You’re at a party or event and it’s pretty meh. The only saving grace is the food. “At least the food is good” is all you keep telling yourself. You begin to wonder what it would be like to start and run a catering business. Can you make money doing it? What do the working hours look like? How and where do you begin?
By the end of this article, you’ll know if you want to start a catering business, how lucrative it can be, and some easy steps to get yourself growing and expanding your services. Let’s pretend you’ve already decided on starting a catering business and get to the good stuff. Let’s begin with some numbers.
Catering Expenses And Pricing Models
This is the part of the planning phase that everyone hates but is, BY FAR, the most important to nail. The goals of this section are to figure out your expenses and pricing models.
Up Front Costs
What amount of money do you need to get started? For catering, it includes materials to hold and serve food. Think about serving trays, serving utensils, tablecloths, a food warming system for storage, etc. The biggest item will be the food warming system to keep your delicious food warm before it hits the table. These cost $300+ but are necessary as well as provide you validity and professionalism. Make a list of the up-front costs and tally up the total. It should be around $500 or less. It’s not cheap but it’ll provide you the tools to be successful.
Ongoing expenses for catering include heat sources to keep the food warm while it’s out being served, plates, silverware, napkins, and other things you may provide at every event. These also include things like gas and any costs needed to prepare the food. I`m not going to include the actual food or drinks here because those costs will come from the client who will pay up front for your services. Also, don’t forget about hiring some help! We’ll discuss that in the next section below.
Cost Of Each Job
The cost of each job is primarily time and transportation for yourself in addition to small expenses as explained above. Another cost we haven’t spoken about is an employee or two. It’s borderline impossible to give good service by yourself. You can get by with one other person at first during the event. All other catering is paid for by the customer. Let’s say between cooking, transporting, and serving, you’ll need help for a total of 12 hours. At $15 an hour, that’s $180 not including small costs. To keep this easy, let’s call the cost of each job to be $220.
Pricing And Margins
Once you know what it will cost you to cater an event, you need to figure out what to charge! This largely depends on the size of the event including number of guests, venue, types of foods, and quantity of food. The bigger the size and quality of the catering, the more you get to charge, right? If you’re making rice and beans, you can’t charge too much. If you’re serving salmon, steaks, and caviar, that’s a whole other ballgame. I would base your initial pricing model around your experience with catering, the type of events you’ll be working, and a margin % between cost of food, preparation time, and amount to be served. Food costs are typically around 30% of what you should charge. Remember, it takes a lot of time, up-front costs, and other employees to run a successful event. If the food costs $300, charge $1000. You may, also, want to start a bit lower since you’re new, but this is a good foundation.
When creating a pricing structure, you want to make sure 1. It’s fair to the customer and 2. It creates margins that you’re happy with. Undercharging won’t make you any money. Overcharging won’t bring you many customers. The combination of these will help drive your pricing model.
A margin is simply the difference between what you charge and what it costs you to cater an event. If we take the previous example of ongoing expenses being $220, food costing $300 and you charge the customer $1000, your margin is $1000 – $220 – $300 = $480 profit!
Tip – Remember, pricing is never forever. You can always change pricing as you see fit.
Tip – Take the profit margin and divide it by the number of hours you worked. If you spend 24 hours planning an event, you’re making the equivalent of $20 an hour. Not too shabby for a beginners catering company!
The worst thing you can do is to start a business, work incredibly hard, and then find out you won’t make any money. Do the research first to ensure it’s worth the time and effort as well as finding out how to do it correctly.
Once you know things like up-front and ongoing costs as well as the equipment you’ll require, go out and get everything you need. Start crafting up a menu and experimenting with foods you will serve. Make sure it’s delicious or you won’t have any repeat customers.
After you’ve perfected your recipes, menu, and have your equipment, it’s time to start marketing your business!
Marketing And Finding New/Repeat Customers
Finding customers to cater an event isn’t as easy as walking door to door. Not everyone is throwing a party or event and not everyone trusts someone to cook their food either. You need clout, experience, and legitimacy. Below are some ways to begin marketing to find some clients.
