7 Tips for Starting a Food Business

Starting a food business has to be one of the most challenging businesses to get into. The harsh reality is that most fail within the first year. The restaurant business in notoriously tough, but where there is a will there is often a way! While vision and ambitions are important, turning that ambition into success requires research, planning, capital, business acumen, and perseverance, more research and more planning. Here are some tips that can help entrepreneurs start, operate, and grow their fast food business successfully and within the law.

Do Your Research

The food industry in general is very competitive so it is imperative that you do your research before getting started. Business networking events (such as those operated by Small Business Development Centers, SCORE, and local Chambers of Commerce) offer a great venue for picking the brains of fellow business people. Try to find out what works, what doesn't, and what they would do differently. If you are aware of restaurants that have failed, try to identify why. Online community forums are a great way of gauging market need and customer opinion about local food service businesses.

Doing your research will help you to define your target market, niche opportunity, and identify your greatest risk factors, so that you can build a strong business case and move forward. Whether it's specializing in authentic Chicago deep dish or cupcakes - focus on providing a unique and quality product - don't try to be all things to all people. Be specific!

Consider Starting Small

You should consider testing your idea before you go all out with a pop up location. It will give you an opportunity to run through your idea without all the risk. Many food businesses start as a hobby at home and once they outgrew the space they moved on to something bigger. Going straight from a business plan to the opening a storefront is a big step; the idea is that you have an opportunity to get the kinks out. You can rent a food truck for a month or try a local market just to see how things go. When you do finally make the move to permanent location you can scale up.

Alternatively, fast-food franchises might be an option worth considering for entrepreneurs who are not quite ready to make the leap into full business ownership.

Build a Business Plan

A business plan doesn't have to be an overly formalized document, but going through the process of building and constantly tweaking your plan will help you match the strengths of your business to the opportunities the market presents. It can also help you better deal with threats as they emerge.

A business plan is also essential when it comes to communicating with others - such as customers, partners, and investors - if you want any of these to believe in you, you must be able to convince them that you know what you are talking about when it comes to your business.

Get Financing

Not all businesses need investors to get started, particularly if you start small. However, there are ranges of options from very small microloans that can help smaller fast food outlets get started, to more comprehensive small business loans such as the popular SBA 7(a) and 504 loan programs.

If you are seeking investment, plan it out. Use your business plan and the knowledge you’ve gained from your pop up test as the basis for a loan proposal or investment plan. Investors and lenders will want to know everything about your business idea or venture. Also, be realistic about how much money you need. You can save lots of capital just by buying local produce and purchasing surplus equipment.

Start Your Business the Right Way
Whatever your business type, you must take care of the fundamental regulatory and legal steps involved in starting a business. From tax ID numbers to licensing make sure everything is in order.

Know Your Food Laws and Regulations
This should be part of your research to begin with, but it’s worth making it a one off tip. Know what the laws and regulations are in your state! From labor laws to food safety laws understanding and achieving compliance with legal and regulatory requirements can have a big effect on the success of a food operation big or small.

Find a Business Mentor

Talk to your local SBA office, SCORE, or Small Business Development Center (SBDC). They can give you unrivalled, objective, and FREE advice about the local market and the process of starting a successful business.

How to Start a Cake or Baking Business from Home

Legality

With the explosion of cottage food laws in the U.S. over the past 5 years, in many states it is very easy to start a cake business from your home. Research your local law by googling <yourstate> <cottage food law> or contacting your local state Department of Health or Department of Agriculture for their regulations. The site CottageFoods.org has easy to find information also. Cottage food laws give food entrepreneurs a way to enter the market from home without the previously required substantial investment of tens of thousands of dollars in a commercial kitchen. It is important to note that all cottage food laws were not created equal. Many have restrictions on where you can sell, what you can sell, and how much you can sell, so it is important to research the law in your state before you begin selling, and know the requirements and your responsibilities.

After you've verified that you can legally work from home, decide what you will sell. Double and triple check that your product is allowed for sale from home under your state's laws. Most cottage food laws do not allow the sales of potentially hazardous food - in other words, food that requires refrigeration. This knocks out perennial favorites like cheesecake, tiramisu, tres leches, and tamales. Begin your business on solid legal footing with a product that is allowed by law.


