I Lost 15M on a Food Business…

Summary

• I started a food business thinking it would align with my fitness and nutrition background.
• In the first month, our sales hit $600,000, but the margins were very tight.
• We sold 60,000 meals at $10 each, but our cost per meal was $9.
• This meant we were making just $1 per meal, before deducting all other expenses like marketing, sales, and payroll.
• The profit margin in this food business was only about 7%.
• Despite a $600,000 revenue, the actual profit was minimal – maybe around $500,000 in total after all headaches and work.
• I realized that even if I wasn't losing money outright, the opportunity cost was significant.
• I took my focus away from a potentially bigger and more profitable venture for this small-margin business and lost a year’s worth of growth potential.

Video

How To Take Action

Implementation Strategies for Entrepreneurs and Personal Growth

Focus on High-Margin Activities

I suggest evaluating your current efforts and focus on high-margin activities. Sometimes you get caught up in ventures that seem aligned with your interests but don't make financial sense. Take a hard look at your profit margins. If they are too low, you need to reconsider whether it's worth your time and effort.

Understand Your Costs

A good way of doing business smartly is by keeping a close eye on your costs. Many expenses might not seem significant but add up quickly. List all your costs and see where you can cut down without affecting the quality of your product or service.

Opportunity Cost Awareness

Being aware of opportunity cost is crucial. If you’re spending time on a lower-margin business, you could miss out on a more profitable venture. Assess where your efforts are being spent and ask yourself if they could be applied more effectively elsewhere.

Continuous Learning and Evaluation

Keep learning and be open to adapting. Things could look good on paper but not work out in practice. Regularly evaluate your business performance and be ready to pivot if necessary. Sometimes it's better to cut your losses early and refocus on more lucrative opportunities.

Simplify and Automate

Work on simplifying processes and automating where possible. This can massively reduce headaches and free up your time for higher-value tasks. For example, use software tools for inventory management, customer relations, or marketing automation.

Financial Buffer

Build a financial buffer. Low-margin businesses can be risky, and having some cash reserves can help absorb shocks. It gives you time to adjust strategies without panicking.

Dual Focus: Passion and Profit

Balance your passion and profitability. It’s great to work on something you love but ensure it’s also financially viable. This balance helps maintain enthusiasm while securing your financial future.

By focusing on these strategies, you can avoid potential pitfalls and steer your efforts towards more fruitful ventures, ensuring growth and success in your business or personal endeavors.

Full Transcript

here's how I lost $15 million trying to start a food business I thought okay I'm in Fitness I talk about nutrition I can start a food company we did this big launch the first month sales were a little disappointing for me so we did like 600,000 the first month now you might be like that sounds like a lot of money let me walk you through the margins of this business so we're doing $600,000 per month now the average meal was 10 bucks so we were selling $60,000 meals per month well sounds good right times $10 now here's the part that no one wants to talk to you about in the food business my cost was $9 I had to cover every expense Marketing sales payroll on this $1 I was able to make in this business somewhere in the neighborhood of 7% profit margins I just 5x the amount of headache for an extra this much profit honestly I might have made 500 Grand on this whole thing I decided to take my off the big pile of money and go on the small pile of money and I lost a year just because you don't lose money doesn't mean you didn't lose money