February 13, 2013

Food Product Cost & Pricing Calculator

food product cost calculatorKnowing how much your products cost you to make and how to price them in a way that will make you money is as important to a successful food business as having good recipes.  And yet it’s the piece that is often missing for too many food entrepreneurs I talk to.  Having ‘a rough idea’ of what your products cost is not a strategy for success.  Too often, when you dig down, it turns out that the price these entrepreneurs are charging (based on what they think customers will pay) isn’t covering their costs.  Which is why I’m happy to introduce two new food product cost and pricing options for small food businesses. 

1. If you are not comfortable with Excel or simply prefer to have someone help you determine your costs and pricing, Small Food Business now offers affordable one-on-one Food Product Cost & Pricing Consultation.  With this service, which costs $150, you can send up to 4 recipes which I will analyze and, within 5 business days, get back to you with your product costs and pricing suggestions.  This option also includes a 15  minute phone or Google+ consultation where we can talk one-on-one about your product costs and pricing or about any part of the business you’d like to talk about. (Additional recipes cost $10 per recipe).  For more information about the Food Product Cost & Pricing Consultation please click here and fill out the inquiry form.

2. The Small Food Business Food Product Cost & Pricing Calculator: If you are comfortable with Excel, I’ve created a tool that enables you to put your recipe into the spreadsheet and then it will automatically calculate your product costs and provide pricing suggestions.  This can be used for all of your recipes and you keep them safe and sound on your computer where you can always access them.  Available for $49.00, this calculator comes with written instructions and an example to help walk you through the set up process.

food product calculator

You input your recipe and the associated weights and total costs for each ingredient and the spreadsheet will automatically calculate your per unit cost and how much the total ingredients in this recipe costs you.

productcost_screenshot

The calculator autmatically determines your Cost of Goods Sold (Total Per Unit Product Cost) and your recommended pricing structure based on your indicated margins.

As always, if you are unhappy with either the consultation or the calculator, or if they don’t meet your needs for whatever reason, I will refund 100% of your money.

26 comments on “Food Product Cost & Pricing Calculator

  • Zoe Bartlett on said:

    This is the ‘golden ticket’ for every person in the food business. If you are not currently making decisions based on the costs (and commodities change throughout the year), this is a must have item. Thank you Small Food Biz, for making this valuable tool available to all.

  • padmanabhan2654 on said:

    Reblogged this on Some thoughts and commented:
    Not only pricing, but also the avenues for marketing are essential. The marketing strategy adopted, the quality of food supplied, feedback from customers, and various ways of improving the sales are all essential for Small Food Business to survive. If any one of the various factors mentioned flops, the survival of the business is in danger.

    • smallfoodbiz on said:

      I don’t disagree at all. Like a good recipe, running a successful small business relies on numerous ingredients. That being said, one of the biggest things I run into time and time again when working with entrepreneurs is that they don’t know their product costs and simply price their products based on what they ‘think’ a consumer may pay. That’s a dangerous strategy especially if it turns out it’s costing you more to make each product than you’re charging (which I’ve seen happen!).

  • Ellen on said:

    Just a note – the distributor price of 5.23 would provide a 30 cent margin, but not a 30% margin, when the distributor sells it to a retailer for 5.53. I think there may be a math error.

    • smallfoodbiz on said:

      Ellen,

      Thanks for pointing that out. The spreadsheet itself is correct but I posted the wrong screenshot (lesson learned about not simply titling things ‘screenshot1’, ‘screenshot2’, etc!). Thanks for letting me know the screenshot was wrong. It’s been updated now.

    • smallfoodbiz on said:

      Alli,

      The spreadsheet will automatically come to you via a link in the receipt email you receive to the email address you indicated during checkout. If you don’t receive it send it me an email at info (at) smallfoodbiz (dot) com.

  • Anna on said:

    Hi there, does your excel sheet also work for metric measurements? – grams and mls? thanks it looks like a great tool.

    • Jennifer on said:

      Yes – technically the spreadsheet works with any unit of measurement. The key is that you have to stay consistent between the Total Quantity and then the Number of Units. For example, if you use flour in your recipe and you want to use grams then you need to make sure you input into the Total Quantity cell the total grams you purchase and then in the Number of Units in Recipe cell you can put in how many grams your recipe calls for. Where you’ll get into trouble is if, for example, you use LBS for the Total Quantity and then grams for the Number of Units cell. That being said, from ingredient to ingredient you can change units of measurements – the key is staying consistent within the ingredient itself.

  • Katie on said:

    Great resource! This accounts for the costs of ingredients and labor, which is what we have done in our business. However, we are now in year 3, and we are realizing, Hey, what about overhead costs like wholesale deliveries (labor), commercial kitchen rent, utilities, insurance, and licenses. Would you recommend adding up those costs per year, then dividing by total units sold, to figure out the “Total per unit product cost”?

