Are Home Cooking Businesses Profitable?
If you have decided to take the risk of cooking from home, I tell you that this type of enterprise is giving a lot to talk about.
Without a doubt, it can become a profitable business if you comply with certain indications.
A key piece in this type of entrepreneurship is to create a good business plan. And as part of this plan, you must include its promotion.
You must also establish and delimit your market niche, that is, define your specialty, if you are going to work with Creole food, vegetarian, or if you are going to make sweets.
By being clear about your market niche, you can increase your chance of success and make a difference with other establishments that may be considered your competition.
In this installment, we will provide you with some elements that will undoubtedly help you start your home cooking business.
In this way and for you to continue learning, carefully analyze the information that we prepare for you.
- When is a home cooking business profitable?
- What is the billing flow of a homemade food business?
Continue reading!
When is a home cooking business profitable?
In the first place, home cooking businesses are profitable when the income obtained is greater than the expenses and costs incurred in a certain period.
Therefore, you must have accounting advice from the beginning of your operations. This way you will know if your homemade food business is profitable or not.
However, if you have not started your operations, we show you below some elements that, without a doubt, can help you. Pay attention.
Define who your ideal client will be and what they are trying to do
The ideal client of your homemade food business is the one who is pleased with the benefits you provide, who enjoy your food, and who recommends it to their family and friends.
In other words, it is the entire public that loves and enjoys this type of food.
To define the characteristics of your ideal client, we recommend you take into account the following variables:
Are home cooking businesses profitable?
Your loyal customers can be some working moms who don’t have time to cook for their children, but who want healthy food for them, which you can provide.
Another group of fixed customers can be office workers, you can create for them a package of weekly menus that are cheaper than in other restaurants.
In this way, you can ensure the engagement of your fixed customers.
Or… Is there not an ideal client and an ideal situation? Let’s think about what users are trying to do in our business. It will be:
- Do they like your home cooking business because it represents a healthy and reliable option?
- Could it be that they like your business because the attention is like at home?
- Or, do they like your business because the service is fast and cheaper than other restaurants?
We can have many more options, but for now, let’s just think about these 3… Do you have clients who try to do these 3 options? Are most of your clients within any of these possibilities?
According to the type of client you address, you will have to design your business.
If, for example, your homemade food business cooks healthy, you should focus on always having the best and freshest ingredients to prepare your meals.
Now, if customers like your attention and feel at home, make sure that the magic of your kitchen makes a difference compared to restaurant food and even more so from packaged and already processed foods.
Remember that you not only sell homemade food, you also sell what your customers do when they go to your business. This concept is called “Jobs to be done” and you can learn more through the following video:
Location
Your home-cooked food establishment should be close to your ideal customers, such as offices, nursing homes, or hospitals. And even, you can offer it from your residence and do the service at home.
In this way, by placing it in these areas you can promote customer consumption.
Initial investment
A good part of your initial investment will go on the supplies you need to make your products.
You can buy supplies wholesale and thus reduce costs.
On the other hand, you will need to find staff, but the number of employees is not so great in case you are cooking from your own home.
In turn, part of this investment will be used for the permits and licenses that you require to start operating. Your business must be registered, however simple or small it may seem.
It is important that your products are labeled, that it contains the name of the company, and it would be great if it had the food information of each product.
What is the billing flow of a homemade food business?
Next, we will show you an estimate of the billing flow of a homemade food business, which we will analyze taking into consideration a percentage (%).
By the provisions of the Madrid Hospitality Association, the billing flow will be distributed as follows:
Materials and supplies
Of the total annual turnover of the homemade food business, 10% to 20% corresponds to the purchase of raw materials.
Also, you should find a good supplier of all your ingredients and make sure they are high-quality products.
Do not forget that this weighting is only an estimate because it will change depending on the quality of the raw material used in the process of preparing your food.
Workforce
Of the total annual turnover of the business, approximately 10% to 20% is used to pay salaries and other employee benefits.
Basically, as employees, you must have someone in charge of placing the orders, a waiter, a person in charge of making the food deliveries, and the cook.
Remember that the value may vary according to the size of the premises.
Do not forget that if your premises is large, it will require more employees, therefore, the percentage may change.
Fixed costs
Of the total annual turnover of homemade food business, 20% to 25% is designated to fixed expenses, for example, water, internet, electric service, etc.
In addition, it is also important to consider the rental of the premises and the renovations that must be done to project the image of the business.
The lease price can even exceed 20% of the total annual turnover.
profit margin
Ultimately, it is estimated that 25% or 30% of annual turnover corresponds to business profits.
But, it is only an estimate, since it will depend on all the factors mentioned above.
Now, do you consider that a homemade food business is profitable?
Before we leave, we put at your disposal a management tool called Platzilla. It is ideal to carry out the reins of your business. Do not miss it!
Conclusions
We finish this first installment of a series of articles where we analyze a little about whether home cooking businesses are profitable when it comes to undertaking.
But, before taking them into account you must define a specific market. Don’t forget to find out who your competition is.
On the other hand, the most relevant factors to take into account when starting your business are:
- Ideal client: the ideal client is the one who delights their palate with what your homemade food business offers.
- Location: Your business can be located near your ideal client, for example, offices, universities, or residences.
- Initial investment: for a homemade food business, the initial investment is specifically destined for the supplies for the preparation of the food.
Finally, the billing flow of a home cooking business will be divided between the main supplies, the personnel, the expenses, and the profit margin.
Remember that the values that we indicate here are only estimates, their real value will depend on many factors that you will define when you establish your business.
Dare to undertake, because homemade food businesses are profitable if you meet certain characteristics. Do not forget!
We invite you to read the second part of this installment at the following link:
