Profit by Design: Building a Food Business That Doesn't Require Endless Investment
(Listen on Apple or Spotify. Full transcript below.)
Margins matter—but what's the rest of the financial strategy that transforms good margins into actual profitability and positive cash flow?
Sarah lays out the complete three-part framework behind "Profit by Design," the philosophy helping food founders escape the 70% failure rate.
Beyond product margins, you need clarity on your true operating expenses and the ability to build financial scenarios that answer critical questions: How many units do I need to sell to break even? How much capital will this really take? How long until I stop reinvesting?
Sarah shares the story of a baker whose scenario modeling revealed she'd need to bake cookies around the clock just to break even—saving her from launching an unsustainable business. Learn why planned losses are easier to navigate than surprises, how to know if you're on or off track each month, and why having this complete financial roadmap transforms entrepreneurship from constant uncertainty into strategic execution.
This is the missing link between understanding your margins and building a food business that actually works financially.
___________________________________________________________________________________________________________________________
Episode Timeline
00:00 Introduction to Good Food CFO Podcast
02:02 Profit by Design Philosophy
05:26 Understanding Financial Strategy
11:02 Creating a Financial Strategy
18:39 Operating Expenses and Financial Scenarios
24:29 Designing Your Business for Profitability
30:18 Conclusion and Call to Action
Full Episode Transcript
You're listening to the Good Food CFO podcast. I'm your host, Sarah Delevan, joined as always by our producer, Chelsea Stier. Hey, Chelsea.
Hey Sarah, I want to kick off this episode with a brand new Baba Yacht member highlight. We haven't done one of these in a while, so I'm very excited to introduce you listening to Barb Myers from Fixa Foods. At Fixa Foods, they believe that healthy eating should be satisfying, simple, and full of flavor. Their plant-based, dairy-free, and gluten-free nut dips
are crafted with carefully sourced ingredients and extra virgin olive oil, making it easy to bring more real food into your daily meals. So whether you're a busy person seeking healthy options or a foodie looking for gourmet flavors, their fresh nut dips help you fix deliciously simple nourishing snacks and meals that bring joy to your table. You can learn more at fixafoods.com. They are going to, it looks like start shipping.
in the fall, but if you are in the Oregon area, definitely take a look at their website and see where you might be able to pick up a jar.
It has been so fun to get to know Barb. She has given us some feedback on our software. She was kind enough to volunteer some of her time to do that. So we're super grateful for Barb for that. And as you teased a little bit, Chelsea, yeah, we're going to be doing an episode with Barb in the coming months. So really excited and so glad to be celebrating her and Fixa Foods here on the podcast.
Yeah, absolutely. All right, Sarah, I want to get right into it today. You've been teaching a course to many organizations over the past, would say, year, it seems like, that we're calling profit by design, right? And I think that it says it right there in the name, but what you're really talking about is the idea that you can design a business to be profitable. And I think that's a concept that
I don't know how to say this has been blowing people's minds basically.
It's interesting. There's been two things, I'll share really quickly, two things that I have taught over the years that just seem to really like hook onto people or people really love it and they want more and more of it. And one of it was the customizing your P &L. To me, it just seemed like such a simple thing, almost a boring thing, but it is really impactful for businesses and
I mentioned that on Katie Mlezova's podcast years ago, and it was like everybody wanted to learn more and hear about it. We're still teaching that course today. And Profit by Design, there's a farmers market in Ohio, and I went, you they asked me to come and teach on margins and profitability, and I put together a course, and it went amazing. And people, again, were sort of like eating up the information. And so we've continued to offer it. And as you said, yes, we've been
doing, I've been doing this workshop for the last year now. And we do it over and over too. So the same organizations bringing more and new people in, we've done it with Retail Ready a couple of times now. We work with Curate, which is an amazing organization based on the East Coast. And we've done lots of cohorts with them teaching the Profit by Design course. it's essentially our philosophy, right? Yeah.
in and it's laying out that philosophy to help founders understand that yes, you can design a business to be profitable and how can you do that? What are the elements of making that a possibility?
