A successful entrepreneur needs to be aware of costs. It’s not possible to set prices for goods or services as an entrepreneur without understanding the costs that go into producing that good or service. During this activity, you will:
- Decide what to sell in your ice cream shop
- Create a spreadsheet to calculate costs and set prices
- Design a menu and pricing for the items you are selling
What to Sell in Your Shop
You are the proprietor for a new ice cream shop and your first exciting task is to decide what you are going to serve. Your shop will have:
- 5 prepackaged items that you simply buy and resell like these ice cream cookie sandwiches
- 3 ice cream “recipes” your workers will make like a peanut buster parfait and
- 5 types of ice cream for standard cones or sundaes.
Create a Google Sheet. Title It “Ice Cream Shop Costs & Pricing”. Rename the first sheet to “Prepackaged”. Add 2 more sheets and name them “Recipes” and “Cones”. Process.
Prepackaged Items
Type in in the column headings shown so your sheet looks like this:
Find 5 items you would like to resell in your ice cream shop. Type the name and source in column A, and link the text to the webpage you found them on. Type the cost in column B. Put the number of items per package in column C. In column D, insert a formula to divide the cost in column C by the number of items/units in column D. This will give you the cost per item. Next, we will set prices and calculate profit.
Ice Cream Recipes
You are going to create 3 signature recipes for your shop. Each of these recipes should have at least 4 ingredients. You will calculate the cost to make each item and them set prices based on the cost of production. First, decide what your signature ice cream dishes will be. Next, break out the portions and calculate the costs. Here’s how to calculate the cost of 1 1/3 cups of Purple Cow Vanilla Ice Cream. Format your “Recipes” sheet to clearly show what you are making, and how much it costs. Your recipes should look like this. Example
Cones
The last item on your menu is the bread and butter of any ice cream shop, the ice cream cone. Find some actual cones for your ice cream cones. It doesn’t matter if they are sugar cones or wafer cones. Calculate the cost per cone. Next, choose a brand of ice cream. Let’s assume you are going to use the same brand, and therefore have the same costs, for all your cones, regardless of the flavor. Once you’ve found your brand for sale somewhere, you need to calculate the cost per ounce.
Creating a Menu
The reason a shop owner is concerned with how much their products cost is because this allows them to set prices. Setting prices that are similar to your competition and allow you to make a profit is important. The rule of thumb in setting prices is to divide the cost of an item by .3 For example, let’s say I found all the costs associated with building a hot fudge sundae and it totaled $1.79. The formula:
$1.79÷.3 = $5.9666666666666
This shows you that a reasonable price for that sundae is around $6. You could use the “charm pricing” strategy and make the price $5.99, or you could write it as a flat $6.
Once you have all your prices figured out, you will create a menu with a section for “Specials”, “Prepackaged” and “Cones” Be sure your menu uses a templates format. It should look professional and have interesting descriptions for your menu items. Feel free to borrow the actual product descriptions from wherever you sourced them.
Canva has a lot of interesting, free menu templates
Costs
Calculating costs is mathy. It involves looking at the price of a product and, based on the serving size, calculating how much each serving of that item costs you. A basic example, let’s say a recipe calls for 2 cups of ice cream, and you are able to buy 10 cups of ice cream for $5.00 Divide the $5.00 by 10 cups, and you see that each cup costs $0.50, therefore the cost of 2 cups is $1.00. The problem is that the measuring units in your recipe, tablespoons for example, may not be the same measurement unit found of a container of chocolate syrup, which would likely be ounces. Fortunately, there are measurement conversion tools available online.
The first step in calculating the costs of your menu items is to figure out what you need to buy. When you look at your recipes, you may have some that contain the same items, for example, you may use hot fudge for both a sundae, and a banana split. Create a Google Sheet and call it Ice Cream Shop Costs.
Across the top row, enter the following:
- Ingredient
- Cost
- Container Size
- Serving size
- Number of Servings
- Cost per Serving
List all the items you will be shopping for down column A, the ingredient column. Next, visit grocery stores online to find out how much each item costs. List the costs down column B. You need to be able to look at the labels of the items you buy and record the container size. The container size goes in Column C. Next, you need to look at the nutrition label of each item and record the serving size and number of servings in columns D and E
Finally, and this may be intuitive, but you are going to divide the cost of the product by the number of servings to calculate the cost per serving. You can do this by using a formula like the one below. Just be sure you have the correct row and column when you reference the cell.
Tricks for formatting your Google Sheet
How to use formulas for calculating cost per serving and total cost.
Pricing
The price you charge for each menu item should be calculated considering the cost is 30% of what you charge. We can calculate the price by dividing the cost by .3, this will give us an optimal price for each product.
Formula for calculating what you should charge for each menu item.
Menu – Google Docs Template
The final piece to your Ice Cream Shop assignment is to create a menu. Look for a Google Docs Menu Template. Once you’ve selected a template, you are going to write up a “Specials” menu for the 4 items you created. Give your menu a business name/title, a slogan, and then list your 4 desserts and prices. Add a written description that makes your recipe sound delicious.
