So, you have a great idea for a food business you would like to start –but how do you get the ball rolling to turn it into a reality?
– Researched the market, to learn where your customers are, and what they are looking for?
– Calculated the costs of starting and running a business?
– Learned about the laws and regulations in your state?
There’s a lot to consider, but don't worry! We’ll walk you through the steps on how to start a food business from home, and a list of things to check off your list as you're getting started!
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Do Your Research
It’s important to do a bit of homework up front: take the time now to really get to know your niche, and learn about the demand for your product or service. This can make all the difference in the success of your business, and it will save you time, later!
Your business idea
Let’s begin at the beginning: how much do you know about the type of food or food-related business you want to start, and about the market for your product or service?
To learn more about your niche, look for other food entrepreneurs who are having success with the same type of business. Pay attention to what is working for them, from how they advertise, to what they include in an offer, to how they treat their customers.
It’s also a good idea to connect with other business owners. You can do this in person or in online groups, where members exchange tips and support. You might even find a mentor who understands your ideas and goals, and who is willing to share advice on how to grow your business.
Analyze the market for your product or service: how much demand is there for what you want to sell?
Consider whether you will you be filling an existing need or gap in the market, or competing against several businesses who are already occupying the same niche.
Put yourself in your customer’s shoes, and take a look at what is available in the places where you plan to sell. If a customer already has several options to choose from, find a way to make your offer unique.
Basically, find the “secret sauce” that will help you stand out from the competition, so you can attract buyers!
It takes a lot of resources to start a new business, and to continue operating it – and you might not see a return on your investment for quite a while. Do you have the necessary resources to jump into this and stick with it?
Think about the financial investment required for startup costs and equipment. Will you be able to recoup these costs quickly? If not, have a realistic idea of how long it will take to recover your costs, and of what other investments you might need to make, down the road.
Consider how soon you can start making money. For example, can you begin selling at vendor events as soon as you have products ready?
Don't forget to the investment of your time and energy! Consider the amount of time you currently have available to work on your business, and how much time you’ll have over the next year, and beyond.
Decide whether this venture will be part-time or full-time, and how you can balance it with other aspects of your life. For example, If your business shares the same space you'll use to prepare family meals, you may have to schedule times that are dedicated to production.
Speaking of your production space, now’s the time to think about how much room you will need for your food business.
Set Up Your Kitchen and Workflow
A well-laid-out production space is going to be essential for a home food business. With a little planning and organization, you can have a workspace that's both efficient and safe.
Equipment and supplies
Sketch up a plan for how to arrange your space – remember to include room for any special tools or appliances you will need to create your products.
This might include mixers, ovens, food processors, refrigerators, or freezers. Will you need workstations, floor space, or electrical outlets for your production appliances?
Make sure you have enough space to store your ingredients and finished products, and consider how you'll manage inventory as your business grows.
Keep your workflow in mind as your arrange your kitchen, leaving enough space to prepare, cook, and package your products.
Keep your work area clean and clutter-free to streamline your production process, and also to meet food-safety standards.
State Requirements and Cottage Food Law
Each state or province will have different laws that apply to starting a food business at home. You'll need to do some research to determine whether your business is allowed in your state, under what is often called “cottage food law”. This is also where you should be able to find out if you’re required to apply for a permit or license, and if you’ll need to have your kitchen inspected.
Get familiar with your state's cottage food laws, because they can affect almost every aspect of your home-based food business.
If running the business from your home kitchen is not an option under cottage law, find out how you can satisfy regulations – this could mean that you will need to operate from a commercial space.
Familiarize yourself with food-safety regulations. You might be required to obtain a food handler's permit, and your kitchen will need to meet certain health and safety standards. In some places, you could be required to use a commercial kitchen for any food business, but if your state has put laws in place for cottage food businesses, there should be a list of approved foods, usually available on your state's website.
Be sure to follow all regulations, to protect your customers' health, and also to avoid fines.
Zoning and permits
Check your local zoning laws to ensure you're allowed to operate a food business from your home – you might need a special permit or variance to run a business in a residential area, and you'll want to make sure you're in compliance before starting your business.
These days, you can often find these laws on your county website. If they are not available online, you can also check your county directory. In some locations, there will be a Municipal or County Planning and Zoning department, or your county clerk may be able to direct you to the records you need.
If you live in a neighborhood with a Homeowners' Association (HOA), you might also need to have approval from the HOA in order to run a home business. They may have their own restrictions, such as not having signs or advertising on your car or property, and not having customers coming to your home.
Setting up a Legal Business
Should you form an LLC? Register a DBA or business alias? These are definitely questions for a lawyer, but your state should also have specific resources on what type of business they will consider you to be, as well as any registration requirements, and how to file state tax information.
You’ll want to have a separate, business bank account for both expenses and business income. This will make tax time much simpler next year!
If you are required to register as a business in your state, you will probably find instructions on the process on your secretary of state's website. The specific requirements will vary depending on your location, so be sure to find out what the official rules are. You may need to check to see if your business name is available or already in use, by checking a state database of registered businesses. You'll probably need to obtain an Employer Identification Number (EIN) from the IRS, for tax purposes.