Yeah. And Sarah, that's why we wanted to talk about this today, because as you said, it is the philosophy essentially of the Good Food CFO. And we talk about our philosophy here a lot on the podcast, but I don't think we've ever said like, here it is laid out. Like this is our philosophy. This is what we stand by. and so that's really where I want to go today. you know, I'd love to hear from you, how you developed this course, this conversation.
And what you mean or what we mean by this is our philosophy.
Yeah. I love that you asked how I developed this course because it goes back to a question that, mean, if you've been listening to the podcast, you know this story. Ashley Sutterfield had a client who sent her an email that was like, how do businesses do it? How do people grow their businesses without continually having to invest, continually having to take on debt? Like, how do people do it? And that
email, I want to say changed, it clicked something in my brain, right? I had known for years, going back to my first and earliest days in food finance, that product margins were paramount to being a financially successful business or being able to be a financially successful business. But I felt like I'm not talking about this the right way. I'm not
giving information to founders in a way where this will really click with them because I don't want anybody else to be asking this question years into the future. I want people to know how to build a business without continually having to invest or to feel like they're being forced to make a decision between closing down their business or taking on the amount of debt that makes them uncomfortable. And so that's where this came from. It was like
You know, we were talking a lot about margins, we teaching a lot about margins here. And one of the very first slides in that workshop is this question that I literally copied and pasted from the email. And it's like, how do we build businesses that are financially sustainable? And the answer is yes, margins, right? But it goes beyond margins. know, even if you have...
60, 70 % margins for your business, there's a little bit more that goes into it in terms of having what we call a financial strategy, right? And being able to go, okay, with this information, what else do I need to create a profitable business by design? So long answer to your question, Chelsea. That question that we got from Ashley literally changed, I think, the trajectory of what we talk about, how we talk about it.
was the creation point for this workshop.
Yeah, and I love that phrase financial strategy. It's one that we don't hear a ton of. You know, what is your financial strategy? So that's something I would love to dig into. I think we should take a little break. And when we come back, I definitely want to talk more.
that sounds good.
Over 70 % of early stage food brands fail due to cashflow issues, incorrect pricing, and thin margins. The Good Food CFO breaks through that noise. Partnering with founders from pre-revenue through their first million in sales, we have created a first of its kind financial software that is designed to teach you to understand your numbers, price for profit, and make confident financial decisions that support long-term sustainability.
The Good Food CFO's proven framework is helping good food businesses thrive. Your business is next. For a limited time, you can head to the goodfoodcfo.com and join the waitlist to receive 50 % off your first month's subscription. Now back to the show.
Okay, Sarah, before the break, I teased that we were going to dive into this idea of financial strategy. So why don't you lay out for us, you know, how you think about about financial strategy, how you define it. And let's go from there.
Yeah. I sort of get nerdy whenever I want to talk about something that probably has a definition. I'm like, I want to know the proper definition of it. And interestingly, financial strategy is not a term that has a definition like in the Merriam-Webster dictionary, which I found really interesting. But I want to talk about the definitions because I think it's a great jumping off point for this conversation, like sort of helpful for framing it.
The definition, one of the two definitions of financial that's in the dictionary is the system that includes the circulation of money, the granting of credit, the making of investments, and the provision of banking facilities. These are all things that a business does, right? Circulating of money, that's spending money to make money, right? Having operating expenses, cash flow is essentially circulation of money, right? The granting of credit.
Technically, when a food business has 30-day terms, they are granting credit. They are also being granted credit oftentimes by a credit card company or their bank for a line of credit, etc. The making of investments. We know every food business starts with a zero dollar bank account and so investments need to be made, etc., etc. So these are all the things, all the financial… the ways that money comes in is borrowed, goes out.
in a business. Then you've got the strategy part. I love the definition of strategy, which is so simple. It's a careful plan or method. To me, these two things coming together, it's like a careful plan or method of how money will move through your business is your financial strategy. That's what I boil it down to.
