How does one make income projections for a concession business? We recommend thinking about your food cost as a percent of the menu price. In your income projections, you can use this percentage to calculate your food cost for that month. Let’s say you are projecting to make $8,000 a month with a one item menu. You charge $8 for that menu item, and your food cost is 25% of the price:
$8000 total sales for month * .25 = $2000 total food cost
In an Income Projections template spreadsheet, there are a few fillable sections that allow you to account for the cost of food based on your sales. Additionally there are sections for your revenue and your other expenses. Here is the breakdown of categories for the Income Projections template:
- Income – this section is where you list the revenue generated from sales
- COGS – (cost of goods sold) here you detail your total food costs. Be sure to account for every detail: food, seasoning, napkins, utensils, food trays, etc.
- Gross Profit – this is the difference between your income and your COGS
- Expenses – these are all your overhead that isn’t associated with the product that goes out the service window.
- Net Income – the difference between your Gross Profit and your other Expenses. Your Net Income is your final profit.
Expenses can be a little tricky. Some expenses are monthly occurrences like loan repayment, auto insurance, etc. Others may be yearly, semi-annually, bimonthly, etc. Make sure that you properly record expenses when they need to be paid. With expenses though, you generally know what you are going to pay ahead of time.
Making Accurate Income Projections
Income on the other hand is a big guessing game at the beginning. Until you get out there, you really don’t know how much money you can possible make in a given month. But there are a few assumptions that you can make and we’ll talk about how to handle this in the next section on Assumptions.
Because of the certainty of expenses and the uncertainty of income, I highly advise that you underestimate your sales. Do you think you can reasonably do 50 sales a day? Try to project for 40 sales a day and see if you still maintain profitability. Try to figure out what the minimum number is you need to break even, that is when your income matches your total expenditures and your net profit is $0. You don’t want to shoot for this number in real life, but it can be helpful to know what you need to make in order to be profitable.
In the template, I used dummy numbers to give you an idea of how profits can accumulate over time. What’s more, I wanted to demonstrate that a bad month doesn’t necessarily hurt you in the long run.
For example, I am showing a decline in sales during months 4, 5, and 6 (probably winter months), and the profit margins are real tight from month 4 through month 8. Even better, I’ve projected operating at a loss for month 1 since the business is very new. But when all’s said and done, at the end of the first year of business I’m projecting over $27,000 in total profit. That money can be used to either give you a nice owner bonus (highly inadvisable) or to build the business to be better and stronger.
Your financial statement isn’t the place to make pie-in-the-sky projections. You will want and need to be very realistic and very honest. If you can’t reasonably demonstrate success, then you either need to rework your business model, or abandon ship. When trying to project your future underestimate your income and overestimate your expenses (unless you have real numbers to work with). This will help you avoid any pitfalls, especially right out of the gate.
If the numbers don’t work out in your favor then consider an alternative path. This is the planning phase where you will get to understand what it takes to work on a food truck. If you are unhappy with anything, now is the time to know.
Remember, there are a lot of long hours of prep and service on the food truck. Your margins may not be as high as you expected, and that is perfectly ok. It is up to you to decide whether you want to live the life of a food truck owner.