A product loses money when what you charge for it does not cover everything it costs to make and sell: ingredients, packaging, your time, energy, waste and the channel's commission. You rarely see it in the day's takings, because money still comes in. You see it in signs: you sell more and keep nothing, the price has not changed in a year, there is unsold stock every week, or it only works if you do not count your hours. If you see two or more, run the checks below before you make the next batch.
The signs
You sell more and the money does not grow. This is the clearest one. If you sell more this month than last and end up the same or worse, something you sell is not leaving a margin. It is one of the classic growth traps: more volume of a weak product tires you out without paying you more.
The price is more than a year old. Butter, chocolate, eggs and packaging change price. If your price has stayed the same, your margin has been shrinking without you seeing it.
It is the product everyone asks for and the one that takes the most hours. If a product fills half a day in the kitchen and you sell it at the price of something you make in an hour, check what it leaves per hour.
There is always some left over. If every week you throw out, give away or mark down part of the batch, you paid for those units and never got paid for them. Waste raises the cost of every unit you do sell.
It only moves on discount. If you have to cut the price or throw in extras to sell it, the real margin is the one at the discounted price, not the list price.
One channel leaves almost nothing. The same product can make money at your market stall and lose it on a delivery app, because the commission eats the difference.
It only works if you do not count your time. If the product stops making money once you add your hours, you are not making money. You are working for free. The guide on how to pay yourself explains why your time belongs in the cost.
You do not know what it costs. If you cannot state the cost per unit as a number, you cannot know whether it makes money.
The four checks
1. Loaded cost at today's prices. Recalculate ingredients, packaging, energy and your time using what you paid on your last shop, not what you paid when you set the price.
2. Divide by what you sold, not what you made. If you made 16 and sold 14, the batch cost is shared across 14. That is how waste gets in.
3. Take off each channel's commission. Do the sum separately for your stall, direct orders and each app. The guide on comparing profit by channel shows how to line them up.
4. Look at what it leaves per kitchen hour. Divide what a batch leaves by the hours it takes. A product that leaves little per unit but is quick to make can beat one that leaves more but takes all afternoon.
Worked example: a tray of brownies
You sell brownies at $4.00 each at a farmers market and through a delivery app. You bake trays of 16.
Cost of one tray, at today's prices:
| Item | Sum | Amount |
|---|---|---|
| Ingredients | 16 × $0.90 | $14.40 |
| Packaging and label | 16 × $0.35 | $5.60 |
| Oven energy | per tray | $1.60 |
| Your time | 1.5 h × $18 | $27.00 |
| Total per tray | $48.60 |
If you divide by the 16 you made: 48.60 ÷ 16 = $3.04 per brownie. It looks like you make 4.00 − 3.04 = $0.96 each.
But you sell 14. Two per tray go stale, get given away or are eaten as samples. The real cost per brownie sold is 48.60 ÷ 14 = $3.47.
- At the market: 4.00 − 3.47 = $0.53 per brownie. It makes money, but little more than half what you thought.
- On a delivery app: say the app charges 30% of the $4.00. You receive 4.00 × 0.70 = $2.80. And 2.80 − 3.47 = −$0.67 per brownie. Every brownie you sell through the app costs you 67 cents.
At the market, the gap between what you thought ($0.96) and what is real ($0.53) is the waste. On the app, the commission turns a thin margin into a loss.
What to do once you have confirmed it
You have several options, and it makes sense to try them in this order:
- Bring the price up to today's cost. If chocolate went up, your price has to follow.
- Cut the waste. Smaller batches, bake to order, or a format that keeps longer.
- Sell the product only where it makes money. In the example, the brownies stay at the market and come off the app, or go on the app at a different price.
- Change the recipe or format if customers will not pay the price you need.
- Drop it if nothing works, and put those hours into products that pay.
To see how this fits with the other tests, per unit, per hour, per channel and after your own pay, read how to know if your product is profitable.
Do it with the calculator
Put the recipe into the food cost calculator at today's prices, with the units you actually sell and one channel's commission at a time, and it tells you what every brownie leaves in each place.
Frequently asked questions
Can a product that sells well still be losing money?
Yes. If each unit brings in less than it costs to make and sell, selling more only makes the loss bigger. Selling well tells you customers like the price, not that the price pays you.
Should I drop a product that loses money?
Not always straight away. First check whether a price change, less waste or selling it only through the channels where it does make money fixes it. If none of that is enough, dropping it frees time for products that pay.
How often should I check whether my products make money?
Every time a major ingredient goes up, and every few months even if nothing obvious changes. Ingredient prices move faster than most people change their prices.
Should I count my time if I do not pay myself a wage?
Yes. If you leave it out, almost any product looks profitable. Put an hourly value on your time and include it in the cost, so you know whether the product pays for your work.