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c Management

I think it’s important to back out the numbers Let’s back out the numbers and set a goal. If your
from time to time. In other words, how much revenue goal is to sell 300 pounds of coffee per month, that’s a
would you like to be doing and how much coffee do great place to start. The minimum volume that Olam
you need to sell to get there. An important piece of sells is a single bag of coffee. That is between 132 and
this puzzle is understanding your profit margin per 154 pounds of coffee depending on origin. Using shrink
pound. As we already hypothetically established, if as 15-20% between unroasted and roasted volume, you
you are buying coffee for $4/lb and selling it for $16, will need 3-4 bags of green coffee to produce 300
how much of the $12 is pure profit? Lots goes in to roasted pounds. Purchasing multiple varieties of coffee
understanding your costing. As a trader I tend to in- will also give you options to offer both blends and
clude as much costing as possible in my per pound single origins with the same basic inputs. Using the
price to better understand my margins. I would include oversimplified formula of [Revenue-Cost of
labor, material, financing and overhead costs in that goods=Profit] you would stand to make $3,600 in
per pound margin. However, some of these costs are profit at $12/lb if you sold 300 pounds per month.
not easy to breakdown into a per pound figure. There- However, if you are still using the hot air popcorn
fore, some people might only include the labor and popper you’ve probably burned yourself a few times
material costs to calculate the per pound margin. Ei- and spent over 60 hours unevenly roasting coffee…but
ther way, we can all agree this is a question better there is a significant charm in the simplicity of this
suited for an accountant, and the actual net profit operation. I think you see where I’m headed here. It
margin will be much less than $12 might be time for an equipment upgrade. The popcorn
per pound. So, where do we popper has been good to you but it may need to be
go from here? shelved in place of more professional and cost effec-
tive roasting equipment.

An important

piece of this puzzle

is understanding

your profit margin

per pound.

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