Know your numbers
The Business of Food
by Jennifer Barney
Know your numbers
2-min read
What stood out at NOSH's pitch slam last month were the number of mentions by investors for startups to know their numbers.
The investor discussion was led by Stu Strumwasser, Managing Director of Green Circle Capital Partners and included panelists representing Hormel's Venturing and Incubator Unit, Encore Consumer Capital, Hummingbird Equity Partners and North Castle Partners.
The market for food + bev is still frothy, and investors are hunting. We all know about the cool, on-trend categories to bet on. But when investors are asked how they choose, financial acumen is the common mention.
I wrote a version of his earlier this year. It bears repeating.
If investors are interested in you but doubt that you know your numbers or doubt your number’s validity, you have a problem.
Many of you are misstating your financials which signals that you don't know your numbers.
I'm seeing P&Ls go out to investors with incorrect calculations. What typically gets missed are reductions to revenue to get to Net Revenue. Additionally, I see wrong gross margin percentages (it should be off of Net Revenue not Gross Revenue).
As you’ve learned by now, pricing, promo, and margin structure are different not only between channels but within them. Not to mention cost differences between SKUs. If you get it wrong it can be devastating not only to the bottom line but to your future in the biz.
Once you go out with a price to a customer you can’t easily raise it. You can’t go back and say “my investors said I need to raise price because I’m not making my margin”. They don’t care.
Building a customized velocity-based growth and financial plan is the end result of having a sound matrix of price points, customer margins, and all-in (trade spend inclusive) unit economics for each revenue stream scenario.
One of my superpowers is guiding my clients on how to build this for themselves. Unless you are an excel jock, it can get super tedious. But it must be done.
That’s why I’m happy to announce someone else has built a template for you.
Check out Margin Velocity Planner. Here are all the things it can do:
Establish unit economics
Analyze price points at retail
Estimate trade marketing expenses
Determine viable COGS ranges
Build a multi-year financial plan
I have demo’d this with founder and creator Manoli Kulutbanis and it’s pretty slick. For a few hundred dollars (read: not thousands) you can save a bundle of time and frustration.
Go get 'em!
All my best,
Jennifer
Expo West 2022 NEXTY Awards nominations are now open!
I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com