Starting a food or natural products business, is just that: a business. Its purpose should ultimately be to generate profits, so that other goals may be met. You will never be able to do that without sound business planning, execution and follow-up. Do your homework and answer these tough questions — but don’t panic! There are many resources available to help you through the process.
Ask Yourself These Questions
Take a look at these questions and the things you will need to consider related to each one.
- Do I have something people want to buy?
- How will I produce & package my product?
- How much will it cost?
- What resources will I need?
- What business & legal issues apply?
- Where can I get more help?
Before you even start up your business, be sure there is a real demand in the marketplace for your product or service. Your business should be about the customer and their needs, not your desire to make a certain product.
Are there enough people out there to buy your product on a regular basis? How will you reach them? Not just in Western North Carolina or your own community, but around the country and world?
Today’s marketplace is shifting from mass markets to mass niches, where goods and products are tailored for specific needs. A market niche is a small subset of the general population that has not yet had its needs met — they are not finding and buying a product in the form that they want.
Your job is to find those people and give them what they might not even know they are looking for. That's what market research and product development is all about!
Two very good websites developed specifically for food entrepreneurs can help you do your research and answer the tough questions:
The Rutgers Innovation Center website has a fee for access, but it is well worth it if you hope to have a successful business based on sound planning.
AceNet's Food Ventures is one of the oldest food business incubators out there and has some good worksheets on their site.
You will need to explore all the options and costs associated with producing, packaging, marketing and distributing your products. Is it something that you can produce in your home? In a shared-use facility like Blue Ridge Food Ventures? Can it be made by a co-packer, or will you have to build your own production facility?
For food entrepreneurs, a good place to start is with this Overview of Food Processing Regulations that will guide you to the requirements that are associated with your proposed product. For example, USDA rules do not allow packaged meat products, such as beef jerky, to be made at Blue Ridge Food Ventures. So you'd have to find a facility that meets the applicable USDA regulations for your meat product.
Look at the type of equipment that Blue Ridge Food Ventures has on hand. Will it accommodate your production and packaging needs?
Once you have some answers to these questions, you will go on to the next one: Can I make and sell it for a price the consumer will pay?
What are some startup costs? Everything you do to get your first "jar of jam" or "tube of hand cream" made: all those test batches, getting logos and labels designed, setting up your legal entity, purchasing business and liability insurance, getting your business license, product safety testing...the list goes on.
What are some operational costs? Facility rental, storage, travel, marketing expenses (sell sheets, brochures, shelf-talkers, market tables and banners), loan payments, waste and breakage.
What will your unit costs be? Ingredients, containers, lids and labels.
All the variable and operational expenses above have to be added to your cost of ingredients and packaging to come up with the total cost for producing one unit (one jar, one bottle, one package, etc.). Again, the Rutgers and AceNet sites can be very helpful.
Here's a helpful section of the site with a costing worksheet to help you determine what your product will cost to produce at Blue Ridge Food Ventures.
A successful business takes more than vision and will power. It takes all manner of skills.
The fun part of a business is usually the creative, product-developing, recipe-testing, package-designing phase. But the business and marketing aspects are easily as important, if not more so. You need to have adequate human resources (both internal and external), to help look at all facets of the business, not just the product or service you have in mind.
Of course you will need the facilities and equipment to manufacture and package your products, and the suppliers and distributors to move it to where your customers are.
What about financing all of this — not just your startup costs (which can run many thousands of dollars), but enough cash or credit to cover operating costs until that magical break even point is met?
Ask yourself: Do I have the drive to make this happen? Do I have the time, energy and commitment needed to see it through? Do I have a team to share the challenges with?
In organizing your business, you may choose from a sole proprietorship, general partnership, Limited Liability Corporation or other operational form. Each type of business has different advantages, disadvantages, and tax consequences.
You will want to know how to protect yourself, your personal assets and your business organization. Assessing your risks and purchasing adequate insurance coverage are crucial.
You will need to learn about contracts, business and employment laws and taxes even before you hire that first employee.
You are not alone. There are many resources, both public and private, that can help you through this process. Western North Carolina has some of the best:
You can also find tools and resources in the entrepreneurial development section of the AdvantageWest website.