“Setting your prices to achieve Product Profitability does not guarantee that you’ll achieve Business Profitability.”

If there is one critical concept that I want every food + beverage business owner to know, understand and accept this year, it’s the one I’ve written above. 

I’ve talked about it on The Good Food CFO podcast, The Real Food Brands podcast, The Food Biz Wiz podcast and even on a few webinars like the one I did with WeStock.

We’ve been misled on how best to approach our pricing. 

I got it wrong in my food business...

And when businesses get it wrong they can hit or exceed their sales goals but struggle to achieve profitability and they aren’t sure why.  When the cause goes unresolved or the source of the problem is unidentified, losses start to mount and the result can be the closure of the business.

So how do you ensure that you’re pricing your products for BUSINESS profitability? 

Follow my 3 rules for pricing:

1. Don’t calculate your prices using your per unit labor cost

2. You CAN’T successfully price your products in a vacuum

3. You CAN price your product with a simple formula, and your target ingredient cost %

Ready to learn more and get your products priced right? 

Click here to listen to The Good Food CFO podcast. 

Watch the video version of the podcast on YouTube, complete with helpful slides. 

I’m here to support you - so join us in the Profitable Food Business Community to share your questions.

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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.