W02 Case Study: Maria's Soup Shack
Maria’s family gathered at her home after the funeral service. Her beloved husband Juan passed
away unexpectedly. Now, her home was filled with family, friends, and neighbors, but she had
never felt more alone.
“What will you do now?” Maria’s sister Natalia asked, helping herself to another bowl of Maria’s
rice and chicken soup from the large pot. The soup was nearly gone, having fed those who had
come to express their condolences for the past few days.
“I don’t know.” Maria had some savings, but she would need to get a job very soon. “Our brother
Paco said I could run his fruit stand.”
“But then you’ll have to move.” Natalia frowned and lifted a spoonful of the delicious soup to her
lips. “This really is the best soup in the world, Maria. Too bad you couldn’t go into business
selling it instead of Paco’s lemons and limes.”
Maria observed the many now-empty bowls of her famous rice and chicken soup. It had been her
grandmother’s recipe and Juan’s favorite. She knew she wasn’t expected to cook at her own
husband’s funeral, but it seemed to make everyone happy. She could use some happiness today.
Maria stirred what was left in the giant pot of soup, a perfect blend of broth, chicken, and rice.
Making this soup was what she knew how to do best in the world. “Do you think I could?” she
asked Natalia absent-mindedly, watching the colors in the beautiful soup swirl. “Start my own
business? Making soup?”
“Why not?” Natalia said, blowing on her soup before she took another big spoonful. “How hard
could it be?”
A business of her own would give her freedom to stay in her home and be near her friends. She
wondered, how hard could it really be?
When the guests finally left, Maria sat down to relax and ponder on this idea. The more she
thought about it, the more excited she became about the opportunity. Fortunately, her husband
had saved a fair amount of money for a rainy day. Perhaps she should just go buy the ingredients
and cooking equipment, rent a building, hire help and start selling. Yes! Tomorrow she was
going to get up early and make it happen. After all, it would keep her mind off of Juan. Then she
remembered his kind and supportive attitude. She felt him telling her, “You can do anything you
want - if you just put your heart into it.” Exhausted from both grief and excitement, Maria
decided to head to bed early. She knew she was going to need extra rest if she was going to pull
this off.
,Source:
Pexels
The next morning, she arose early, said her morning prayers, and began to make a list of all the
things she would need. But as she was writing the list, her father came by and was surprised to
see her getting ready to head out. “What are you doing?” he asked.
“I’m going to start a business!” she replied. “I’m making a list of everything I need to buy
today.”
Her father wrinkled his brow. “What are you going to make?”
“Abuela’s chicken soup. Everybody loves it.”
“Everybody?” he said. It wasn’t one of his favorites.
“Oh. Don’t they?” she asked, feeling unsure for the first time.
“It’s honestly not for me to say,” he said. “But before you waste time and money, go find out
whether people really would be willing to pay for it. Once you’ve proven that there is enough
demand for it - and for the right price - then you can go crazy buying all the stuff. But I wouldn’t
spend a dollar before I did that.”
Maria frowned. "I have no idea how to do that. ”
“I'll help you. I’ve learned a lot of hard lessons over the years. Hopefully, I can help you avoid a
few of those.”
He sat down, and they began to make a plan that would help her best research her target market.
, The Soup Shack: The Profit Formula
Maria spent weeks researching her market. Local restaurant menus focused more on salads not
soup, likely due to the hot weather her town experienced during tourist season. However, they
hadn’t tasted her grandmother’s recipe yet, which was tasty all year round.
She invited her neighbor Gaston Petrenko who worked as a chef in a restaurant, several friends
who worked as waitresses, the owner of the town’s largest local catering company, and a family
of tourists staying nearby to her home for a free soup dinner. The feedback was overwhelmingly
positive, confirming Maria's belief that she had something special to offer.
