A potato chip business plan has to face one number early: a grocery store pays about $3.50 for a bag that costs a small maker $2.80 to fry and pack by hand. Factories win that shelf with machines. A small chip maker wins with freshness, local flavors and events, where hot chips sell by the cup at $6 and cost $1.55. So the plan sells bags direct and to a few delis for the name, and makes its money at fairs. In the example below, a kettle chip maker in South Dakota ends its first year about $9,600 ahead on $71,500 of sales, with every hour paid at $20, and earns its startup back early in the second year. Below is a description example, each part of the plan, the first year month by month, the startup budget, and a free template.
The short version
- Describe the business in a paragraph: the chips, the flavors, who buys, the goals.
- Cost a bag from the potatoes: about 4 pounds of potatoes make a pound of chips.
- Bags direct earn about 44%; grocers about 20%; fair cups about 74%.
- Plan the fairs and events: they carry the year.
- A kettle fryer and an event setup are most of the startup.
- Weigh potatoes in and chips out on every fry.
- TaroStack records each fry's yield and keeps potatoes, oil and bags counted. More below.
Part 1: the business description
Spearfish Kettle Chip Co., a made-up kettle chip maker in Spearfish, South Dakota, I use in these examples, writes:
Spearfish Kettle Chip Co. fries kettle chips in small batches from local potatoes in a shared commercial kitchen, and sells them in bags at markets and online, to delis and grocers around the Black Hills, in shipped cases, and hot by the cup at county fairs, rodeos and events. In its first year it aims to sell 1,200 bags a month and work twenty events.
Part 2: what each sale costs
| Per unit | Bag, direct | Bag, to grocers | Hot chips by the cup | Case of 12, shipped |
|---|---|---|---|---|
| Potatoes, oil and seasoning | $1.30 | $1.30 | $0.55 | $15.60 |
| Bag and label, cup, or bags and a shipping box | $0.35 | $0.35 | $0.15 | $5.70 |
| Slicing, frying and packing at $20 an hour | $1.00 | $1.00 | $0.67 | $12.00 |
| Delivery, its share | $0.15 | |||
| Card or online fees | $0.15 | $0.18 | $2.88 | |
| Variable cost | $2.80 | $2.80 | $1.55 | $36.18 |
Where each channel's margin ends up, and where it leaks, is in potato chips business profit margin, and how a fry's yield turns into cost in batch yield formula.
Part 3: customers and prices
| Product | Price | Variable cost | Contribution | Margin | A month at full speed |
|---|---|---|---|---|---|
| Kettle chips, 5 oz bag, markets and online | $5.00 | $2.80 | $2.20 | 44.0% | 400 |
| Kettle chips, 5 oz bag, to grocers and delis | $3.50 | $2.80 | $0.70 | 20.0% | 800 |
| Hot chips by the cup, at fairs, averaged over the year | $6.00 | $1.55 | $4.45 | 74.2% | 750 |
| Case of 12 bags, shipped | $48.00 | $36.18 | $11.82 | 24.6% | 25 |
The fair cups are averaged over the year: about 1,500 a month in summer and few in winter. In a month at full speed they bring $3,338 of the $5,073 of contribution, the direct bags $880, the grocers $560 and the cases $296. What an event stall costs is in cost to sell at a farmers market.
Part 4: the first year, month by month
Fixed costs are $2,075 every month: the shared commercial kitchen ($900), fair and event fees averaged ($800), insurance ($90), the website ($40), ads ($150), fryer upkeep and oil disposal ($60), and software and card fees ($35). Sales start at 15% of full speed:
| Month | Bags, direct | Bags to grocers | Fair cups | Cases | Sales | Profit | Cash, year to date |
|---|---|---|---|---|---|---|---|
| 1 | 60 | 120 | 113 | 4 | $1,590 | −$1,309 | −$1,309 |
| 2 | 80 | 160 | 150 | 5 | $2,100 | −$1,060 | −$2,369 |
| 3 | 100 | 200 | 188 | 6 | $2,616 | −$807 | −$3,177 |
| 4 | 120 | 240 | 225 | 8 | $3,174 | −$547 | −$3,724 |
| 5 | 160 | 320 | 300 | 10 | $4,200 | −$46 | −$3,770 |
| 6 | 200 | 400 | 375 | 13 | $5,274 | $467 | −$3,302 |
| 7 | 240 | 480 | 450 | 15 | $6,300 | $969 | −$2,334 |
| 8 | 280 | 560 | 525 | 18 | $7,374 | $1,482 | −$852 |
| 9 | 320 | 640 | 600 | 20 | $8,400 | $1,983 | $1,132 |
| 10 | 360 | 720 | 675 | 23 | $9,474 | $2,497 | $3,628 |
| 11 | 400 | 800 | 750 | 25 | $10,500 | $2,998 | $6,626 |
| 12 | 400 | 800 | 750 | 25 | $10,500 | $2,998 | $9,624 |
The year's sales are $71,502 and the profit $9,624, with every hour paid at $20. The first five months lose money, $3,770 at the lowest, close to the $4,000 of working cash, so a plan starting in winter needs more cash or a spring start, when the fairs begin.
Part 5: the startup budget
| Item | Example |
|---|---|
| Commercial kettle fryer, used | $4,500 |
| Mandoline slicer and potato washer | $900 |
| Seasoning drum and bag sealer | $700 |
| Event fryer setup, tent and hand sink | $2,500 |
| First potatoes, oil and bags | $900 |
| Bag and label design | $700 |
| Website and photos | $700 |
| Working cash | $4,000 |
| Total to start | $14,900 |
The $10,900 spent before working cash isn't earned back in the first year; at $2,998 a month it is early in the second.
Get the template
Download the potato chips business plan workbook. Four sheets: your bags, cups and cases with price, variable cost and a month at full speed; the first year, month by month, with sales, profit and cash; your fixed costs; and your startup budget with working cash. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Potatoes by the hundredweight, oil by the jug, bags by the thousand, four flavors, delis reordering weekly, and a summer of events that each need a stock of potatoes, oil and cups packed the night before. A notebook can't say what each fry yielded or whether there are enough bags for next week.
How TaroStack does it
TaroStack records each fry's yield and keeps potatoes, oil and bags counted.
Each fry a batch. A fry takes the potatoes, oil and seasoning off stock, records the chips made, good and rejected, and gets a lot and a date, so each batch's cost and yield show.
Supplies counted. Potatoes by the pound, oil by the gallon and bags by the each come up on a reorder list in days of cover, with each supplier's lead time.
Delis on one list. Each deli's order is a sales order, with one picking list for the delivery run.
| The job | Notebook | In TaroStack |
|---|---|---|
| Each fry's yield | Weighed, maybe written | Good and rejected on each batch |
| Bags for next week | Count the boxes | Reorder list in days of cover |
| What a bag really cost | One yield, one price | Costed from what each fry used |
| The deli run | A list | Sales orders, one picking list |
Recipes, batches, reorder lists and sales orders 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.