Preorders and subscriptions for small food brands

A preorder means selling before you make anything: you announce, close orders on a fixed day, take payment, and only then shop and cook what is already sold. A subscription is the same thing on repeat: the customer commits to receiving something every week or month. Both tell you how much you will sell before you switch the oven on, so you make the right amount, have almost no waste and get paid before you spend. The cost is that some customers will not wait, and that any discount you give subscribers has to come out of what you save.

How to set up a preorder

A preorder that works has simple rules a customer can understand from one message:

• Cut-off day. "Orders by Wednesday 8 pm, delivery Saturday." Set the cut-off with just enough time to get to the wholesaler, cook and pack.
• Pay when you order. Card link or bank transfer at the moment of ordering. No payment, no order. This is what turns a preorder into money you can count on.
• Minimum batch. If making fewer than a certain number is not worth the gas, time or ingredients, say so up front and explain what happens if the minimum is not reached.
• Fixed delivery days and areas. One delivery day, by area, instead of single drop-offs all week. A pickup point works too.
• A small extra. Make one or two spare units to cover accidents, not ten "just in case".

With orders closed, you know exactly what to buy and how much to make. That is where production planning starts: the orders give you the shopping list, and the shopping list tells you how much cash you need.

When a subscription makes sense

Subscriptions suit products people use often and in much the same way each time: bread, granola, juices, weekly meal prep, sauces that run out. They suit occasional products, like birthday cakes, much less.

What you need to decide:

• Frequency and contents. Weekly or fortnightly, and exactly what they receive.
• How they pay. The simplest is charging for the month in advance. Charging week by week means more work and more late payments.
• Pauses and cancellations. How many days' notice they must give to skip a week or stop. If they tell you after the cut-off, that week is charged.
• Records. A list with name, address, what they get and until when they have paid. Without it, a subscription turns into a mess within a few weeks.

Worked example: meal prep boxes with and without preorders

You sell meal prep boxes at $12.00 each. The variable cost of each box (ingredients, container and label) is $5.50.

Without preorders: you cook 50 boxes on Sunday and sell what you can through the week by message. In a typical week you sell 41 at full price, 4 on Thursday at half price, and 5 go in the bin.

• Full-price sales: 41 × 12.00 = $492.00
• Half-price sales: 4 × 6.00 = $24.00
• Total collected: 492.00 + 24.00 = $516.00
• Cost: 50 × 5.50 = $275.00
• Contribution: 516.00 − 275.00 = $241.00

With preorders: you close orders on Friday. The same 41 orders come in, paid in advance. You cook 42, one spare.

• Sales: 41 × 12.00 = $492.00
• Cost: 42 × 5.50 = $231.00
• Contribution: 492.00 − 231.00 = $261.00

The difference: 261.00 − 241.00 = $20.00 more per week, about $80.00 a month over four weeks, selling the same number of boxes. And there is something the contribution does not show: with preorders you collect the $492.00 before spending the $231.00 on ingredients. Without them, you buy first and earn the money back over the week, if you earn it back.

How much discount you can give subscribers

If you are thinking of offering subscribers a discount, run the numbers from the example first.

The most your saved waste pays for: $20.00 a week ÷ 41 boxes = $0.49 a box. That is 0.49 ÷ 12.00 = 4.1% of the price. A discount of up to about $0.45 a box comes out of what no longer goes in the bin.

If you give everyone 10%: each box drops to 12.00 × 0.90 = $10.80.

• Sales: 41 × 10.80 = $442.80
• Cost: $231.00
• Contribution: 442.80 − 231.00 = $211.80

That is less than preorders without a discount ($261.00) and even less than cooking blind ($241.00). A 10% discount only pays if the subscription brings more sales. How many? You need to recover 261.00 − 211.80 = $49.20 a week. Each extra discounted box leaves you 10.80 − 5.50 = $5.30. You need 49.20 ÷ 5.30 = 9.3, so 10 more boxes a week, just to end up level with simple preorders.

Other options: give the discount only to people who pay for the month up front, or replace it with something that costs you less than 10%, such as free delivery on your delivery day.

What you lose and how to protect it

• Impulse buyers. Some customers do not plan and buy when they see the product. If you have a channel where you sell on the spot, such as a market stall or a café counter, keep a small amount there without preorders.
• People who forget the cut-off. Send a reminder the day before the cut-off, always at the same time.
• One-off cancellations. Clear pause and cancellation rules mean a dropout does not leave you with extra stock.
• The admin. Collecting payments, keeping records and planning routes take time. Count it when you compare this channel with the others.

Companies that order the same thing every week for their office work like a subscription, with their own rules on invoices and payment terms; those are covered in the guide to corporate and bulk orders. To see where preorders fit among all your channels, read the guide to choosing your sales channels.

Do it with the calculator

Put your recipe into the food cost calculator to get the variable cost per unit. With that, your price and what you throw away each week now, run the two calculations from the example: how much more you make with preorders, and how much discount you can afford.