She then decided to set up a booth at the local farmer’s market and see what kind of feedback she
received there. Quite a few people tried it the first day, and from the looks on their faces, they
seemed very pleased. What was even better, she noticed that over 35% of them came back later
in the week, about 22% of them bringing friends or family to try it too. Her sales were increasing
by 8-10% every day.
“But what if these people only pay this much for soup at the market? Would they expect to pay
less if I had it in a restaurant?” she wondered. She decided she had better do some surveys.
When a customer purchased her soup, she would ask questions like, “How often do you eat out?
What times of the day do you usually eat out? How much would you expect to pay for a bowl of
soup like this in a restaurant?” She learned that only about 40% of these individuals ate out
regularly, but most would pay between $5-6 for a bowl of soup, with some being willing to pay
more.
Maria figured that even if only 20% came regularly, she should be okay, but she needed to figure
out whether charging $5-6 would be enough to make a profit.
She made a list of all the ingredients she needed and how much each would cost. The next day,
she experimented with making large batches and found two local farmers who could supply meat
and rice.
Now, she needed to make sure it would work financially. She crafted her finance framework,
mapping out the initial costs of ingredients and the staff she needs to hire.
She felt like she had good idea of the costs, but was it low enough to leave her enough money to
live if she were to charge less than $6?
Calculating Unit Economics
When you know there is interest in your product, you should determine whether it will make
money. This is called calculating the “Unit Economics.” Your goal is to determine if the costs to
make the product are less than what your customers are willing to pay for it.
Let’s see how this works by looking at a breakdown of Maria’s costs.
The Soup Shack Case: How much should Maria charge?
Even though everyone seemed to like her grandmother’s soup, Maria knew she had to be able to
sell it for more than it cost her to make it. Fortunately, she had taken an online accounting class
and remembered that the first step in proving it could make money was to calculate the costs,
beginning with the Direct Materials and the Direct Labor.
Unit Costs
First, she had to determine what the cost would be for all the ingredients for each bowl of soup,
since she was going to sell it one bowl at a time. She wrote down her grandmother’s recipe and
Maria’s family gathered at her home after the funeral service. Her beloved husband Juan passed
away unexpectedly. Now, her home was filled with family, friends, and neighbors, but she had
never felt more alone.
“What will you do now?” Maria’s sister Natalia asked, helping herself to another bowl of Maria’s
rice and chicken soup from the large pot. The soup was nearly gone, having fed those who had
come to express their condolences for the past few days.
“I don’t know.” Maria had some savings, but she would need to get a job very soon. “Our brother
Paco said I could run his fruit stand.”
“But then you’ll have to move.” Natalia frowned and lifted a spoonful of the delicious soup to her
lips. “This really is the best soup in the world, Maria. Too bad you couldn’t go into business
selling it instead of Paco’s lemons and limes.”
Maria observed the many now-empty bowls of her famous rice and chicken soup. It had been her
grandmother’s recipe and Juan’s favorite. She knew she wasn’t expected to cook at her own
husband’s funeral, but it seemed to make everyone happy. She could use some happiness today.
Maria stirred what was left in the giant pot of soup, a perfect blend of broth, chicken, and rice.
Making this soup was what she knew how to do best in the world. “Do you think I could?” she
asked Natalia absent-mindedly, watching the colors in the beautiful soup swirl. “Start my own
business? Making soup?”
“Why not?” Natalia said, blowing on her soup before she took another big spoonful. “How hard
could it be?”
A business of her own would give her freedom to stay in her home and be near her friends. She
wondered, how hard could it really be?
When the guests finally left, Maria sat down to relax and ponder on this idea. The more she
thought about it, the more excited she became about the opportunity. Fortunately, her husband
had saved a fair amount of money for a rainy day. Perhaps she should just go buy the ingredients
and cooking equipment, rent a building, hire help and start selling. Yes! Tomorrow she was
going to get up early and make it happen. After all, it would keep her mind off of Juan. Then she
remembered his kind and supportive attitude. She felt him telling her, “You can do anything you
want - if you just put your heart into it.” Exhausted from both grief and excitement, Maria
decided to head to bed early. She knew she was going to need extra rest if she was going to pull
this off.
