Understand Where Your Food Truck Is Making Money

Building a food truck empire from idea to long-term success isn’t easy. You need to know how your food truck is making money, or if you’re in the red. To better understand your food truck financials, knowing these three measures of if and how money is coming in is a good place for food truck vendors to start.

Profit is the positive financial gain your business makes after you’ve subtracted all your expenses. The ability to generate profit is crucial to the survival of your business.

Understand Where Your Food Truck Is Making Money

To be more profitable you need to understand the concepts of profit margins and profit drivers. You can then develop strategies to increase your profits, including ways to increase your sales revenue, your profit on individual products and services, and decrease costs.

Growth

Turning a small food truck business into a big one is never easy. Part of growing is to put together a growth strategy that brings you the most results from the least amount of risk and effort.

Growth in sales is usually (but not always) a positive sign. Look for year over year growth but remember that it has to be profitable and sustainable.

Cash generation

Growth should be guided by your ability to generate and manage cash, not simply by making a profit. Good cash flow management is one of the most important factors in building a healthy, growing business. Cash allows a food truck to stay in business.

Cash generation is the difference between all the cash that flows into the business and all the cash that flows out. Investigate where the cash is generated, how it’s used, and whether enough is coming in.

Return on assets

Any company’s return on assets is its net profit divided by the average value of its assets during a given period of time. This measure shows you how well your mobile food business is using its assets to make money.

ROA = Net Income/Total Assets

ROA gives you a reliable picture of your ability to pull profits from the assets and projects you’ve invested in.

The Bottom Line

Most food truck vendors are in business to make a profit. At the simplest level, profit means making more money than you spend. Make sure you don’t confuse profit with income. As a result, they can’t grasp why all their income isn’t getting them ahead.

Are there other financial areas you follow to determine if your food truck is making money? We’d love to hear how you do it. You can share your ideas in the comment section, our food truck forum or social media. Facebook | Twitter

By Richard Myrick|2019-03-08T09:29:51-05:00Mar 8, 2019|Accounting|

About the Author: Richard Myrick

Richard Myrick is an architect by degree (Lawrence Technological University, Southfield, Michigan) who began his career in real estate development and architectural planning. In September of 2010 he created Mobile Cuisine Magazine to fill an information void he found when he began researching how to start a mobile hotdog cart in Chicago. Richard found that there was no central repository of mobile street food information anywhere on the internet, and with that, the idea for MCM was born. Richard also wrote the "Running a Food Truck for Dummies" available in bookstores everywhere and Amazon. You can reach out to Richard by email at: [email protected].