Business Plan

Develop a business plan. Everyone always wants to skip this part and get straight to the baking, but it is really and truly important. How much does your product cost you to make, and how much will you sell it for? Where will you sell? How will you market yourself? Is there demand for your product in your area? How much competition will you have? How do the competition’s products compare to yours in price and quality? How long will it take to turn a profit? Your business plan will tell you whether or not your business is even viable. It's worth it to make a plan, rather than bang your head against a wall for months wondering why your business isn't working.

Set your prices correctly from the beginning. It's easier to start at the right level than to start low and then expect your customers to be understanding when you start raising your prices. Would you rather make ten cakes for $20.00 or one cake for $200.00? Work smarter, not harder. UseCakeBoss to learn your costs and understand how to set fair prices.

Read our list of the Top Cake Business Mistakes. No, really, go read it right now. You are the boss of your business. It is possible to give customers exceptional service while still sticking to your business policies. Don't blow around like a leaf in the wind. You're the captain of this ship. By the same token, don't let your business run you. Sometimes a home business can be overwhelming, because you're always at work. Set aside phone-answering hours, and don't be afraid to let your phone go to voicemail, or your email go unanswered, until tomorrow. You will burn out quickly if you're working every waking moment.


Food Safety

Your state's cottage food law may require you to complete a food handler's or food manager's course. Food safety is critical to your business - if you make someone sick, your business may never recover. Food safety isn't hard, but it requires diligence in the kitchen. We recommend keeping your kids and animals out of the kitchen during prep time, even if this is not a requirement in your state.


Taxes and Other Legal Issues

Check with your state Controller to see if your product is subject to sales tax, and if you need to obtain a permit and charge sales tax on your goods. Paying back taxes with fines and fees is no fun. Start out on the right foot.

Pick a business name and register it as a DBA with your county. This ensures that no one else in your county can use your business name, and that you are not using anyone else's business name. Optional - you may also wish to conduct a national search to verify that this name is not in use by others, or trademarked by someone else. Trademarks can be tricky, and sometimes the best thing to do is to contact an attorney that specializes in these matters.

Speak with a tax or legal professional about how to structure your business, whether it be a Sole Proprietorship, LLC, or some other entity. In general, setting up a business structure helps protect you personally from the business's liabilities. Liability insurance for home baking businesses can also be obtained, usually around $500 per year. Contact your home insurance agent to see if they have a policy for you.


Marketing and Networking

Set up a web site and Facebook page for marketing. Quite a lot of marketing on Facebook can be achieved for free or at least very inexpensively. The importance of a professional looking web site, properly optimized with the right key words, cannot be overstated. None of this, however, replaces good word of mouth. One successful cake at an event has the potential to launch your business.

Order inexpensive startup business cards from a site like Vistaprint or Zazzle. Never be without a card! Network, network, network. Join your local cake club and meet other colleagues in your area. You never know when you might have an emergency and need someone to take over your workload for a period of time. Cake clubs are also great for learning new techniques and furthering your craft.

Start selling! Good luck with your new business!

4 Steps to Start Your Own Food Business

1. Establish a niche: "You have to know why your cake is better than all the others out there," says Hall. "A cute name? Unique packaging? Is it the first completely organic carrot cake?" McRae learned her value from her customers: "I delivered—and I found out I was the only one in my neighborhood who did."

2. Find taste-testers: Call gourmet markets near you, Hall suggests, and ask them to try your cake—if they love it, they might place an order. McRae started out making pies for her running club; so many people placed orders and told friends that she needed a brochure.

3. Figure out your price: Go to local bakeries to check out how much your competitors charge. Or be bold: "I called other bakers and asked how they came up with their prices," says McRae.

4. Learn to advertise on the cheap: Google Adwords worked for McRae—the service allows you to target an area (for example, the New York City region) and the amount per day you're willing to spend. Social networking sites are a free way to stay in touch with customers—"Many are my friends on Facebook, so they see my posts. Soon I'll write, 'Get your holiday orders in!' and they'll probably read it." Hall suggests approaching stores with promotional discount offers: "A lot of places let you do it, and it really drives sales."

5. Write a business plan: To see samples from Jim Horan, creator of the One Page Business Plan, go to our 6-part guide for entrepreneurs. And check out Cooking Up a Business: Lessons from Food Lovers Who Turned Their Passion into a Career, and How You Can, Too by former O magazine editor Rachel Hofstetter.