Radish seeds — $2 for 500 g, tray — $0.40, growing medium — essentially free. Yield 150 g, sold at $1.20 per 100 g — that's $1.80 revenue per tray. "400% profit margin." But missing from that calculation: electricity, water, packaging, harvest and packing time, waste percentage, delivery cost, and the effort of finding buyers. Once everything is accounted for, the picture changes completely — and often unexpectedly.
Quick glossary: Cost of goods (COGS) — the sum of all costs to produce one unit, including direct costs (seeds, substrate, packaging) and indirect costs (electricity, depreciation, time). Yield — the weight of marketable product from one unit of area or one tray after harvest and sorting; depends on crop, seeding density, and growing conditions. Pricing — the process of setting a selling price that covers COGS and delivers a target margin, accounting for the market and the sales channel.
How to Calculate COGS: What Goes In and What Gets Forgotten
Direct costs per 10×20 cm tray — the ones that are easy to notice:
- Seeds: consumption depends on crop and seeding density; radish 15–20 g/tray, sunflower 40–60 g/tray, basil 3–5 g/tray
- Substrate: jute mat ~$0.15–0.20, coco ~$0.20–0.40, peat substrate ~$0.10–0.15 per tray
- Tray: depreciation for reusable trays; full cost for disposable
- Packaging: bag, container, label — $0.20–0.65 depending on format
Indirect costs — the ones spread across trays and forgotten:
- Electricity: lighting, ventilation, heating or cooling; for a rack of 100 trays per month this can amount to significant cost depending on spectrum and schedule
- Water: a minor line item, but at scale and with water treatment — factor it in
- Time: harvesting one tray takes 3–8 minutes, packing another 2–5 minutes; at any reasonable value for your time, 100 trays per week represents real labour cost
- Waste: 5–15% of trays in a typical operation don't reach marketable quality; this percentage is absorbed by the rest and raises actual COGS
Yield: What Affects It and How to Forecast It
Yield per tray is not a fixed number. It depends on crop, seeding density, growing conditions, and harvest standard. Two runs with the same seeds and substrate will produce different yields if one harvests at 6 cm height and the other at 10 cm.
Reference yield from a 10×20 cm tray at standard seeding density:
- Radish: 80–120 g
- Sunflower: 100–180 g
- Pea: 150–250 g
- Basil: 30–60 g
- Arugula: 40–80 g
Yield below the reference is a signal: either seeding density is too low, the crop experienced stress (temperature, humidity, lighting), or harvest was taken at shorter height. Yield above the reference looks good at first — but if it means the plant was overripe and leaves have toughened, marketable quality is lower.
For COGS calculation, always use the real average yield from the last 10–20 trays — not a theoretical maximum.
Sales Channels and Pricing: Who Takes What Margin
Selling price depends not only on COGS — but on the channel. Different channels yield different prices but require different costs and volumes:
Direct sales (market, social media, subscription): the highest price, 100% of margin stays with the producer. But time spent finding buyers, packing individual orders, and delivering — these are real costs that must be included in COGS.
Restaurants and cafés: price 20–40% below direct sales, but stable volume and a predictable schedule. Quality and supply consistency requirements are higher. Factor in delivery cost and communication time.
Retail shops and chains: the lowest price — a chain takes 30–50% of the retail price. But volumes can be significant and logistics are centralised. Requirements for packaging, labelling, and documentation are the highest.
The rule: for each channel, calculate a separate full COGS accounting for channel-specific costs — and a separate minimum price that delivers the target margin. Selling to a chain at direct-sale prices and vice versa is a common mistake that makes one of the channels unprofitable.
Three Mistakes That Cost the Most
Not counting your own time as a cost. "I'm home anyway" does not mean free. If the time spent on production could generate income elsewhere — that is an opportunity cost. When scaling, the moment when hired staff becomes necessary always arrives earlier than expected — and if pricing never covered labour from the start, the business becomes loss-making the moment you hire.
Calculating profitability per tray rather than per production cycle. One tray of radish might show an attractive "profit." But if a 50-tray rack takes 10 hours of work per week plus another 5 hours on delivery and sales — profitability when time is factored in looks different. Calculate monthly profitability with all costs and actual working hours.
Scaling volume without confirming demand. Doubled the number of trays — demand didn't grow. Result: product spoils, COGS rises due to waste, revenue stays the same. Scaling follows confirmed demand — not the other way around. More on production and sales planning in the article on business planning.
How to Know the Economics Stack Up
Build the full COGS per tray including time and indirect costs. Compare against the selling price in each channel. If the margin in a channel is less than 30–40% of the selling price — either COGS is too high, or price is too low, or the channel doesn't suit the current scale.
For deeper understanding: Microgreens Basics: Crops, Cycles, and Growing Parameters — explains how the choice of crop and growing regime directly determine yield and COGS before the first tray is even sown.