The other way I want to talk about this for people is like, okay, Sarah, put this into like founder terms, put this into like not dictionary terms. we recently got an inquiry from someone who wants to work with us on the CFO side of things. And I thought that their inquiry perfectly encapsulates like what we're talking about when we're discussing financial strategy. And so I'm just going to read you part of their inquiry. said, right now I am seeking clarity on.
building a solid financial plan, understanding how much I should invest myself, whether or not I'll need to raise a friends and family around, what kind of sales I can realistically project, and how to map my expenses against that. What this founder is essentially saying is, you help me create a financial strategy? Can you help me figure out how to put this business together and how to look at it so that I understand
my cash needs, I understand my investment needs, I understand where I should be selling and how much I should be selling. All of that is the financial strategy. To me, this is very important. It's not to overwhelm, right? That's a list of things that could be overwhelming to a founder. I want to go back to what I said before the break about my earliest days in food finance and learning that
Big revenue numbers don't equal positive cash flow. It doesn't equal profitability, right? It doesn't create ease in the business. And listen, being an entrepreneur is never going to be easy, but I'm striving to make the cash flow part easy for founders. You need to have what I always call the inside of your business working well. And when that is working well, you can say,
to yourself and to your team, we now know that if we grow revenue, we will also grow profitability.
Yeah, which we just talked about at the end of last season with the business that you'd been working with that was able to, as you put it in that first year, really work inside their business and get things their ducks in a row, so to speak. And then the next year they were able to work on their business. And we saw huge, huge gains from that financial strategy.
Yeah. And so taking it back to this idea of profit by design and what we teach in that workshop is whether you are working to launch your business or you are in your business, right? Currently active. There are things you can do to, I want to say proactively create profitability or proactively create more profitability, more positive cashflow in your business.
Again, these are things that you can do from the start or if you're in a situation where the cash isn't flowing how you want it to or you're kind of struggling or you're facing that potential of having to like take on more debt and it makes you uncomfortable. Like there's no time like the present to dive into what is the financial strategy I have now, right? Because you have one, whether you did it intentionally or not. And how can I change that strategy to get better outcomes?
than what I'm seeing now.
And so if that is, you know, where you're at, like, let's say you are launching a business, right? So you are pre revenue. What are the things you should be looking at in developing that financial strategy?
Yeah, number one, and I think this will come as no surprise to founders who listen to this podcast, is your product margins. And I talk about this a lot too, and this is a big part of that workshop, is not just what are the margins of the products I am selling today, but if I am even thinking about for a moment the possibility of selling wholesale direct, selling through distribution, selling on third-party websites.
need to know what my margins will be in all of those channels today. And the reason we talk about this and the reason I love to do this presentation to farmers market organizations and people who are just working on launching is because you're in one channel, right? Or you're not in any channels yet. And so it's a perfect time to say, okay, if I'm pricing my product at $8 and my margin is 60%,
currently, and I want to keep my shelf price $8, but sell into these additional channels, what is that impact going to be on my margin? And then with that margin, what is the impact on my cash flow? And when you lay that out for people, what we see, and I think why this workshop is so powerful is because what you see is, shoot, I'm not making any money through distribution. I might not even be making any money through
wholesale direct relationships if say, for example, I'm starting at 50 % in the farmer's market channel. It opens people's eyes to the potential future if they're thinking about growing their business. I think when people can see it, they understand it and they go, okay, I'm going to go back to the drawing board and see if it makes sense for me to raise my price or does it make sense for me to
modify my product or whatever it is. They understand the implications financially of trying to grow a business or trying to grow revenue with products that have margins that don't align with their like comfortableness with taking on debt or needing outside investment, things like that. So it's a big part of it. So it's like step number one is get that sorted, not just for where you're selling today, but where you may sell into the future so that you understand
your options, your risks, et cetera.
Yeah. And I like what you just talked about with how, you know, if that margin isn't where, you know, if you realize that the margin isn't where you want it to be, doesn't, solution isn't necessarily, I need to raise my price. Right? There are options, there's ways to work through it and really get to somewhere where you feel good about your margin, but also good about the experience to your customer.
