How to Cost a Recipe Properly: A Step-by-Step Guide for Food Businesses

Why recipe costing matters

If you don't know your cost per portion, you can't know your margin. And if you don't know your margin, you can't know whether your business is profitable — or how much headroom you have to discount, absorb ingredient price rises, or invest in growth.

Recipe costing is the foundation of a financially healthy food business. It's not complicated, but it does require discipline and the right process.

Step 1: List every ingredient and its cost per unit

Start with your supplier invoices or purchase receipts. For each ingredient in the recipe, you need to know:

• The purchase unit (e.g. 1kg bag, 6-pack, 5L bottle)
• The purchase price (what you paid, including delivery if applicable)
• The cost per gram, ml or unit

For example: if you buy a 1kg bag of flour for £1.20, your cost per gram is £0.0012.

Step 2: Calculate the ingredient cost for each recipe

Multiply the quantity used in the recipe by the cost per unit for each ingredient, then sum them up.

Ingredient	Qty used	Cost/unit	Cost
Plain flour	200g	£0.0012/g	£0.24
Butter	120g	£0.0085/g	£1.02
Caster sugar	80g	£0.0014/g	£0.11
Eggs (free range)	2 eggs	£0.35/egg	£0.70
Vanilla extract	5ml	£0.018/ml	£0.09
Total ingredient cost (12 portions)			£2.16

Cost per portion: £2.16 ÷ 12 = £0.18

Step 3: Add a waste factor

Not all ingredients make it into the final product. Trimming vegetables, cracking eggs, burning the first batch — waste is real and must be costed. A typical waste factor for baked goods is 5–15%.

Step 4: Add packaging costs

If your product is sold in packaging — boxes, bags, labels, tissue paper — include the cost per unit. Don't forget the label itself if you're printing Natasha's Law compliant labels.

Step 5: Calculate your food cost percentage

Food cost percentage tells you what proportion of your selling price is consumed by ingredient costs. The industry benchmark for bakeries and food producers is typically 25–35%.

A food cost % below 25% is generally healthy for a bakery or food producer. If yours is above 40%, you're likely underpricing or over-spending on ingredients.

Step 6: Factor in labour

Ingredient cost alone doesn't tell the full story. If a recipe takes 2 hours to make 24 portions, and you value your time at £15/hour, that's £30 in labour — or £1.25 per portion.

Many small food businesses ignore labour when costing, which is why they feel busy but not profitable. Even if you're not paying yourself a salary yet, you should cost your time.

Step 7: Set your selling price

Once you know your total cost per portion (ingredients + waste + packaging + labour), apply your target margin:

How FoodCore automates recipe costing

Doing this manually in a spreadsheet works for a handful of recipes. But when you have 30+ products, multiple suppliers, and ingredient prices that change regularly, it becomes a full-time job.

FoodCore calculates the cost of every recipe automatically. Enter your ingredients and supplier prices once, and the system shows you the cost per portion, food cost percentage, and suggested selling price for every product — updated instantly when ingredient prices change.