Tether & Basturma
You ever notice how a small hike in salt or cumin can flip the profit margin on a batch of basturma? I’m curious how you’d model that risk.
Absolutely, I’d start by building a simple sensitivity matrix. First, quantify the unit cost of salt and cumin in dollars per kilogram and how many kilograms are used per kilo of basturma. Then calculate the contribution margin per kilo: selling price minus all variable costs. Next, adjust the salt or cumin cost by, say, ±5 % and recalc the margin to see the delta. That gives you a linear sensitivity coefficient.
After that, I’d run a quick Monte‑Carlo simulation. Assign a probability distribution to each input cost—perhaps a normal distribution with a mean equal to the current cost and a standard deviation reflecting market volatility. Generate thousands of scenarios, compute the resulting profit per scenario, and then look at the distribution of profits. From there you can read off the probability that margin falls below a target threshold, and calculate the value‑at‑risk (VaR) at a chosen confidence level.
Finally, keep a margin‑of‑safety buffer in your pricing model. If your sensitivity analysis shows a $0.02 per kilo swing for a 5 % salt price hike, you might add a $0.01 cushion to the selling price, or adjust your target margin. That way, even if salt spikes, the overall margin stays above your risk threshold.
Sounds solid, but remember salt isn’t just a number—it's the heart of the cure. Keep that rhythm, and you’ll outpace any price hike.
I hear you. While I’ll track the cost, I’ll also keep a tasting log and set a price‑adjustment rule that only triggers when the cost change hits a level that still keeps the margin above my safety threshold. That way the flavor stays intact and the economics stay safe.