If you plan to operate under a name or brand name that is different from your official business name, you'll probably have to register this, as well, either with the state, or through a local registry.
Local laws and business requirements will apply here, as well. You may need to get a business license to operate in your city or county, and in order to sell food locally, you might need approval from the local Health Department.
You’ll also want to look into getting business and liability insurance – this is to protect your business, but event organizers will often require you to have event insurance, in order to set up as a vendor. There are even companies who specialize in insuring food businesses. (An example is Food Liability Insurance Program (FLIP).)
Develop a Business Plan
Creating an official business plan is an important step in setting up your food business. Don't be tempted to skip it, even if it sounds boring!
Once you've put together a business plan, you'll have a better picture of how your business will operate over time, what your goals are. You'll also be able to summarize this information and explain it to others, which will come in especially handy if you are applying for a business loan, or talking to potential investors.
A solid plan will include a summarized description of your business (handy for elevator pitches!), and a more detailed description, including your production processes.
Your business plan will also include the results of your market research, and outline your sales and marketing strategy.
This will explain how you'll reach your target audience, whether through social media, content marketing, or local advertising.
You'll also be able to go over how you intend to develop your brand.
As part of your research into starting your business, you'll consider startup costs, including equipment, packaging, and marketing expenses. You'll also want to project your expected revenue and expenses for the first few years, and make sure you have a plan to cover any financial shortfalls.
If you will be presenting your plan to a bank or investor, you'll want to put a lot of thought into this section.
Creating a business plan can seem intimidating, but when it's done, you'll have your own business guide to come back to as your business grows!
Develop Your Product
This is where you get to have fun – where it all started, with that great idea you had!
Recipe or product creation
All of the market research you've done will pay off here – you know what your customers are looking for, and you know your competition – it's time to create your signature product. Develop recipes that reflect your unique style and showcase your culinary talents.
While you're having fun, don't forget to:
Keep a log of everything you make. Consistency is key, and you want to know exactly what ingredients or techniques you used for that one perfect batch.
Keep it simple. You want recipes that are easy to reproduce, and that can be scaled up as your business grows.
Reconsider any products that are expensive or inefficient to make, or that are too fragile to be transported to the customer.
Keep a recipe book or binder with step-by-step instructions and all of your recipes and ingredients.
If something happens and you need to be away from the business, someone else should be able to follow your instructions exactly, to keep production going. If your personal, artistic touch is required, then obviously this won't solve everything. But it can still help if you are especially busy and hire an assistant!
Keep a list of suppliers for needed ingredients.
If you use any specialty or commercial-sized appliances, you'll also want contact information for the manufacturer or a local appliance technician, in case you need an emergency repair.
Before launching, you'll want to test your product thoroughly. Recruit friends and family to be your taste-testers. Package up some of your food and let some kids volunteer to put it through some stress-tests – will it survive being dropped, shaken, or left in the sun?
Any feedback you can get now will help you later, so be generous with the samples, while you fine-tune your process to create a product line that customers can't resist!
If you're selling products, determine where and how you'll sell them. Explore options like vendor events, farmers' markets, and consignment sales. If you're offering a service, create a plan to find customers or clients. Will you rely on advertising to attract business?
Marketing your food business
Invest in business cards and signage that reflect your branding and logo. Network with other food entrepreneurs and potential customers to raise awareness of what you’re offering.
Engage in local events
Participating in local events is one of the best ways to gain exposure for your food business. Consider joining farmers' markets, food festivals, and community events where you can showcase and sell your products. This allows you to connect with potential customers, as well as receiving immediate feedback on your products. It also helps you network with other local business owners who can provide valuable advice and support.
Build an online presence
In today's digital world, you want to have a strong online presence. Social media platforms like Instagram, Facebook, and Pinterest are a great place to engage your customers and show off your latest creations!
You can even invite them to join your VIP facebook group to get a sneak peek at upcoming products.
Video is one of the most effective ways to capture your audience's attention, so consider using TikTok, Facebook Reels, or a YouTube channel to share recipes, tips, and a behind-the-scenes look at your business, which can also help drive traffic and build your brand.
Set up a website that showcases your products, shares your story, and allows customers to place orders. If you want to keep it simple, you can also have a site that simply lists your contact information and where your products can be found!
Plan for Growth and Future Success
Periodically take a look at your business's progress, and stay informed about market trends and opportunities – continual research and learning will help your business grow and remain competitive. Be open to new ideas, and look for opportunities. Once you learn to recognize them, you can find them everywhere!
Go for it!
Starting a home-based food business is a big step, and an exciting one. Yes, it will take time, effort, and commitment to build your idea into what you have envisioned. But you've taken the first steps! We believe you can get there, and we hope the information above has given you a good starting point.
Home-based food businesses are a subject we love to discuss – leave a comment or question below if you have a topic you'd like us to explore further!