Play-by-Play: Revenue Model, Indecently Exposed

May 28, 2010 by Craig

I want to publish some analysis regarding the costs of running this business/application. However, to make any real impact, I have to publish the revenue numbers too. I originally said I wasn’t going to do that, but I think it’s worth doing so now given my next post. That, and Teflon Ted said I’d be uncool if I didn’t.

Answers to My Questions

Q: How much on ingredients does the bakery spend?

Depending on the quality of ingredients anywhere from $1000.00 – $5000.00 per week

Q:How much of the overall waste could be eliminated through better
planning (via the product we want to build)?

I would say that there is always waste, any more than 10% can be very detrimental to a small bakery, especially on a daily basis.
I think if done properly and the bakery is actually planning and following their projections the waste could be brought down to 3-5 %

Running the Numbers

Conservatively: $1000 in ingredients per week * 5% minimum reduction in waste = $50/week in potential savings to the customer. That’s about $2600/year.

Multiply $2600 by some number A, which is the percentage of this savings that you can successfully extract from the customer. I’ve been ballparking this number at 20% for no good reason other than the result seems palatable to me. $2600 * 20% = $520/year, or $43/month.

There are about 25,000 bakeries in Canada and the US. Multiply this by some number B, which is your customer conversion rate. I’ve been using B = 1% as a suitably low number. 25,000 * 1% = 250 customers, which seems pretty attainable.

250 customers * $520/year = $130,000.

The real revenue number is 65 million * AB (minimum). Increase A and B to increase the total revenue.

That’s a brief look at the revenue side. Next come the expenses.


1 Comment

  1. Sweet, I’m making starwars cookies

    Comment by Dave — May 29, 2010 @ 4:41 pm

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