$200 for a one hour event!
May 2018
If you've ever run a coffee van, you'll be familiar with the difficulty we have in trying to explain that, even if an event only has 20 people, our charge out rate is still a minimum of a couple hundred dollars. Or, better still, if you've asked for us to do an event, and you've been thrown off by the price we quote you, please read ahead for our reasoning (and forgive us for our seemingly high quote!).
"Sure", you say, "I'd love to come to your daughter's birthday party". "My hourly rate is $200 including GST. Usually I charge a minimum two hours on a Sunday, but since you're a regular, I'll happily do it for just one hour".
"What?!", Says the regular customer, whom you've always had a very pleasant relationship with, and who thought a coffee van at her child's birthday party on Sunday morning would be both a great addition to the party, and surely a nice little gig for her favourite coffee van owner. "Two hundred dollars minimum?! But there's only about twenty adults. It won't take you long at all! If it's only 30 coffees in total then surely thats only worth $120 tops?"
And right there, ladies and gentlemen, lies the age-old conundrum for the coffee van owner. To charge high and fair, or to do it for the love of your regulars.
Of course, we would love to be able to "pop in" to parties and events, sell 15 coffees, and take $60 dollars, be happy with that and go home. And don't get me wrong, plenty of vans do, and I'm not suggesting they shouldn't! But the reality is, unless we guarantee our income, and unless our minimum charge is at least $200, we are losing money, or at best, breaking even. Of course, if you have 4 or 5 events lined up in one day, then you can charge less per event. But if that happens, you're a lucky one, albeit a tired one!
Here's why we can't do a one hour job for less than $200 an hour:
For any job, big or small, there is at least a 10 minute stock up prior to leaving home. We don't just open our vans and "bing", everything is ready to go. There's the stocking of milk for the event, and just how much milk should you buy for this one-off event? God only knows! There's the checking you have everything that this specific event organiser wanted (don't forget the marsh mellows). Then, you turn your machine on for the standard half hour warm up, and start driving. Factor in a few extra minutes to navigate the roads to this location that you haven't been to before. Then when you arrive, usually there's 5 minutes trying to track down the person who organised the event. And where do they want you to park? "Over there would be great!" "Hmmm, you say, any chance I could get under the shade, where the van can be flat (rather than on that slope!), and near the power supply to plug in (like we spoke about on the phone)?." "Oh, hang on, Terry will just have to move his ute for you." "Where's Terry?!", and "What's that? You don't have the 15 amp power outlet, only a 10 amp? Thats ok, I guess I'll just run the generator." You get my drift. It's not the fault of the event organiser that they haven't thought through all the ins and outs of running a coffee van, and its not the fault of the coffee van owner that they don't know the ins and outs of the property they are visiting for the first time. So I would say, 20 minutes minimum for set up time once you arrive, and an average of 30 minutes driving time. Sometimes you may travel 45 minutes for a job. But even if it's less than a 30 minute drive, its a 30 minute machine-warm up time. That has to count towards your fee.
Now lets turn to stock. Lets say you make 20 coffees and 10 hot chocolates in your one hour job. Before you make any coffee you run three shots through on each group handle - as standard practice to warm up the machine. Then, during service, 5 of the customers want an extra shot. So instead of 20 shots, you've now made over 30 shots. That's over half a bag of coffee, lets say $18 worth, assuming you pay $25 per kg for your beans. You bought a bit of extra milk, to be safe, so you got 5 bottles of full cream and 2 bottles of light milk for a total of $18. Plus a couple soy, an almond and a lactose free for a total of $10. Lets say all your other products - hot choc powder, marsh mellows (they were popular), cups, sugar, syrup, coffee trays, chux wipes, paper towels, spray and wipe, the garbage bag you used, came to a total of $15 (I know you didn't buy a whole bottle of spray and wipe, or use a whole roll of paper towels - the $15 is an average cost of all these items for you one hour job). So your coffee expenses are:
Coffee beans: $18
Full cream and skim milk: $18
2 soy, one almond, one lactose free milk: $10
Other products: $15
Total: $61
You stay for one hour, not including the 20 minutes you were there beforehand to set up, and then you spend another 20 minutes packing up and cleaning before you drive home. You ran the generator the whole time, and you drove, lets say one hour in total (30 minutes each way - if you live in a city, like I do, this is a good run). Lets say your fuel costs were $20 for the day.
So, in total, you've been paid $200 for the job. Take out GST, and you've been paid $181. Not a bad morning. But you spend $61 on your coffee products and $20 on fuel, which totals $81. Now your profit is down to $100. So if you spent 10 minutes getting your van ready at home, drove 30 minutes to get there, got there 20 minutes before and stayed 20 minutes after the one hour service, drove 30 minutes home, and then re-stocked/re-filled water on your van for another 10 minutes, you worked for a total of 3 hours. That means your hourly rate, after your expenses, is $33.33, before you take out income tax. Lets say your marginal tax rate is 30%, then you're making $23.33 per hour, or $70 for the event. It's a Sunday, right? $23.33 is far less than the minimum wage for a casual worker of your age and experience on a Sunday.
To summarise this for you:
You received for the event : $200
Minus GST (divide $200 by 11 to get GST of $18.181818) = $181**
Minus coffee and fuel expenses of $81 = $100 net profit before tax.
Minus income tax at 30% marginal rate = $70 net profit after tax.
So, next time you get asked to do a job for one hour, and you offer to do it for $200. Remember, what you're really saying is, I'll do it for $70.
The Sunday morning sleep in option doesn't look so bad after all!
Of course, the intangible benefit of this job is firstly that you're keeping your regular customer happy. She'll likely be a customer for life (assuming she was OK with the $200 and realised you weren't overcharging her!). Secondly, you may get other business from that event. One of those party guests could be hosting an event for 500 people the next weekend, and it just so happens to be looking for a coffee van. Sometimes the goodwill you generate from a small event goes a lot further than the money you make that day.
If you are a new operator, I would take the approach that any business is good business, big or small. However, if you are a long-term operator, or if you have a decent run already established, and you really do value your rest time, I'd say don't do it. You are better to focus on your regular Monday to Friday and your regular events. You will avoid becoming burnt out by saying a polite "no thanks" to some of the smaller gigs.
How much is your time worth? As long as you know exactly how much you're making, only you can answer that.
Alex
**Some of your expenses (eg cups, syrup, chux wipes, fuel, have GST attached, which means you will get GST credits for these. This will reduce the amount of GST you actually pay at the end of the quarter by a few dollars, but it won't make a huge difference, and we have left it out for simplicity).