It may seem self evident that as a food truck owner you need to know how your food truck is making money, or if you’re in the red. Unfortunately, we’ve found from some food truck vendors that there are a few operators who struggle with this metric. As a result, they can’t grasp why all of the income they bring in isn’t getting them ahead.
To better understand if your food truck is making money you need to know these three measures of how money is being generated.
How To Determine If Your Food Truck Is Making Money
- Growth. 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. Cash allows a food truck to stay in business. It’s 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.
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.
The Bottom Line
Running a food truck can be both challenging and rewarding. Determine whether or not you are profitable is one of the keys to running a food truck business. You need to understand basic accounting principles if you want to figure out whether your mobile food business is generating an income or not. Fortunately, this is a relatively simple process for most vendors.
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 below or on social media. Facebook | Twitter