After reading Part One of this series, you should have a good foundation for writing a detailed and descriptive business plan. The next part is to help you focus on the important financial aspects of your food truck business. This is important to keep your business organized and on track to achieving your business plan goals. Even if this food truck business is a dream fulfillment, you don’t want to be left financially destitute or lose the business because of poorly kept financial records.
Keep it Legal
Before you do anything else, keep it legal. Your license is at the top of this list. Check with city, state and county laws to make sure you have any and all permits in place that are required by law.
Take into account the fees that are necessary for the licenses/permits. Keep in mind, that there are forms, applications and possibly safety training classes, depending on the requirements for the location of the food truck business.
There might be restrictions in the industry for the location of the business. Fees can vary from one location to another, just as the requirements for operation can also vary based on location.
List of expenses to take into consideration:
- Your Truck
- Permits and Licenses
- Business and Truck Insurance
- Kitchen/Equipment
- Worker’s Compensation (If you plan to hire employees.)
- Accountant
- Public Relations
Start-up Costs
These are all part of the food truck business start-up costs. Don’t forget to add a section for miscellaneous expenses such as food, advertising materials, vehicle/kitchen repairs and more. The average start-up costs usually run at around $150,000+ for the first year of business.
It is imperative to remember that entering a food truck business is not cheap. Expect high monthly costs and that it costs money to keep the business going. Yes, it will take some time to get into the business before you start seeing a significant profit.
Overhead Costs
These costs tend to be fairly high. If employees are hired, then expect those costs to rise. If you do hire employees, there needs to be a section in your overall financial plan for their wages and worker’s compensation. Worker’s compensation is required by law.
It’s true that using a vehicle as the primary mode of business will prevent you from entering any real estate leases. However, there are other costs that are added to the vehicle business to make up for it.
It’s a smart move to leave room in your overall budget for vehicle and equipment repairs. It’s also a good idea to separate the two. Make one part of the budget for vehicle, and the other part for equipment repair and maintenance.
List all equipment used in your food truck business. Keeping records and documenting everything will help your business to be prepared for the inevitable routine or emergency maintenance. Preparing these documents will help you to keep your budget on track.
Fuel Costs
Fuel costs will be constant and will also vary tremendously. It’s possible that your food truck business will be in a central location, only moving for special events and occasions for additional income. Or instead, you may choose to drive your truck around to different locations and sell to a variety of customers.
It’s good to keep fuel logs and mileage to document your expenses as the cost of fuel changes constantly. If your route alters day to day, the estimate needed to budget fuel costs is likely to also fluctuate. This can be a challenge to estimate fuel costs month to month. It’s recommended to keep this area of your budget open to change.
Marketing and Advertising
Marketing and advertising are extremely important. How are consumers going to know about your food truck business if they don’t know about it? Customers are not going to show up out of the blue. It is important to get your name out there to market what you have to sell.
There’s websites, social media, flyers, posters, business cards, television, radio, newspapers, magazines, events and more to promote and market your food truck business.
There are free servers to help you build a website for your business. If you can afford to do it, hire a reputable professional that can help build and promote your website. This will help to get your business out there to the public in your chosen location. This is ideal to get your business to look as appealing as possible to potential new customers.
Don’t forget, there are many opportunities that your website represents for your food truck business. This is part of advertising. If you have an app or a link on your website that allows customers to pay for their items online, it can help increase profit.
Keep in mind, you should still allow money in the overall budget to be in your register.
Record Keeping
It is vital to keep excellent records, as well as to work in unison with a professional and reputable accountant to keep all your finances of your food truck business on track.
Keep in Mind:
- Be involved when it comes to the financial part of your food truck business. You do not want to be taken advantage of when it comes to the financial state of your business.
- There is a chance that if you rely solely on an accountant and it unfortunately turns out that they were not trustworthy, it’s possible that you could lose everything you worked so hard to obtain.
However, the knowledge gained from an experienced accountant can help your food truck business to be successful. Consulting a reputable one is a good idea.
Choosing Your Equipment
Truck
Your food truck business is an investment. The biggest investment should be the truck. This is the foundation of the business and ideally, should come with all the specific equipment and necessities right away. This truck is where you will spend all of your time; therefore it needs to be functional and comfortable for you and your employees.
Factor in that this truck will also double as advertisement. The right colors and logos will help to support and market your brand. Choose a truck that is within budget. Set a minimum and a maximum amount that can be spent on the food truck.
Experts say to not go too cheap, because in the end, you will spend just as much in repairs and maintenance as you would have spent on higher quality equipment. The reasoning is simple, the higher the quality of equipment, the longer it will last without needing repairs and maintenance.
Product Inventory
The cost of your food truck business’ product inventory will vary, depending on the type of food and the amount that is expecting to sell. This will change every month, hopefully increasing as the business grows, while narrowing down the menu of good selling items versus items that are not.
Restocking food costs will vary, again, depending on how well food items are selling. It’s recommended to leave the area open on your inventory forms to fill in at a later date. This specifically helps to keep food costs on track. Documenting inventory and product selling trends will help reduce unnecessary buying.
Miscellaneous Inventory
Make a list of everything, down to the smallest detailed inventory item.
This includes:
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- Condiment packets, to-go boxes
- Napkins, cups, plates, utensils
- Cooking pots, trays, oven-mitts
- Uniforms, menu-boards and more.
It’s a good idea to study models of successful food truck businesses and document everything that you will need. Research and learning the necessities will help you to see an item or two that you probably overlooked or didn’t know. One of the most common forgotten items in the food truck business is fire extinguishers. Remember; don’t skimp on safety precautions, if you can go overboard. It’s better to be safe than sorry.
Do you want to start a food truck business? Contact EntreDot.org and we can help step you through our Six Steps to Success™ to launch you franchise.
