Costing and Contingency
The first things to do is note and gather true costing data so we can establish true profit potential; With the steps in place to know and control profits, expansion, costs, ROI.
Dividing your business into the following cost related main categories simplifies things.
- Pie Cost
- Production Cost
- Purchasing Cost
- Logistical Cost
- Running costs
To determine our potential nett profits of what our pie or product will be, we need to do the following to ensure profits are strong enough;
1. Pie Cost
Getting this right is critical to your business. Many tend not to include what are perceived as small easily absorbed variable costs; Such as water and electricity and the pinches of salt, which could be detrimental to your business profits. Accurately factoring in and choosing the safest, most cost-effective methods for baking, such as gas or electric ovens, for instance, can be fundamental decisions.
Pie costs are influenced by many factors far beyond the obvious such as raw material costs and labour. Very importantly, bakery equipment the type and quality thereof particularly their running costs, as well as the production processes and all its many variables. Factory size, layout and its ergonomics are massive factors that require streamlining for profitable pie production. Input your costing data using our pie calculators and get healthier profit into your pies.
2. Production Cost (This and production itself should be optimized)
Your production costs are determined by the following;
- Number of hours worked per day
- Number of pies made and sold per day
- Number of staff
- Staff wages
- Water Costs
- Electricity/Gas costs
- Property rental per month
- Product reject percentage (Keep this down to Zero. With our system and guidance you can)
- Packaging
- Distribution
- Contingencies (Include a host of things you might not expect can drain profit our system fixes)
3. Purchasing Cost
How, where and at what prices do you pay for your raw ingredients in order to produce pies?
- Have tiered list of preferred suppliers.
- Ideally, don’t purchase all your eggs from one basket. Consider if a key supplier has issues or has no no stock.
- Furthermore, the costs of collecting your raw ingredients; Such as fuel, vehicle depreciation and maintenance as well as time costs have to be factored in. We should be frugal without negatively affecting quality.
4. Logistics Cost
This is a cost that can eat into your margins if not well executed. Either way, logistics is an integral cost.
Keep your vehicle costs low with a reliable functional vehicle.
Make sure you check the repair costs of the specific vehicle you are looking at purchasing. This is easily done through inquiring at dealerships, motor vehicle repair shops and asking around.
Don’t deliver too far. Consider distance and its practicality.
Work tires, maintenance, fuel costs in; Plus, add contingencies to cover the time taken to refuel, change tires (flat), wash vehicle/s etc.