    • Jennifer on said:

      I think you need to understand what those overhead costs are on a monthly and annual basis but rather than adding them into the cost of your product on a per unit basis, you should make sure that you have enough of a margin in your product pricing so that those costs get covered plus some.

  • Rochelle on said:

    Your product looks great, so glad someone has put something like this out there.

    Just wanted to make a suggestion in case you are ever looking for ways to develop this further (and it may have this but I couldn’t tell from the example), in my own very ugly but practical version of this, I have a separate sheet as a ‘Supplier Pricing Master List’. All cells within recipes using the same ingredient are linked back to the master price list. That way when a supplier price changes I don’t have to change the price in 5 or 10 (or more) recipes, I just change the master list and it flows through to every recipe. Your first three columns are in my master list so the recipes just contain last two columns.

    • Jennifer on said:

      Rochelle,

      That’s actually what I have for my own personal costing spreadsheet but I had a few complaints from folks that it was too complicated for those who didn’t have a lot of experience with Excel which is why it’s been designed this way. Thanks!

      • Rochelle on said:

        Yeah that makes sense Jennifer. I muck up my own easily enough from time to time, but know how to fix it, so yes I can imagine it would be messy to use as a third party.

    • Jennifer on said:

      You have to input the ingredient costs yourself because everyone’s costs are different based on where you’re located, where you’re buying your ingredients from, and how much you’re buying at any given time. Hope that answers your question!

  • Alexandra on said:

    I’m wondering how the number for the “your price to distributors” came out.
    It seems for me that the “total per unit product cost” and the channel margins are added together. However, instead of calculating the percentage, it’s just simply 2.21+0.6+0.3+0.05=3.16.
    Is that correct?
    Thanks.

      • Alexandra on said:

        Thank you, Jennifer.
        Yes, that makes more sense.
        However, the result (“your price to distributors”) above in the second picture looks incorrect. It suppose to be $3.87 instead of $3.16.
        Which means that the result for the “Your $ profit from distributor sales” should be $1.66 instead of $0.95.

        • Jennifer on said:

          You’re correct because that’s an old screen shot of the earliest version of the spreadsheet. The formula correction was made after I posted the picture so that it’s accurate in the spreadsheet. Truthfully, this post was originally written almost two years ago so there have been other additions to the spreadsheet as well to make it even more robust than the original. I should mention, that every time I’ve added a major ‘update’ to the spreadsheet, I’ve also emailed out the new version to all prior purchasers for free. I don’t believe that you should have to pay for every update nor should someone who buys now not be able to take full advantage of future updates.

  • Kunal Gupta on said:

    Hi ,

    This is a great tool.

    How can I customize the currency setting in the excel? I want to change $ to my local currency.

    Thanks again.

    • Jennifer on said:

      Kunal,

      Unfortunately the only options for currency for this spreadsheet are USD, AUS, EURO, and UK and it’s not possible to customize to other currencies. However, the spreadsheet doesn’t actually do any currency conversion so can be used by any other currencies and just know that where you see, $ – for example, it’s really you’re currency. I realize that’s not a perfect solution but it’s the best we can do. My apologies. Jennifer

  • Victoria on said:

    In the table, “Per Unit Packaging Costs”, where do you get the value $0.254 for the actual Packaging Cost? Is that from a formula or is that the set price that you have?

    • Jennifer on said:

      That number would be based on a formula in the spreadsheet that takes your total packaging costs and divides it by the total number of units you buy. So, for example, if you purchase 100 units of packaging and it costs you $100 then the spreadsheet will do the math and tell you that your packaging costs $1 per unit.

  • Laura on said:

    I’m interested in buying this but where does the cost of the kitchen rental get included? I pay $20 per hour for my kitchen space so this is critical!

    • Jennifer on said:

      Laura,

      Technically your kitchen cost is considered an overhead expense and not built into the cost of each individual product. For example, what happens if you have a product baking and while it’s baking you’re working on a different product. Which product would you account that time towards? The kitchen cost (and your other overhead expenses) come out of your margin which is why you want to shoot to have as high a margin as possible. This spreadsheet is designed to help you figure out the cost associated with the production of your products – the direct labor associated with the product, the ingredients, and the packaging (if necessary) – as well as help you play with margins and determine the right pricing structure for you that will help cover the other aspects of running your business (kitchen time, marketing expenses, administrative time, etc.). You may want to do a search on this site for ‘margins’ and/or ‘pricing’ as there’s a lot more information that’s been compiled over the past few years that you may find helpful. Best of luck to you! Jennifer