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.
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.
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