Everyone can calculate the cost of raw materials, but why are we still failing?
Before starting a business, everyone will probably start studying various approaches and methods, whether it be cost calculation, proportion of cost control of each part to income, from the internet, books or various courses, which may come to a conclusion that experts have given principles. But in the case that you apply the principles without delving into your own context, you may overlook the necessary “hidden costs”!
The shop we opened is Active Income.
If the shop is closed, there will be no income at all! Therefore, costs such as wages, rent, and depreciation are all costs that occur all the time. Therefore, they should be calculated in relation to the period in which income can actually be generated.
▪️ Rent and depreciation
New business owners often miss this point. When equipment or furnishings wear out, large expenses come in, and then they find out later that the sales and profits they thought they had made may have only just returned their investment, and may not even have been fully realized, and there was no real profit at all.
▪️ Energy cost (electricity/gas)
Using the overall average method may result in a loss of sales instead, because some menus may use fewer ingredients but require a lot of gas or electricity. If you only calculate COGS, you may see that the cost is not high. But in reality, when you look back at the energy cost, the shop may unknowingly lose money for a long time, and it will be difficult to increase the price because it may affect existing customers.
💡 1% of 1 million is equal to 10% of 100,000.
Calculating from a percentage basis from the beginning may cause the shop to fail from the beginning!
• If labor costs are set at 20%
Just think about how many employees you could hire for that amount of money.
A simple example is if the average salary per person is set at 10,000 baht/month.
Small shops can only employ two people at most, while larger shops can employ up to 20 people.
Fewer people means more variety in the workload. Think about doing a single task, compared to doing multiple things at once, whether you can do them without fail and maintain consistent standards.
• Price bargaining power
Buying raw materials for ten thousand at a time or a thousand at a time, who has a better chance of negotiating the price?
Conclusion
Applying the conclusions of a successful large store to a small store may not be the best solution. Instead, the best way to do the math is to do as much detailed calculations as possible to determine the long-term viability of the store.
And the investment of large stores that may come from pure passion without studying the opportunities and possibilities may be an investment that cannot sustainably make the business survive or may result in a huge loss.
Use tools that will help you calculate your selling price and daily sales targets in detail before you actually open. Analyze costs and plan your business accurately!
