In my previous post (Food Product Costing – Part 1) I talked about the impression I have that many food business operators don’t know their product costs on an item-by-item basis.

Here are some frequently-given rationalizations for not monitoring food product costs followed by my comments about why they miss the mark.

  • I don’t have time.

This is akin to sitting down to take a test and saying you don’t have time to read the questions. How can you possibly get things right if you don’t take the time required? The good news is that knowing your product costs needn’t take very much time and it’s time well spent because it’s one of the most important activities you can do to help your business succeed.

  • My accountant does it.

If you make business decisions based solely on information you receive once a year, you are missing an important opportunity. Preparing tax returns and calculating net profit for the year is, by definition, focused on looking back at past events. Important, yes, but not the complete picture. Businesses need to work with forward-looking information as well. Projecting the impact of rising ingredient costs, for example, will help you make better business decisions.

  • My business is too small.

When I hear people say this, I’m tempted to ask, “Do you realize how you limit yourself with that mindset?” In actuality, not knowing your food product costs is likely to be a hidden obstacle that prevents your business from reaching its full potential. Understanding your costs is one the best ways to identify opportunities to improve your business and achieve your goals.

It’s too complicated.

Product costing can be challenging (without the right tools) – I’m the first to admit it. Many who try to build a DIY spreadsheet solution discover that it can quickly turn into drudgery. Figuring out the calculations, developing the formulas, and managing all those cell references can be too much to handle – especially for folks who are avid math-avoiders. This often drives people to throw up their hands in frustration and abandon the entire effort.

The reality is that costing out your recipes does not need to be overly time-consuming and can provide forward-looking business insight to help you make better decisions. And it’s vital for any business, no matter what size.

The importance of food product costing became so obvious to me that I created a web application (Foodakin.com) that enables all food business operators, even math-avoiders, to know their costs quickly and easily.