A small fresh dog food business can earn a gross margin around 50% to 60% on what it sells direct, much more on treats, and far less wholesale, once the cook's time is counted as a cost. Margin = (price − cost) ÷ price, where cost is the meat and vegetables, the pouch and label, the labor and the card fees. In the example below, a 1 lb beef pack costs $3.96 to make and sell direct and goes for $8.50, a 54% margin. The same pack sold to a pet store at $5.50 earns 33%. Monthly plans earn a little less per pack than single packs but come in every month, and baked treats earn more than 70% because they're mostly flour and time. A month of five ways of selling brings $10,910 of sales and about $5,570 of gross profit. The margin leaks through packs that thaw in transit, ingredients bought at the wrong price, and the extra hour a cook day really took.
The short version
- Cost a pack with your time in it: ingredients, pouch and label, labor, card fees.
- Margin = (price − cost) ÷ price.
- Direct packs earn about 54% to 60% in the example; pet store wholesale 33%.
- Monthly plans trade a little margin for steady orders.
- Treats earn the most, because flour and time are cheap next to meat.
- Leaks: thawed packs, meat price swings, unrecorded hours.
- TaroStack costs every batch from what you paid for the meat that went into it. More below.
A pack, costed
Paddock Pet Kitchen, a made-up fresh dog food maker in Lexington, Kentucky, cooks beef and chicken recipes in a shared kitchen and freezes them in 1 lb packs.
| A 1 lb beef pack, direct | Cost |
|---|---|
| Beef, sweet potato, vegetables, premix | $2.10 |
| Pouch and label | $0.40 |
| Labor | $1.20 |
| Card fees, 3% of $8.50 | $0.26 |
| Cost | $3.96 |
The kitchen rent and freezer are fixed costs, $1,320 a month, counted once rather than in each pack. How the food is made safely is in pet food HACCP plan.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Beef pack, 1 lb | Direct and farmers market | $8.50 | $3.96 | $4.54 | 53.5% |
| Chicken pack, 1 lb | Direct and farmers market | $7.50 | $3.03 | $4.48 | 59.7% |
| 30-pack monthly plan | Delivered | $210.00 | $107.80 | $102.20 | 48.7% |
| Baked treats, bag | Market and online | $9.00 | $2.40 | $6.60 | 73.3% |
| Beef pack, 1 lb | Pet store, wholesale | $5.50 | $3.70 | $1.80 | 32.7% |
The pet store pays no card fee, so its cost is $3.70, but $1.80 a pack is a third of what a direct pack leaves.
A month's numbers
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Beef pack, direct | 260 | $2,210 | $1,182 |
| Chicken pack, direct | 180 | $1,350 | $806 |
| Monthly plans | 22 | $4,620 | $2,248 |
| Treats | 120 | $1,080 | $792 |
| Beef pack, pet store | 300 | $1,650 | $540 |
| Month | $10,910 | $5,568 |
That's a 51% gross margin on the month. Take away the $1,320 of fixed costs and $4,248 is left, with every cooking hour already paid. The plans are 42% of the sales and 40% of the gross profit, and they're the orders that arrive whether or not it rains on market day. The year's plan is in dog food business plan, and the co-packer option in pet food co-packer.
Get the calculator
Download the pet food 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 a 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 uses one price for beef. Beef bought three times in a month at three prices, and a cook day that ran an hour long, change what each pack really cost, and the margin on the sheet drifts from the margin in the bank.
How TaroStack does it
TaroStack costs every batch from what you actually paid for what went into it.
True cost from the batch. Each batch takes beef and vegetables at the cost of the deliveries they came from, FIFO cost layers or a moving average, freight included.
Labor on the batch. Batches can record the labor minutes they took, so the hours behind a pack are on record.
Margins on real cost. Margins are worked out on what things actually cost, and a price-creep report per supplier shows when beef starts costing more.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a pack really cost | One beef price | Cost from the batch's deliveries |
| The hours behind a cook day | Remembered | Labor minutes on the batch |
| Beef creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches and true cost 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.