One of the best ways to find clients is by networking. This entails going to other events or speaking with friends and family face to face. How many times do you meet people and they ask what you do? A lot, I bet! As a caterer, I bet you’re around other events constantly! Communicate that you’re an event caterer and do all sorts of business from small to large! Say you’d love to cater for one of their events one day! Hand out a business card. Get their phone numbers. If you make an impression, they’ll remember to call you one day!
Tip – Get some cheap business cards with your company name and information on it. They’re easy to pass out and make you look legitimate even if you’re just starting out.
Website And Internet Searches
Before anyone will hire you to cater for their event (unless it’s a close friend or relative), you’ll need a website. No one will hire a company to cook and serve food for their guests without a website with information. It, once again, makes you look legitimate in the eyes of the customer. Go on Squarespace, make a simple website using one of their templates, and make it live. One of the best ways for customers to find you is via internet searches and they can’t find you if you’re not on the internet, right?
Tip – Try and specialize your company or website to be around your local neighborhoods. If you’re in Chicago, for instance, maybe your company is “Lincoln Park Catering” or “Catering Chicago”. This way, when someone searches for planners in their neighborhood or city, they’ll be guided directly to your site. It’s a niche but it’s also a great way to find local customers.
You can look online for mailing lists via a company such as Mailchimp. You can create brochures or marketing materials and send them to random people by location, age, or other demographics for your target audience. When you do this, people always get the information right into their virtual or real mailboxes. It’s a great way to get the name out and doesn’t necessarily have to be very expensive.
Tip – A mailing list can also be in the form of social media! You can create a Facebook page or maybe write messages to your friends on there telling them about your business. Others can share your status or follow your page, and this acts just as good as a mailing list except people know who you are and want to help spread the word!
Partnerships And Relationships For Your Catering Business
Finding reliable consistent work is key in the catering world. Look up party planning services and call them directly saying you’d love to work with them on future events and describe your pricing models and maybe even setup a free tasting of your food. If you can create good relationships with other businesses who utilized catering services, they’ll always go back to you if you do a great job. Once you setup key relationships in the industry, they’ll be calling you for work, not the other way around.
Marketing can be one of the toughest things to get right but if you do a good job, are professional, and have great food and service, word of mouth will exponentially grow your business for you. With some profits, you can also reinvest that into more marketing initiatives as well as other ways to increase your legitimacy and experience.
Once you have a couple of clients and catering events under your belt, it’s time to start thinking about how to expand the business! After all, you don’t want to make a few hundred dollars a week. You want this to grow into a thriving company!
You should always practice reflection and improvement on a regular basis, which then helps drive how you will expand!
Reflection And Improvement
After each event has passed and your work is all done, make sure to take 15 minutes and think about:
- What went right?
- What went wrong?
- Did everything go according to plan?
- Was the customer happy with the result?
- Did you have fun?
- Did you make the money you thought?
It’s important to reflect on the day and ensure it’s everything you thought it would be and how you feel about the future. How would you improve the previous event? What can you do for the next event? Constantly evaluating yourself is imperative to create the best possible business model.
Expand Your Catering Business
To expand, you must first find more customers or expand your services. Can you increase your marketing efforts? Can you find a way to start catering larger events with a larger profit margin? Maybe you find a party planning company you love to work with and create a partnership lowering your costs and decreasing your effort.
Expanding a business is tough work. You must really reflect on what you’re currently doing and how to make it more efficient or bigger. Start by increasing marketing and building relationships. Once you’ve hit capacity for your current team, you can then start to higher some more help. You could even look into expanding your business into a full-fledged party planning business if that interests you,
Tip – Make sure you don’t grow too fast! Growing organically will make sure the quality of the events doesn’t drop off. Keep catering great food with great service and word of mouth will bring you more customers automatically.
Final Thoughts: Starting A Catering Business
Starting and growing a catering business can be a lot of work but it can be very lucrative and rewarding. If anything, it’ll help you realize what it takes to start a business and you can parlay that knowledge into something else down the line. Until then, cook away!