Yeah, yeah. And again, going back to my earliest days in finance working as a buyer, we discovered that our most popular product, which was like a taco buffet, was losing money. I mean, we were selling it for less than what it cost to just for the ingredients, forget even about the labor for putting it together. And so I think I love that example, this example that I'm going to share here, and I haven't shared it in a long time. I think maybe since like episode one,
But we had to ask ourselves this question. This is our most popular product. Do we want to continue offering it at a loss? Yes or no. And the answer for us was no. We sell way too many of these to be doing it at a loss. So then what can we do to continue to serve the customer well, but also make money on this thing? And it was a combination of things. For example, like guacamole came with
came with the taco buffet and I was like, let's just pull back, right? If you want guac and chips and salsa, that's an add-on. So let's bring it back to its core product. Let's evaluate what does that core product actually cost and price it appropriately. And this was like a decade before COVID and the commonness of raising prices. And so in that period of time, it was like,
those folks who regularly came to us to buy this product, we communicated to them, we had to raise the price on this and we had to make some modifications, but it's a fair price and we hope you'll still get it. Their response was like, this is still a great deal. We totally get it and we don't need the chips and guac or like, you know what I mean? It worked out fine. In other cases, we had to eliminate something from our product lineup because when we did the math, it was just so, so
expensive. The price point, it just didn't make sense for our customer. And so we had to make the difficult decision of removing some things from the menu, but putting in its place something else that did work. The same thing can be done with a CPG brand. You can examine, can...
figure out what do I keep, what do I not keep, maybe I can only sell certain products in certain channels because of the margins. You have control over those things and that's a part of designing your business to be profitable, right? Recognizing I have control over some things. I can make decisions. Having the data in front of you to make those decisions.
Yeah, I love that. And I love the design word in the, you know what mean? I love that that's like a common theme through this course. And what your philosophy is, is like, you can design it. You are in control. I love that. Okay. So we've worked through our margins, every possible channel we might go into. We've thought it through right now.
what is the next thing that we want to be looking at?
I think it's really important to think about your operating expenses. These are the things that you are going to have to pay for from day one. That word forecasting is a very scary word, but there are going to be things that you know for sure that you're going to have to pay. Whether you're renting a kitchen, your insurances, there's these things that you know you're going to incur internet fees, whatever it is. You want to get those down and understand them.
it's never going to be perfect and this is not about getting things perfect. Listen, going back to pricing and margins, the cost of an ingredient can change at any point, right? And so it's not about like having it right from the beginning and it never changing and being able to execute on that. It's about understanding, having a general understanding so that you can make decisions. So when you're talking about operating expenses, it's like get down the things that you know and you know you're going to have to pay.
And we've started to tell people, an extra 10 to 15 % of the core expenses you have. Just add it on top as a buffer for things that you're not expecting that you might run into on a monthly basis. But the reason operating expenses is the next thing that you want to look at is because when you have your pricing and your margins, right, and you have your operating expenses, you can then create financial scenarios. And going back to that founders,
inquiry, right? Understanding how much I should invest myself, whether or not I'll need to raise friends and family, what kind of sales I can realistically project, and how to map expenses against that.
Okay, Sarah, so wait, how are you saying this goes back to the idea of financial scenarios?
So when you have your pricing and margins for every channel and you understand with some level of clarity what your operating expenses are going to be each month, you now have everything you need to build out what if situations for your business. So for example, what if I sell at the farmer's market exclusively for one year? That would mean that you are selling at one price, let's just call it $8.
know, for the year and maybe your margin is 60 % and you've got $1,000 of operating expenses, right? With that information, you could very easily calculate or use a tool like our software to calculate how many units do I need to sell to break even? How many units do I need to sell at the farmer's market to be profitable? And again, it's going to be a little bit of guessing, right? How many units can I sell at the farmer's market if you're not actually physically there yet?
there might be an estimation, but you can also do some research, right? Talk to people, talk to the market manager. You know what mean? Like do some research and try to get a sense of, what if I sold 10 units in the first week? Because I'm brand new. What if I sold 25 units, right? You'll still be able to get a clear picture of how many units you'll need to sell in a month to break even. And then with that information, even though you might not know how many months it'll take to get there, you can take a stab at it.
