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How many do you need to sell to be profitable?

Published on March 27, 2020

Some facts for foodscience entrepreneurs…

I meet a lot of entrepreneurs, often at the first steps of their food business. In the last couple of years, launching food products, aiming for big retail is getting hotter and hotter. But I often see a lot of inconsistencies which I think should be addressed. The biggest is about the business itself. Most of these wannabe entrepreneurs have forgotten, in their flame, to open any spreadsheet.

Let’s take the example of an “innovative pea protein cookie company” which aims to launch a range of vegan, pea-protein-enriched cookies idea is to sell the product in supermarkets by the unit when workers buy their lunches. Ingredients are quite expensive and the final product should be sold around 4€/unit in order to create a 30% margin. As this price is quite high, it can only target some demographics in big cities such as Paris.

My first question, when meeting with the entrepreneurs was “how many do you need to sell to be profitable?”. It seems that this question was quite new to them and that nobody had ever asked it (discouraging the hope and creativity is such a bad thing, isn’t it?).

So I took a napkin to do the math:

  • just to cover the basic cost of the team (two young graduates in Paris), you need to make 60*2 = 120k€/year
  • you will have some company-related costs, let’s say 20k/year
  • cookies are good but they seldom sell by themselves, so you will need some marketing online, PR, etc… let’s say again a very small 20k/year

So how much cookies to be barely even?

  • 4€ cookies => 3,8€ after 5,5% VAT
  • 30% margin => 1,15€ margin / cookie

So… the company should sell 140,000 cookies/year or around 500 per working day.

Was there a plan to go from zero to this?
And then from there to 10,000 in order to generate a profit and grow have I mentioned that this startup was looking for a few thousand euros in investment to develop?)…

I know that entrepreneurs should be ambitious, aim high and don’t plan as big companies do. But does that mean spending one year in a non-sense dream? This question is both for entrepreneurs and for those which work is to “help” them, such as incubators or coaches who should put some reality calls in their method.

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