How to Calculate Selling Price of Food

Posted by Damian Roberti on

All right, so How do you calculate the selling price of food and how much should I mark up food when I sell it to Damian? These are two great questions that I got from some subscribers. And we're going to go over those two subscriber questions. I'm going to show you a huge resource, if you're not familiar with Shopify, on how to sell food on Shopify and figure out exactly how to calculate the price for your food, and we're going to dive into that right now. All right guys, so welcome back to Marketing Food Online. If you need more resources google the following: "how to calculate selling price of food", "food pricing calculator""
""food cost formula menu pricing", "how to calculate food cost for a recipe""

 

So, if this is your first video, welcome to Marketing Food Online. I'm Damian Roberti, founder and CEO of Marketing Food. If you are brand new, definitely hit the subscribe button. We have over a thousand videos for you. For the food entrepreneur, I had three questions I wanted to dive into really quickly in this really quick video for Shopify.

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Two of the questions were, how do you calculate your selling price of food and how much should I mark up food when I'm looking to sell it online? And I actually found a fantastic resource. It's actually through Shopify. I'm gon na show you a little bit on my screen here, how this calculator works, and down below this video, I'll have a link that'll take you right over to our website and get you directly to this link. So, you can actually check out this calculator for your own food products. So, if you're not familiar with Shopify, really quickly, let me show you some great benefits. I actually have two stores on Shopify: marketingfood.com and Food Biz USA, which is our generic website, that we actually do a lot of our teaching and training on through Shopify as well. You might also want to learn more about: "menu pricing calculator"
"""food costing and pricing""".

 

So, what we have right here is that Shopify has got three different types and three different levels. The one that we actually use and that's really sufficient for what we do because of the size of our store, is the basic Shopify, which is $29 a month. Now, you can get Shopify, which is the next one up, and then advanced Shopify. The last two, if you're really just starting out, honestly, you want to stay away from them because you don't necessarily need that big of a store just yet. I'd recommend you check out the basic ones if you're not familiar with them. And again, if you want to check it out, they have a 14-day free trial, by the way. You can check that link out down below the video. So, let me show you really quickly how to do this.

 

By the way, Shopify is a fantastic platform to sell food of any kind. If you're looking to sell candy, if you're looking to sell cupcakes, baked goods, if you're looking to even sell stuff through your home, and you want to sell locally, you can even tap into Shopify. If you're a food truck, you can even tap into their POS system and their website and integrate all of that together. The big thing about Shopify that's really great is the number of apps that they have, which increases the functionality and features of your website. That's why we love it so much. And that's why we use it for the two sites that we have. Here is their little price calculator. Now, this is actually dedicated specifically to the food profit margin calculator.

 

This thing is awesome, and it's instantaneous. It's quick, it doesn't take much time to do this, but it's going to give you a really good understanding of how to price your products. Now, let me give you a few tips though. After we put our numbers in here, I'm going to go ahead and calculate the profit, but you have to be aware of a couple of things. Number one, if you're going to take into consideration your fees that you're going to have, you're going to have a transaction fee. Of course, any platform you sell on, online, you're going to have a transaction fee. Take that into consideration.

 

That could be two, three, 4% or even more of the transaction. So, when you see this and you see your actual profit, keep in mind that you may need to increase the actual per transaction amount. That's something that I recommend to a lot of clients when I do my consulting business, is just that you don't want to sell a product for like three, four, five, or six dollars, because to be honest with you, you're going to get eaten up in fees. You also have to keep in mind that Shopify charges, as I showed you, a $29/month fee.

 

So, that's a fee right off the bat, no matter how much you sell, plus any other fees that you may have involved, such as storage of inventory, employee payroll, paying yourself. All of these things are things you need to take into consideration. So, let me show you how this works. This is a fee calculator right here. Very simple, cost of your item. I'm going to create some generic ideas. So, this cost me $5 to make and the margin is 50%. You hit calculate profit and you're good to go. So, it actually shows you your sell price. You need to be at around 7.50. You're going to make 2.50, your profit per unit. And then your gross margin is going to be 33.33%. Cool, fantastic.

 

Now, here's what I would recommend. Most of the average selling amounts for us on our platforms are for our candy and snacks. It's between around 28 and 32, $35. So, the reason being is that I know for a fact that there are some items that sell less and some that sell much, much more, but our average customer spends over $30 per transaction. There's a reason. As I just mentioned, you want to make sure that you're making enough money on each transaction to obviously make it profitable, because every transaction is going to have a multitude of other expenses. Like I said, about the fees for the transaction, if you're using PayPal or Stripe or even Shopify payments, you want to make sure when you start selling food on Shopify that you're marking up your product, so it's actually profitable. So for $5 items, this is not going to make it what you need. So, how do you do that, Damian?

 

You want to make sure that you bundle your products. One of the best ways to increase the per transaction amount is going to be through bundling. So let's say here, right here, instead of $5, what if we went to $35? I'm sorry, half the items are $5 and we wanted to get them up. Let's go to 100% markup. So, the market percentage is going to be 100%. So, you're going to sell this $5 item for $10. So, let's say if we want to go, we want to mark it up 300%. So, there we go. So, your sell price is going to put you at around $20 for the cost of a $5 item. You're going to make a profit of $15 on the transaction.

 

If that's obviously something that's applicable to your product, then now you know, you're going to be making a 75% margin. So, now let's go up maybe 500% on it. There we go, so now I have an item that cost me $5. I'm going to charge 30 and I'm going to make 25. Now Damien, that sounds crazy. I got an 83% margin, believe it or not, online. When it comes to specialty food products, it's not. There are some products that we actually make that cost us around 2.25, 2.50, and we charge 24.99 for them, and let me show you that. 2.50 and let's just say that was that. All right, so we're going to go up around 700%. So we're at around 800%, which means your sale price will be around 22.50.It's actually a little bit more than that.

 

So, we make around $20 per unit of that particular product because we make it to order and it's very inexpensive to make. So, this is a great calculator specifically for food. If you are looking to find out how much of a margin you have and how much you should sell for, just keep in mind that, as I mentioned, those other fees will eat up any profit that you may have. So, thank you to the two subscribers for sending in those questions.

 

How do you calculate the selling price of food? And of course, how much should I mark up my food products? I hope that answers your guys' questions. And if it does, please give us a big thumbs up. If you have any other questions about pricing a product, specifically food products, please let us know down below and I'll get to your questions as soon as I can. I'll see you guys in our next video.

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