A butcher shop buys meat by the box or the primal and sells it by the cut, so its margin is decided by yield: the fat, bone and trim that come off before anything goes in the case. Price a steak from what the pound cost after trim, not from the invoice. The trim isn't lost: it becomes ground beef and house sausage, and sausage keeps the best margin in the case. Margin = (price − cost) ÷ price. In the example below, a pound of beef retail cuts costs $9.40 after trim, wrapped and sold, and goes for $15.00, a 37.3% margin, before wages. A month of five categories brings $84,650 of sales and about $32,600 of gross profit.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- Price from the cost after trim, not the invoice price.
- Beef retail cuts: $9.40 a pound, $15.00, 37.3%.
- Trim becomes ground beef and sausage.
- House sausage keeps the best margin; restaurants the thinnest.
- TaroStack costs each cut from what each cutting batch used. More below.
A pound, costed
Cedar Valley Butcher, the made-up butcher shop in Cedar Falls, Iowa, I use in these examples, cuts beef and pork from inspected plants under the retail store exemption; wages are a fixed cost in its plan, so the costs below are what each pound uses:
| A pound of beef retail cuts | Cost |
|---|---|
| Beef, after trim | $8.80 |
| Butcher paper, tray and label | $0.15 |
| Card fees, 3% of $15.00 | $0.45 |
| Cost | $9.40 |
Working out the cost after trim is in butcher yield test, and the exemption the shop works under in butcher shop business plan.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Beef retail cuts, per lb | The case | $15.00 | $9.40 | $5.60 | 37.3% |
| Ground beef, per lb | The case | $7.50 | $4.60 | $2.90 | 38.7% |
| Pork cuts, per lb | The case | $8.50 | $4.70 | $3.80 | 44.7% |
| House sausage, per lb | The case | $9.00 | $4.10 | $4.90 | 54.4% |
| Restaurant orders, per lb | Invoiced | $9.50 | $6.80 | $2.70 | 28.4% |
The sausage keeps 54.4%, made from trim; the restaurant orders keep 28.4%, invoiced at a wholesale price.
A month's numbers
A month for Cedar Valley Butcher:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Beef retail cuts, per lb, the case | 2,400 | $36,000 | $13,440 |
| Ground beef, per lb, the case | 1,800 | $13,500 | $5,220 |
| Pork cuts, per lb, the case | 1,500 | $12,750 | $5,700 |
| House sausage, per lb, the case | 800 | $7,200 | $3,920 |
| Restaurant orders, per lb, invoiced | 1,600 | $15,200 | $4,320 |
| Month | $84,650 | $32,600 |
The case brings most of the gross profit; the six restaurants bring volume at a thin margin, and the retail store exemption keeps them to under a quarter of sales anyway. Every pound of trim turned into sausage instead of ground beef adds about $2 of gross profit. Wages, rent and power come out of the month's gross profit, in the plan. What the labels on the case say is in meat labeling requirements.
Get the calculator
Download the butcher shop margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator holds one cost after trim. A box of strip loins that yields 70% instead of 74%, or a beef price that climbs every week, changes every steak in the case, and only the cutting records show it.
How TaroStack does it
TaroStack costs each cut from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes primals and boxed beef at the price of the deliveries they came from, so a price rise shows in the next batch's cost.
Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.
Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a cut cost | One price from last season | Cost from the batch's deliveries |
| The hours behind a batch | Remembered | Labor minutes on the batch |
| An ingredient creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.