Measure What Matters In Your Context

In food entrepreneurship, there is no shortage of things to pay attention to. Everything from figuring out the ever-evolving consumer (and their ever-evolving tastes, preferences and dietary restrictions) to figuring out the best way to create the best product to figuring out how it all will be paid for – all of this competes for the entrepreneur’s time and attention. Quantitative measurement of key business drivers brings focus and clarity to what can be a chaotic process of entrepreneurship and provides direction that proves to be a north star during times of trial.
At the Food Finance Institute, we ask lots of questions of clients about specific things they should be measuring and watching closely. “How much do you expect to sell in 6 months, 7 months, 8 months? How much cash will you need to support those sales? What are your sales velocities for where you are currently in distribution? What is your Cost of Goods Sold (COGS) percentage?”

Answers to these questions drive action. For example, if they know they need a certain amount of sales to sustain their model but can’t get it in their current distribution, they can start researching the best markets to expand into while reaching their target consumer. If their COGS is too high in comparison with industry benchmarks, they might need to make some operational adjustments (cheaper ingredients, a new co-packer relationship, etc.) or might need to scale up more quickly than they were imagining. We help people focus on the financial and other key drivers of their business so that they can understand their business performance and make critical decisions about strategy and operations.
On our podcast this week, Amanda Sweetman talks about The Farm at St. Joe’s, a farm that is integrated with the Ann Arbor campus of the Saint Joseph Mercy Health System. The Farm at St. Joe’ provides 9,000 lbs. of produce to the community, including through a CSA style program for staff and community members in partnership with 12 other farms, generating $82,000 of revenue for those farms. These numbers are a point of pride, but are not the whole story in an enterprise and institution that cares about improving people’s health outcomes or reducing feelings of isolation, the biggest social determinant of health. Thus, they also measure how many people receive prescriptions for veggies through their Produce to Patients program (3,500 in 2018) and how many people attend their farm and other events. Because the Farm at St. Joe’s has these larger impact goals in addition to production and sales goals, they track them closely to evaluate the success of the farm, within their unique context.
We encourage new and aspiring food entrepreneurs to measure what matters in their food business: who are they serving, the key financial drivers of their business model, and how much money they need to grow, among other things. Getting quality data about their financial drivers, customers and sales performance (as well as setting up systems to easily pull and report on this data) takes time and usually money, but is well worth it for the clarity it provides.

And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Consultant With Tablet

Business Model Insights

Raising CapitalRaising Capital

  • Cash is king, so plan accordingly (New Hope Network) – “An early stage brand struggling to gain traction needs a lot of cash. A brand that has found its tribe and is growing rapidly needs even more. I promise you one thing, whatever you think you need in terms of cash, you have underestimated by a factor of at least 2X. Every decision you make has a cash implication. Channel, distributor, retail outlet, trade plan, production, inventory, team … everything has a bearing on your cash position. If you aren’t clear as to how a particular action effects cash, then don’t act on it until you understand it fully.”
  • How West Oakland Financed Its Own Grocery Store (Next City)
  • 9 Elements Of Every New Venture That Investors Expect (Startup Professionals)

National Wholesale Brands

CPG/National Brands

Grocery Store Produce Section

Market Trends

Regenerative AgricultureFarming and AgTech

Mergers And AcquisitionsDeals/M&A

EventsIndustry Events