Profit margins are the lifeblood of any catering business, but they’re often difficult to maintain in a fluctuating market. While it’s simple in theory—ensuring your revenue outpaces your expenses—the reality is far more complex. And if you’re already dealing with razor-thin margins, you may struggle to see the path to a more profitable future.
While it might be tempting to slash costs or hike up your prices, these moves must be carefully calculated to avoid compromising the integrity of your brand offerings. In other words, higher profits shouldn’t come at the expense of your competitive edge. Otherwise, you may find that the boost to your bottom line was only temporary.
So, what’s the answer? The key is to find the sweet spot where revenue and expenses align to boost profitability without sacrificing quality. Here’s how you can do just that.
Reassess your pricing model
Pricing your services accurately is essential for profitability. In other words, while you should avoid setting prices too high, it’s just as important not to undercut your bottom line. Adjusting your rates to align more closely with the market could make all the difference if you’re currently breaking even or struggling to stay afloat.
Begin by calculating the cost of goods sold, including ingredients, beverages, rentals, and other essentials for delivering services. Consider this your baseline. From there, factor in additional costs like labor expenses, utilities, kitchen supplies, and equipment maintenance. Together, these costs represent the amount you need to break even.
However, the purpose of a business is to turn a profit, so play with your numbers to ensure you’re covering the cost of goods sold and returning a profit. Aim for 10% to start, but avoid pushing exorbitant prices just to make more money. If you are raising prices, the perceived value of your offerings should also rise!
Highlight your menu’s key ingredients
When planning your menu, it’s easy to get bogged down in details like intricate sauces and premium garnishes. However, if your main dish is a perfectly seared cut of Wagyu, that’s where your guests' attention will be—no matter how tasty the side components!
Prioritizing the key elements of each dish will help you minimize spending on secondary items and manage overall costs more effectively. So, if you’re serving a beautifully prepared dish of ahi tuna, focus your efforts (and budget) on the fish instead of worrying about going above and beyond for every item on the plate. That’s not to say your sides and sauces can’t be delicious! It just means figuring out how to achieve great taste and texture through the simplest means.
Make informed purchasing decisions
While it’s possible to source virtually any ingredient at any time of year, caterers must understand that convenience comes at a cost. You can certainly feature exotic or out-of-season ingredients, but expect transportation and storage surcharges to impact your bottom line. To avoid these additional costs, focus on sourcing seasonal ingredients from local suppliers. You’ll save significantly while developing meaningful relationships with regional vendors who may offer discounts or early access to new stock.
It’s also wise to design menus with the same ingredients, as you can purchase supplies in bulk. Bulk rates are typically more cost-effective, so having ingredients that overlap across meals can reduce your cost of goods sold and up your profit margins.
Consider these cost-cutting strategies a starting point for growing your bottom line. Prices vary dramatically from market to market, so you must stay mindful of your progress and adjust your approach accordingly. But with an eye on your numbers, you’ll learn what works best for your company and find more opportunities to save over time.
