So you’ve set the most mouth-watering menu ever. Well done! Now, how much should you charge for the dishes you offer?
This obviously depends on the type of food you are selling, which market you are trading in and what time of day it is. If you do lunchtime food in a food market in a less affluent part of the city, you have to keep your prices down. Whereas if you’re selling during dinnertime in a more posh market, you can jack the prices up a bit.
But there’s a little more to it than just that.
First things first
First of all, it’s wise to have a look at your business plan and preliminary budget. What are your expenses at this point? How much are you hoping to make? How much do you need to earn in order to afford the produce required for your cooking? Is there a way to reduce your costs and get better prices from your suppliers?
Get your margins right
Andy Waugh of The Wild Game Co agrees that it’s tricky to set your margins. The best way is to walk around the markets you’re hoping to trade in and check the competition.
What are the price ranges for comparable products? Just remember that it’s a lot easier to reduce your prices than it is to bring them up, so don’t set them too low to begin with.
You want to be hitting about 70%, if not more, of what you’re selling.
“You want to be hitting about 70%, if not more, of what you’re selling. We actually don’t hit those margins, because we do lunchtime markets. We can’t compete with other people so we actually dropped our prices a little bit.”
To aim for a margin of 70%, the formula goes as follows:
Food cost / 0.30 = The minimum sale price
For some food items, it will make sense to have lower or higher margins than this. For example, ice cream is a product that customers are willing to pay a lot for if you consider the relative low cost of its ingredients. Don’t rely too much on cost-based pricing if the perceived value is much higher! Likewise, you may even afford to keep negative margins on the food that really attracts customers to your food stall if you can make sure to cover your losses by also selling food with higher margins. Just remember to keep proper track of your margins! iZettle users can easily stay on top of this with the help of their monthly sale reports with the smart POS app.
Don’t be afraid of charging
At the end of the day, people associate quality with price, Andy Waugh points out. It’s instinctive human nature. If you see something that costs seven pounds and something that costs five pounds you will assume that the seven pound one is better.
“Definitely don’t be afraid of charging. If you don’t hit your margins, then you won’t make any money, and you’ll be screwed. If you’re wondering in six months’ time why you need to close down, it’s because you’ve not priced your product properly, or you’ve been spending too much on it.”
Remember that the general impression people get from your market stall determines the adequate price range. If you work hard on your branding and your market stall looks exclusive and trendy, you’ll be able to charge more for the courses on your menu ideally through our iZettle Reader.
Do this today:
Go for a walk around your favourite markets and check out the prices for equivalent food. Here you have your price range.