The full cost of business

(25 /08 /2016)

As consumers we sometimes forget what makes up a product or a service.  Between adding all the raw ingredients together and the cost of labour the actual cost may be far higher than we think. So many times I go out with friends for coffee or a bite to eat and the comment is made “that’s a bit rich”, without thinking what it costs for the owner to make that coffee or sandwich.

Let us take the humble Macaroon.

The ingredients cost say $0.25 to make per macaroon and they generally sell for $2.50 each leaving $2.25 in ‘profit’.  Now let’s look at what a small business has to pay out of this:

  • GST/taxes
  • Insurance
  • Wages
  • Light & power
  • Leases
  • Professional Fees
  • Superannuation
  • Workers Insurance
  • Profit (Otherwise what is the point)

Just looking at this list and think about how many Macaroons you will have to sell just to cover the rent. The same goes for everything we consume.  The cost of labour alone here in Australia is far more significant than in say India or China.  As individuals we expect to be treated with respect and be paid a ‘fair wage’ but as consumers we are always looking for a bargain.

Remember that on the surface you may think a $2.25 ‘profit’ is a big mark up for a Macaroon but the reality is that most eateries struggle to make a little over 4% profit each year. Just keep that in the back of your mind next time you ‘shop’ around for a coffee that $0.50 cheaper. Support Local, Support Small and Support Homegrown.

Receive our newsletters

Signup to receive the latest posts directly to your email - It's free!!