“Those who think profit is a dirty word should try to make one.”
– James Cook
There is always a debate on what is marketing and what is branding. There is one factor that runs into both, and that is consistency. When crafting your message, it must ring loud enough and often enough to make an impact. We talked last month about implementing pizza styles that make you stick out from your competitors. When putting together the marketing campaign around the new style, you want to make sure your branding message is entrenched in the overall campaign.
The guilt in our society with making money has been ingrained in much of our culture. However, our capitalistic economy that this country has been founded on speaks to another side. You should never feel bad about making a profit or having a high profit margin. We, the small business people of America, are providing jobs and adding to what makes our country great. Small businesses give you the opportunity to go after your American Dream.
The discussion of what your profit margin should be is always an interesting conversation. I have been in seminars at Pizza Expo where pizzeria operators talk about 20-percent margins. I also find those operators are the same ones who brag that they never advertise. I have left seminars, gone home and tried to figure out what I was doing wrong not hitting a 20-percent margin. If you can, by all means do. I think the most important thing is to find a profit margin you would be comfortable with and then go after that with everything you got. For me, after years of listening to others, I decided to listen to myself. My number is 10 percent. With that being said, everything over the 10 percent I put right back into the business. At that profit margin, for me personally, I can justify all the sacrifices I make and all the headaches and challenges that come with running a business.
The most impactful way we deploy everything over 10 percent? Expansion. There are years we have a higher margin. When we do, that following year is where we upgrade infrastructure, equipment and/or the experience. If we are constantly over the 10 percent, I give back to the staff by increasing bonus opportunities or by increasing salaries and benefits. It is important to invest back into the business. I feel that the most successful businesses are the ones that are ever evolving.
Once you know the number you strive for, then other controllable goals can be established. Have a food cost number that you pick as your goal, not just a number that you heard on a podcast. Have that number mean something to you. The same goes with labor cost. Our company Cost of Goods goal is 29.5 percent, and our company-wide labor goal is 25.5 percent. That makes our prime costs 55 percent, which leaves 35 percent for all other fixed costs (and it leaves our 10 percent profit). In the next installment of Building Blocks we will talk about the fixed costs, including the big four-letter word: RENT.
Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh. Instagram: @caliente_pizza
