Most Profitable Small Business Ideas

I am a food consultant based in Sydney Australia I'm the founder of food marketing, we help people turn their dreams of bringing their own food business into a reality so make sure you tune for more resources and support for when you open your food business Thanks to covid 19 the world is a very different place so if you're thinking about opening a food business post pandemic you really need to focus on the businesses that have the best margin.

Now to understand margin we're talking profitability what is your percentage of profit as a percentage of your turnover and you will be absolutely shocked to know that most food businesses operate on really slim margins most businesses operate on a less than 10 percent profit now that is a lot of hard work for a small amount of money unless your turnover is exceedingly high To really understand margin you need to understand the three main cost centers of a food-based business now they're going to be your cost of goods sold your rent and your wage cost now it makes sense if you can keep these cost centers down low your margin or your profitability is going to increase So let's start with cost of goods sold now cost of goods sold is really about how much is the product you make so all of your f and b items on your menu how much does it really cost by the time you go to sell it to your customer. Now you'll be shocked to know that a lot of cost of goods sold uh percentages are up around 40 percent for a lot of food-based businesses now there's no room for margin by the time you have your wage cost and your rent you're going to be operating on the slimmest of margins and it's not sustainable in the long term so what are some of the best businesses in terms of ones with lower cost of goods sold here's a general rule of thumb if you are making a product a menu item that has a small amount of protein rather than a large percentage of protein then your cost of goods sold is going to be lower so a great example of that is pizza or pasta in general these are products that have their main ingredients are flour water a bit of salt and then of course with the with the toppings and sauces but the majority of that menu item is actually a carbohydrate now high carbohydrate menu items tend to have really low cost of goods sold why because the ingredient costs are low to purchase so let's think about this pizza places um pasta places now I know it's a protein (diary) but a lot of dairy concepts are low cost of goods sold as well so ice cream businesses are a great example. So there's a few rule of thumbs of businesses that have low cost of goods sold that's a great place to start now food businesses with high cost of goods sold are often protein driven menus but they all are also often the higher priced locations so you might have things like a steak restaurant or fine dining they have very high cost of goods sold their customers are coming to them for a premium product so their ingredient cost is very high but their average transaction value is too because their customers are spending more money to dine there however at the end of the day if you can modify your cost of goods sold and keep it down low then you're not so reliant on being in a really high traffic location so other great examples are some of the asian food concepts like noodle bars. So before we continue what are your thoughts on some other types of concepts that have low cost of goods sold pop your comments in the list down below and let's have a look at what you recommend Okay now let's look at another cost center believe it or not a lot of your businesses spend up to 40% and even more on wages simply to run their businesses now if you've got high cost of goods sold you have high wages we haven't even factored in rent there's not going to be a lot left over for profit so let's look at some

businesses that have much lower wage rates uh in terms of really driving profitability now a great example is a lot of fast food concepts that use technology in place of wages now a great example of that are burger chains chicken chains even pizza places where you pay an order at the counter often using kiosk style or ipad technology it negates the need for front of house sale stuff processing orders so your wage cost really centers on your kitchen stuff of course you're going to have to also have stuff available to troubleshoot and help not if you're doing it online reducing the number of staff members so that's a great way and some examples there are really businesses that have been able to really lower their wage costs and really drive profitability a lot of people will say well investing in technology like that is going to initially be a really high set up cost you're absolutely right but if I told you that for several thousand dollars investment in ipad or kiosk ordering technology you could be saving tens of thousands of dollars per annum on wages would it not look suddenly like an appealing investment? Okay finally let's turn our attention to rent now if you can minimise your expenditure on rent then it goes to say that you are going to have a higher level of profitability Now the problem is in this post covid world you really want to minimize your expenditures as much as possible we don't know going forward about further restrictions being put in place if you're looking at signing leases now is the time to really negotiate whether you're in an existing location or you're looking at new locations but the rule is always this if there is no point having really cheap rent if it's not in a location that is accessible and convenient to your customer base I have a client who has a very successful cafe he only pays two percent of his turnover on rent a lot of people pay up to 30 I've even seen up to 40 of their turnover on rent these people will eventually go out of business it is absolutely unsustainable if you are paying anywhere above 15 of your turnover on rent you are going to get into financial difficulty so needless to say my client who's only paying 2 is laughing that additional 13 is going straight into his hip pocket as profit okay needless to say if you can make great savings in the following three cost centers cost of goods wage and rent then you have the ability to really increase your profitability now imagine if you could make savings in one two or even three of these areas now a great example of this is cloud kitchens or ghost kitchens imagine if you were only renting a kitchen rather than renting an entire restaurant your rental costs are going to be a lot lower your wage costs are going to be lower because the model is not dining in its only takeaway and it's usually powered only by online sales so then your wage cost is also going to be lower now imagine if you could develop a concept that is a cloud kitchen or a ghost kitchen that has really low cost of goods sold for example a carbohydrate rich menu like noodles pizza pasta um any of those concepts with low cost of goods sold then you're going to make savings across all three cost centers and that makes ghost kitchens and cloud kitchens looking like a really interesting concept for profitability moving into 2021!

# Most Profitable Small Business Ideas

#Small Business Ideas