December is a crazy month. You’ve got holiday parties to attend and maybe even cater to (which for many of you represent a large chunk of your annual sales). And of course you have year-end accounting (unless you’ve hired a bookkeeper). Oh, and did I mention, holiday parties, Christmas, Hanukkah, Kwanza, and New Years?
It’s a lot to handle. But you can’t lose steam.
Finish strong. Hit your sales targets and sell your heart out. It’s a busy time of year, but I know you can do it. And if you get stuck I’m here to help. That’s why I’m letting you know what I like to do when December 31st approaches.
Towards the end of the year, I like to do three things:
1. Take a day off. Seriously. I’m not kidding. Don’t answer any phone calls, don’t do any prep work – and consume several pounds of leftover cookies.
2. Plan for the Next Year. Forecast sales, prospect new vending locations, and close the books on the previous year.
3. Run reports (newsflash: I’m a data geek)
This post is going to cover the ins and outs of number 3 (even though I’m sure you want to see pictures of the copious amounts of Christmas cookies I ate). Ok – distracted – let’s do this.
Why you need to make reporting a priority
1. Numbers don’t lie
Numbers tell you if a flavor is declining in sales, if your cost of goods sold are increasing, and if you’re going to break even. Numbers run your business. If they aren’t in your favor, you have to make a decision.
2. Reports help you make decisions
When I need to make a decision, I dive head first into spreadsheets. As pointed out in number 1, the numbers don’t lie. Don’t make a decision just because you think it’s right. Make the decision based on data so you have something to back you up.
3. Reports help you identify problems – and successes
Whether you like numbers or not, every number tells you something about your business. For example, I’ve learned about most popular products, re-order rates, top retailers, compounding flavor popularity, sales discrepancies, etc.
But there can be a lot to process when it comes to numbers. I mean, there are a lot of them. That’s why I’d like to highlight 7 year-end reports I run to make sure my business is on-track. Some of these are manually compiled — others are automatic with your choice of accounting software.
The 7 Reports Every Food Business Needs to Run
1. Review your top menu items ranking
Looking at your best and worst selling menu items over the last 12 months has been pretty eye-opening for me. I know I have a core of popular items, but I had no idea how much the top three items influenced my top-line sales. I analyze product ranking by event location. For example, my sales are low at curbside lunch spots, but I sell a lot at fairs and festivals.
What I learned from running this report: 4 menu items represent a whopping 78% of my sales. Maybe it’s time to cut the fat?
2. Your top retailers
My mustard is distributed in 170 retailers. Sounds glamorous, right? It isn’t. Many of those accounts are tiny. They order twice, maybe three times a year. That’s no way to build a sustainable retail business. Now, my top 15 retailers? They represent half of my retail business. They order often – usually every month – and it’s several cases. Most of them are direct-ship retailers, too.
What I learned from running this report: The 80/20 rule applies to retail. 80% of your sales come from 20% of your customers.
3. Your top distributors
I have 5 distributors. (I wrote about working with food distributors a couple months ago). Some small. Some bigger. Sure, that corresponds to the amount of product they’re moving. But, how often are they ordering? What SKUs are moving best? Have they been doing demos? (Rare, but some smaller distributors do it).
What I learned from running this report: In a couple festivals, I can move more product than all of my distributors have moved in a year . And at a better profit margin.
4. Your distribution channel profitability
You probably sell through a variety of channels — farmer’s markets, festivals, online, retailers, distributors, drop-shippers, catalogs — you name it. All of those channels make you different amounts of money. Some may be popular. And you might be losing money on others. The only way to know is to run a report. Attach expenses directly related to that channel to your profit and loss statement. For example, if you do a festival, there are expenses uniquely tied to that festival. Or shipping boxes and bubble wrap for your online sales.
What I learned from running this report: While tiring, the festivals I do contribute a large amount to our overhead. Followed by retail, internet, and distributors.
5. Inventory turnover at your top retailers
I’ll be honest, I have an incredibly slow-moving product. Mustard simply doesn’t move like hummus, chocolate, or chips. That means I have slower turns of my product. And slower turns ultimately means I need to find more retailers to sell my product to move the same volume a high-turn product would move in a handful of stores.
What I learned from running this report: Most of my retailers order once a quarter — if that. I’m working on ways to help our retailers move more product through running product demos, participating in promotions, and even some advertising.
6. Fluctuation in cost of goods sold over the year
Even though it’s towards the bottom of the list, this is probably the most important report on the list. Why? Because it influences your entire business. Cost of goods sold can improve your margin, help you reach profitability, and cover lots more of your overhead. The better gross profit margin you have, the healthier your business. That means more money to contribute to your operating expenses.
What I learned from running this report: My costs have risen dramatically – and they continued to do so throughout the year. That led me to make our first price increase in 4 years.
7. Units sold every month – overtime and year-to-date
I started running this report last year. It has helped me to identify flavors losing their steam, how I’m doing compared to previous years, and more importantly, why I’m moving less – or more – product during a particular month. Oh, and it helps me plan for production for the following year.
What I learned from running this report: That my business is growing. We’re moving more than double the mustard we were moving last year. Certain flavors have started to decline in popularity, too — it may lead me to cut a couple next year.
There are more than 7 reports to run — these are just the reports I run at the end of every year. They help me plan for a the year coming up. They help inform family members, potential investors, and business partners, too. Not to mention, they get you into an analysis mode. Once you start breaking down the numbers, you get a better idea of where your business stands and where it needs to go.