Forecasting Expenses for Your Food Truck Business
Salaries, food costs, food truck costs, business taxes, commercial kitchen and office rent, equipment leases, phone bills, postage — the expenses associated with running a food truck may seem to never end. However, your ability to get a firm grasp on these cash outflows can play an important role in your business’s success or failure. An expense forecast is vital for you and your sales goals; it keeps you on track and helps keep costs down.
You need to show all expenses in your business plan. Not only will they help investors determine whether you’ve made the proper assumptions, but they’ll also assist you in determining what you’ll be spending to operate your business.
Accurately forecasting your expenses can benefit your enterprise in myriad ways, including the following:
- Avoiding cash flow crunches
- Keeping your company afloat during lean times
- Assisting you in menu pricing
- Facilitating your ability to obtain loans and lines of credit
- Helping you budget properly for growth
Use one year’s data for your business plan expense forecast and make sure you include as many expenses as you can come up with. The more detailed you can be in generating your forecasts, the more complete they’ll be, which will only be a help to you.
To help you cover all the possible expenses you’ll need to start your food truck business, check out this list of accounting codes the National Restaurant Association (NRA) recommends. Another resource for helping determine what expenses you may run into is your local food truck association or other food truck owners in your area. Incorporating their suggestions into your business plan will give your plan additional credibility if someone asks how you compiled the data.
Be sure to save your receipt so your accountant can deduct it from your taxes.
Below, you see a six-month sample of an expense report. Just as you should do when putting your sales forecast together, use the median cost for your expenses in your business plan. You can easily generate this data by taking your weekly sales forecast and multiplying it by the number of weeks in each month.
If you want a complete snapshot of your expenses, produce two more reports in which you use your high and low data. Doing so helps you see how different monthly expenditures can ebb and flow. To prevent any confusion by possible investors, keep these additional reports out of your business plan.
The expenses shown above are broken into two categories:
- Controllable expenses: These expenses change with your control. An efficient business can keep food and fuel cost at a minimum, whereas other business owners end up overspending in these areas. Over time, you’ll discover how to become much more efficient with these expenses. Although payroll may not seem as controllable as your other operating expenses, it falls into this category because you do determine what you pay your employees and how many hours they work each week. You can adjust the items in the controllable expenses category as needed and can change them from season to season.
Often, this category includes a subcategory called other controllable expenses that contains direct operating costs, such as paper and cleaning supplies as well as uniforms if you provide them for your employees. Although many food trucks use social media as their primary source of marketing, you’ll have to produce some items, such as business cards and event fliers. In addition to these expenses, this category includes your office utility bills and any truck or kitchen maintenance.
- Non-controllable expenses: In this category, you have all the fixed expenses associated with your business, such as your truck payment, commercial kitchen rent, and insurance. These items are fixed because you determine a set price when you negotiate contracts for these items, which may change only at the end of the contract terms.
Some non-controllable expenses, such as taxes and the depreciation of your vehicle and kitchen equipment, will be difficult to determine yourself, unless you’re an accountant. Grab a copy of the latest edition of Accounting For Dummies by John A. Tracy, CPA (published by John Wiley & Sons) to assist you with these areas, or you can take the more expensive route and speak with an accountant to get realistic numbers for your business plan.