Build Your Own, Or Keep Using Someone Else's?
There is no general right answer. We have taken two clients in opposite directions in the same year and both were correct. The variable that usually decides it is whether you would sell capacity to anyone else.
- Build against outsource on your own volume, capital and cost per unit
- The break-even volume you would need, and the payback on the capital
- Whether the annual saving covers the debt service, which is where these projects actually fail
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The Same Plant Is A Bad Idea And A Good One
An $850,000 facility, $320,000 of annual fixed cost, 600 of your own units a year at $650 to outsource and $180 to run in-house. Borrowed at 8% over fifteen years, so the debt service is $99,305 a year. The only thing that changes between these two columns is whether you process for anyone else.
Your own product only
$38,000
a year more expensive than outsourcing, before you pay for the building at all
Plus 900 third-party units
$142,000
a year cheaper to run it yourself, at $200 of margin on each third-party unit
Same capital, same volume, same cost per unit. A facility that only ever runs your own product carries its entire fixed cost on your throughput. One that sells capacity spreads it across volume that is not yours, and that is usually the difference between a plant that works and one that quietly eats the business.
The tool also catches the case people miss most: a project that is cheaper to run and still cannot service the loan. At 800 of your own units and no third-party work, this plant saves $56,000 a year against $99,305 of debt service. Profitable and unfinanceable at the same time.
Nine Figures, And One Question Most People Skip
A unit is whatever you count in: head, batches, cases, runs. Keep it consistent all the way down.
01
Your own volume and what it costs now
Units a year through an outside processor, and the all-in cost per unit including freight both ways.
02
Annual fixed operating cost
Staff, utilities, insurance, compliance, maintenance. Be generous. This is what sinks these projects, not the build price.
03
Capital and in-house cost per unit
Building, equipment, fit-out, permits and contingency. Then only what rises with each unit: materials, packaging, piece labor.
04
Would you sell capacity to others?
Third-party units a year and the margin on each. This is the question that decides it, and the one most feasibility conversations never reach.
05
Cash or borrowed
If borrowed, the rate and term. Delicacy Meats self-funded theirs and paid no interest, which is part of why it worked.
Out
A verdict, not just a number
One of five positions, from "the unit cost does not work" through "cheaper to run but you cannot service the loan" to "worth taking seriously".
Useful if
- You are weighing a processing facility, a commercial kitchen or a packing line
- An outside processor is limiting your volume, timing or recipes
- Someone has offered you a building and you need to know if it pencils
- You are deciding between building and a co-packer
- You have been told a plant will pay for itself and want to check
Probably not, if
- You want a construction estimate or an equipment quote. This assumes you already have those
- The decision is not financial. Control over quality and timing is a legitimate reason to build at a worse number, and this tool cannot weigh it
- You want regulatory guidance on inspection or licensing. That needs a qualified advisor
7 monthsfrom opening to break-even at Delicacy Meats
Clients who went both ways
“We used to be limited by external processors. Now we can flow products faster and deliver better quality to our customers.”
– Dave Stolzfus, Dutch Meadows
Dutch Meadows and Omar King built their own USDA plant with no prior processing experience, self-funded, and broke even seven months after opening. They had a trained workforce available from another processor and an anchor customer from day one. Painterland Sisters chose a co-packer in the same period, because building would have absorbed the capital and attention that brand and distribution needed. Both were right.
Read how Delicacy did it