of confusing, complicated info out there for calculating your product costs.  Trust the above steps and keep it simple.  

You can use a basic spreadsheet, or access the tools I’ve developed specifically for local, seasonal, good food businesses inside the Financial Success Formula program.   Enrollment is always open - click here to learn more! 

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About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.

I have been working to bust the “30% Food Cost” and other ‘industry standard’ MYTHS for years. 

Good news: progress is being made and the result is an increase in profitable food businesses all across the country! 

Why am I so passionate about this? 

Simply put: Industry Standards are a danger to your profitability, period. 

Partially because the “standards” are for restaurants, NOT CPG Brands, Meal Delivery, Catering or Wholesale businesses. Partially because they are old and outdated. Mostly because industry standards are taken out of context and not incorporated into a holistic approach to building a profitable food business. 

That’s right, I said it. HOLISTIC. 

The parts of your business don’t operate in a vacuum...

...They are all interconnected
…Each must hit its goal
...They must work together to produce a profitable outcome.

Your business must be viewed as a whole. 

30% Labor Costs might be the right goal for your business! 
IF your other costs total less than 70%.
If they total more, hitting a 30% labor cost will result in monthly losses instead of profits.

One member of the Financial Success Formula program joined with a 25% labor cost and struggled with cash flow + financial sustainability

Another hits 38% labor costs and is consistently profitable! 

Let go of industry standards and find the RIGHT MIX of revenue + cost targets for YOUR business. 

READY TO GET STARTED? 

Get the control and confidence you need as a business owner and get your Profit Assessment to identify WHERE your business is on the road to profitability, and the next steps you can take to find the right targets for your business.

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About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program. and the host of the Good Food CFO Podcast. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.

I know… You want your prices to be competitive. 

You may be thinking...
They are a successful business at the top of their game, so if I model what they are doing I’ll be heading in the right direction. Right? 
Wrong. 

NOTHING is as rosy and perfect as it looks on the outside.  
Take it from me - there are lots of  “successful” businesses with awesome products, killer sales numbers, and not a penny of profit to show for it. 

Pricing your products based on what the “top” brands in your market are doing puts you on the fast track to financial struggle. 

To achieve long-term, sustainable financial success you need to price your products right for YOUR business. 

Here’s a little story for you…
New clients of mine recently pivoted their business model to offer weekly meal delivery service. 
The changes to their business model were quick - they needed to create menus, price them, build a new webpage and start promoting FAST. 

To set prices they looked at other businesses making the same pivot and mimicked the pricing of the company that everyone respects and admires in their industry….

“We saw their pricing and figured they know what they are doing (they are super successful) let’s match their pricing and we should be good.”

Well, two weeks later that successful company was raising their prices!  
The message that sends is that they DIDN’T have it all figured out. 
They were likely losing money at the low price point they set and needed to make adjustments. 

Now my clients were seeking help to set prices that were right for their business, and stop chasing what others were doing. 
Smart Move! 

The time and money lost over the first few weeks can’t be recovered, but corrections can be made. 

Pricing your products based on the competition, your gut, or an industry-standard is one of the biggest mistakes I see food business owners make. And it costs you a lot of time and money. 

But, don’t feel bad if this is a mistake that you’ve made or are making. 
It’s an easy fix and I’m here to help you get it right. 

Building a financially sustainable and profitable business starts with knowing YOUR Financial Success Formula.  

If you’re eager to learn more…

Visit our products page here

AND OF COURSE, THE PROFITABLE FOOD BUSINESS COMMUNITY IS ALWAYS OPEN! 

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About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program and is the host of the Good Food CFO Podcast. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.

Food Costs play a BIG role in the success and profitability of your food business. 

But time and time again I meet business owners who have…
...cost out their products for the launch of their business and never revisit their calculations again
...never cost out their products 
...not paid attention to what their Food Costs are month-to-month. 

They have no idea what their TRUE food costs are!
And the result is low profit margins, inconsistent financial outcomes, and cash flow trouble. 

Here’s the GOOD NEWS:
Understanding your food costs, setting the right targets, and hitting them consistently isn’t hard, and you can get started TODAY.

In this video I share the #1… only takes a few minutes… BUSINESS CHANGING thing you can do today to Better Understand + Start Controlling Your Food Costs.

It’s the very thing that helped one of my program members identify that her Food Costs were 60% - that means 60% of revenue went directly to making her products, and just 40% was left to cover operating + labor expenses.  It became easy to see why she was experiencing consistent losses.

Another member discovered he had average Food Costs of 93%! He was floored, and truly had no idea!

A third member discovered his food costs ranged from 18-35% during any given month and the large swings were playing a BIG part in his cash flow issues

Follow the simple 2-step process to gain a better understanding of your food costs, start saving money and improve your profitability!

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About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.