And let's say you're like, it's going to take me a year potentially to get up to 100 units at the market, which is what I need to break even. If it did take me a year, would need X number you'd know I need X number of dollars to invest to keep my business alive until I'm at that break even point, until I'm at that cash flow positive point. Alternatively, you might be like, okay, I'm selling in farmers markets right now and I want to grow the business. What if I grow into distribution?
right away. What if I grow into independently owned retail shops in my area, right? You start to map out, there's 25 independent stores that I would sell to and I think I could sell them a case every two months. And so just start putting these numbers down and putting them together and you can say, okay, if I was able to execute on this plan, I would need this much money. I would break even an X number of months. I would hit profitability an X number. I would need this much funding.
you can see all of that. Now, here's the deal. That's difficult to do in a spreadsheet on your own if you don't know exactly how to set it up. But that's why we created the software that we've created, right? To allow you to just focus on the scenario building, the asking the question, what if, and seeing, okay, what does that look like? We'll do all the math for you. But literally just the pricing and margins and a sense of your operating expenses
opens your eyes to so much information. Sometimes pre-launch, and I think I've told the story about the cookie company once before, there's a woman I used to work with makes some of the most amazing chocolate chip cookies that I've ever tasted. She was thinking about doing a cottage food business and selling the cookies. We basically created a scenario for her. This was years ago, so we did it in a spreadsheet.
when she realized how many cookies she was going to have to make and how many she could actually bake in her oven at a time, the math worked out too. She would have to be baking 24 hours a day in order to make enough cookies to make enough money to make this make sense, like for her to earn a living from this business. And so that model didn't make sense for her. And so it was like, okay, I'm not going to embark on that. Well, let's look at if I rented a kitchen,
Suddenly, you're renting a kitchen, but now you need to actually make and sell more cookies because your expenses have gone up and you're able to look at it and go, do I want to do this if you're pre-launched? In her case, was like, no, this is not that I'm just going to have making cookies be a fun thing that I do on the side. I'm not going to try to make it my livelihood. You know what I mean? Most times, more often than not, it's a business you do want to move forward with and it's just about finding what is that design.
and the design is what is the channel, right? And am I going to do it from home? Am I going to do it from a commercial kitchen? You know what mean? Am I going to buy it? Am I going to rent it? Working through those scenarios and then being able to say, ah, I like this one. This one feels good. This one looks good. This one aligns with how much debt I'm comfortable taking on. And so you've literally created, you've designed a version of the business that you feel good about personally, financially, right? And like all of the ways.
and it's laid out for you in a way that then you can execute on. Is it going to be perfect? Is it a guarantee? No, but at least you've got that vision out for the next 12 plus months of how this can go. If you're not hitting the mark, if you're like, okay, you projected I was going to sell 25 units this week at the farmer's market, but I only sold 20. Now you know I'm off track from my design by five units. What can I do to get back on track?
Right? So having that design, if you will, having that scenario that you're wanting to tackle and make your reality also helps you to execute on it, right? And to be successful. And we see that a lot. It's like when people get a forecaster, when they have a scenario that they're working toward, they actually are more likely to hit their goals, which is a really cool benefit of doing the work.
Yeah, it kind of goes back to that idea of, I mean, you just said it, right? Am I on track or am I off track? And if you don't know what your track is, how will you know if you're on it or not? And I think that that can be very huge for any business.
Totally. And the other critical piece I see a lot of is founders that they haven't mapped out the potential future of what their business would look like. They haven't said, okay, if I can design this business in a particular way, here's what it will look like. They haven't done that work. And they get into the situation like the founder, going back to the beginning of the episode, the founder that emailed Ashley, who was like, I feel like I have to keep putting money in the business.
There's no vision for how much money is this going to take. There's no insights into how long is this going to take until I can stop reinvesting. There's no insights into are my margins such that I will ever be able to not be investing in this business. So when you start out with a financial strategy and you map it out, right, as I keep saying, you design what you think you want your business to look like.
you can also see and know, all right, I got 12 months at a minimum until this business is making enough money to reinvest in itself, right? So I need $50,000. I need $20,000. Having that insight, having that insight into, I need 12 to 15 months,
to hit profitability, knowing that, then you're not disappointed at month 10 when you're not profitable and you have to invest more money because that was part of the plan. Right? And if that plan doesn't work for you financially because you don't have $50,000 or whatever it is, then you can modify the plan and tinker with it and say, okay, what version of this business does make sense for me? Maybe I don't launch until I can get more money because I can't figure out how to make it work without that level of investment.