,Source:
Pexels
The next morning, she arose early, said her morning prayers, and began to make a list of all the
things she would need. But as she was writing the list, her father came by and was surprised to
see her getting ready to head out. “What are you doing?” he asked.
“I’m going to start a business!” she replied. “I’m making a list of everything I need to buy
today.”
Her father wrinkled his brow. “What are you going to make?”
“Abuela’s chicken soup. Everybody loves it.”
“Everybody?” he said. It wasn’t one of his favorites.
“Oh. Don’t they?” she asked, feeling unsure for the first time.
“It’s honestly not for me to say,” he said. “But before you waste time and money, go find out
whether people really would be willing to pay for it. Once you’ve proven that there is enough
demand for it - and for the right price - then you can go crazy buying all the stuff. But I wouldn’t
spend a dollar before I did that.”
Maria frowned. "I have no idea how to do that. ”
“I'll help you. I’ve learned a lot of hard lessons over the years. Hopefully, I can help you avoid a
few of those.”
He sat down, and they began to make a plan that would help her best research her target market.
, The Soup Shack: The Profit Formula
Maria spent weeks researching her market. Local restaurant menus focused more on salads not
soup, likely due to the hot weather her town experienced during tourist season. However, they
hadn’t tasted her grandmother’s recipe yet, which was tasty all year round.
She invited her neighbor Gaston Petrenko who worked as a chef in a restaurant, several friends
who worked as waitresses, the owner of the town’s largest local catering company, and a family
of tourists staying nearby to her home for a free soup dinner. The feedback was overwhelmingly
positive, confirming Maria's belief that she had something special to offer.
She then decided to set up a booth at the local farmer’s market and see what kind of feedback she
received there. Quite a few people tried it the first day, and from the looks on their faces, they
seemed very pleased. What was even better, she noticed that over 35% of them came back later
in the week, about 22% of them bringing friends or family to try it too. Her sales were increasing
by 8-10% every day.
“But what if these people only pay this much for soup at the market? Would they expect to pay
less if I had it in a restaurant?” she wondered. She decided she had better do some surveys.
When a customer purchased her soup, she would ask questions like, “How often do you eat out?
What times of the day do you usually eat out? How much would you expect to pay for a bowl of
soup like this in a restaurant?” She learned that only about 40% of these individuals ate out
regularly, but most would pay between $5-6 for a bowl of soup, with some being willing to pay
more.
Maria figured that even if only 20% came regularly, she should be okay, but she needed to figure
out whether charging $5-6 would be enough to make a profit.
She made a list of all the ingredients she needed and how much each would cost. The next day,
she experimented with making large batches and found two local farmers who could supply meat
and rice.
Now, she needed to make sure it would work financially. She crafted her finance framework,
mapping out the initial costs of ingredients and the staff she needs to hire.
She felt like she had good idea of the costs, but was it low enough to leave her enough money to
live if she were to charge less than $6?
Calculating Unit Economics
When you know there is interest in your product, you should determine whether it will make
money. This is called calculating the “Unit Economics.” Your goal is to determine if the costs to
make the product are less than what your customers are willing to pay for it.
Let’s see how this works by looking at a breakdown of Maria’s costs.
The Soup Shack Case: How much should Maria charge?
Even though everyone seemed to like her grandmother’s soup, Maria knew she had to be able to
sell it for more than it cost her to make it. Fortunately, she had taken an online accounting class
and remembered that the first step in proving it could make money was to calculate the costs,
beginning with the Direct Materials and the Direct Labor.
Unit Costs
First, she had to determine what the cost would be for all the ingredients for each bowl of soup,
since she was going to sell it one bowl at a time. She wrote down her grandmother’s recipe and
