Can you convert your food into profitable dollars? If you are in the food industry, you cannot possibly be in business without evaluating food costs. When you can accurately analyze your cost, you will have the formula for operating a successful business.
Formula 1: Food Cost Percentage
This is very easy formula. Food Cost % = (Beginning Inventory + Purchases – Ending Inventory) / Food Sales You can plug in your numbers to determine the food cost percentage.
Formula 2: You Net Margins Again, another easy formula: (Your Total Earnings – Cost of Goods (COGS) – Expenses = Net Operating Income = Net Margins)
Formula 3: How to Increase Your Earnings Calculation
Take your total costs and your total earnings and analyze it in a very simple way. If you spend $40,000 to make $50,000 you can increase your earnings by 100% if you spent an additional $40,000. An additional $40,000 investment would generate you $100,000 of gross earnings. This does not take into account if you can increase your net earnings; only your gross earnings.
Other Tips: How else can you make food profitable? Many companies in the food industry are turning expired goods; waste and garbage into dollars. Disney World, is using food waste to make electricity for the theme park and the hotels. If you have food that you are throwing away because it’s expired, you are throwing potential dollars out the door. You need to research electricity companies that will purchase your food waste so can increase your earnings.