When founders are projecting losses, it's a lot easier to take the losses, to accept them, than it is if you haven't projected them. Because at the end of the month, you can sit down and go, this is what it was supposed to be. We knew we were going to have losses. We have money in the bank. It's okay. We can keep moving forward.
It's actually really huge that I think that's a really, like, just want to pause on that because I think that is a very, very, very strong point, you know, that I think it's very easy to get lost in the, no, this isn't going how I thought it was going, or it's, you know, we're losing money or I have to borrow again. But yeah, it would be really empowering to go, no, no, that was part of the plan. We knew that was coming. We're on track.
Yeah. That's huge. right where we're supposed to be, having losses this month of X hundred or X thousands of dollars. Are we doing everything else in the plan correctly? Are we hitting our unit sold goals? Are we hitting our revenue goals? Being an entrepreneur, I think life is a roller coaster and then you add onto it being an entrepreneur, there's another level of roller coaster.
If you know when the ups and downs and the curves are coming, it's an easier ride. It's a little bit more comfortable.
a more fun ride if we're being honest, right? Then you can just throw your hands up and go, yeah, woo!
doing it. exactly. So we focus on financial strategy. We've really thought about what is the good food CFO's role in helping founders. And I like to reiterate it here because it's like a lot of resources are available to companies that are making a million dollars or more in revenue, right? There's software that costs, you know, $350 to $500 a month to to help you.
have a financial strategy at that level. There are obviously CFOs and other consultants that are expensive. The Good Food CFO strives to meet founders from pre-revenue, so haven't launched yet, up to their first million, and not only make it affordable, but give you resources and tools to help you make it to that point. Financial strategy was the thing
That in my mind, when, when I look back at the founders who come to work with us at the Good Food CFO, it's the thing they're lacking. It's the thing that they want help with. It's that inquiry from that founder, help me understand these things. And so the software is designed to enable you to create that plan without having to think about how do I build this in a spreadsheet? Where do I plug in the numbers? Right. It's designed to.
allow you to enter the information and kind of in a conversational sort of way, enter your operating expenses and create multiple growth scenarios that you can compare to one another. And then you can say, one, that's the one that I want to execute on. We believe we're filling a gap, filling a hole in the industry by providing tools that speak to one another, right? And that allow or help
founders to create a design to achieve profitability in their business. And, you know, I'm very much a believer in like sort of divine timing and everything happens for a reason. And, you know, this presentation, that email that came from Ashley's client, it all is leading up to this point to be able to help founders dig into this work. We want to change that statistic that 70 % of food businesses fail because they run out of money.
I'm so excited for the day when we can say, the founders that are using this software, 70 % are succeeding, 80 % are succeeding because they have financial strategies and they're executing on those strategies.
Well, Sarah, I'm glad that we got to dig in today to what we mean when we say financial strategy, because we do say it a lot around here. You do? So I'm glad that we were able to break that down for those listening. And for everyone who is listening, if they are interested in being one of the first people to see, to utilize, to get into the Good Food CFO software, where should they go?
They can visit the goodfoodcfo.com. Lots of information on the website to get access to the software, or if you're hearing this kind of early on, to hop on the wait list and be among the very first to utilize the software.
Okay, perfect. Well, Sarah, thank you again and I'll see you next week.
Wanting to dive deeper into your financial strategy? Visit thegoodfoodcfo.com to learn more about the Good Food CFO software. We'll be back with a brand new episode next week.
This podcast is for entertainment and informational purposes only and is not intended to provide personalized financial, tax or legal advice. Every business is different, so please consult with qualified professionals about your specific business and financial situation. Any actions you take based on what you hear on this show are at your own risk.
HAVE YOU RATED AND REVIEWED THE GOOD FOOD CFO PODCAST YET?
IT’S THE NUMBER ONE THING THAT YOU CAN DO TO HELP OTHERS IN THE FOOD INDUSTRY FIND THE SHOW!
And you can do it in just a few easy steps:
Click here to find the podcast on iTunes
If you listen on Apple hit “Follow” so you never miss an episode!
Scroll to the bottom of the page, Click “write a review” and share what you love about the show!
THANK YOU for helping to support & promote The Good Food CFO!