So you love to eat. No kidding! You need to eat to live. So does everyone else. Starting a food business is fun, stressful, and it's a blast when someone you have no clue who they are likes what you made.
You have a burning desire to start a hot sauce / juice / beverage / cookie / baked goods / bitcoin gummy bear company. Basically if someone wants to put it in their mouth, you have an idea for it. So let's get to it. Break it down, from start to finish (lol, it's never done).
WARNING: This may seem as some what self-promoting, but the only thing I will say now is that I started a 3PL shipping company specifically for food items. No links to it, but you can check my post history, but I'll save you the time. I used to be a web / app developer, got tired of the grind with trying to get clients to pay, got tired, bought a food truck with ZERO experience (seriously, my first event I bought 300 loaves of bread. Used 4.5. It was pretty comical and family / friends ate sourdough for WEEKS). I brought the food truck up, had the truck, a pop-up restaurant on Las Vegas Blvd., got an offer to sell the physical truck and book of business, took it, and kept the name rights. Now I'm using my skills both in tech and food to streamline and help foodpreneurs. Take this with whatever grain of salt you want.
Also, to state real quick, DO NOT PM ME QUESTIONS... I am here to open things up so everyone can learn, so the next person looking how to start up a hot sauce company gets relevant information and not "Sent you a PM." I'm gonna be around all weekend, and want to help everyone. I'll try and make responses as detailed / personalized as I can. The more info you post, the more I can help.
Part 1: You have an idea - Great - Treat it like a start-up, because it is
Food can be unsexy. Kitchens are hot, you burn yourself, you get covered in grease, you slip on stainless steel floors (true), and every once in a while theres some knife cuts. BUT, when you know that you just bought a $20 case of potatoes (50 lb) and are selling french fries for $6 for like 3oz of potatoes, your fave words become "Would you like fries with that?"
Key 1 - Know your numbers. Go shopping. You already have your idea, so go shopping. Make a test recipe at home, solely for the purpose of cost analysis. Jump on google sheets, and list EVERY ingredient on your list, and then look at other things, which I call hidden costs.
Visible Costs - Recipe ingredients, packaging, labeling Hidden Costs - How long does it take you to cook / bake / make (labor time), how long do you need to cook it (oven wear and tear, gas, electric for mixer, etc)
You can have a ton of hidden costs beyond just the actual ingredients, and these often get overlooked. If you plan on growing the business, get a friend and your phone and take pictures of HOW YOU WANT IT DONE along each step. Create the "brand" manual for your food / baked good / sauce, etc. Is the hot sauce supposed to be chunky? Is it supposed to be smooth? Are the cookies supposed to be a 30% shade of brown for crispness, and how long did you leave it in the oven for? Those should ALL be documented. You have the time now, and you should be doing it.
Key 2 - Find your suppliers, and find about discounts
You know what you need, and retail might not be the cheapest, or it could be. Play the sales. If you are making a cookie that uses bananas, can you take advantage of price matching at Walmart vs a restaurant supply store to get a better deal and cheaper ingredients? As a smaller company / maker, this should be a good idea, as it will help you create your MVP much cheaper.
Part 2: For the love of everything holy use google to find about your licensing requirements. (I won't do this for you as part of the AMA, just an FYI).
Everyone seems to get tied up with "Can I make this soup / cookie / hot sauce." The short answer is yes, you can, and you can test it legally. It'll take a few dollars, but it's worth it because of the access you can get.
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Start with your local city or county health department. As you can see from my name, I'm in Vegas. Southern Nevada Health District manages all of the food. They will handle the licensing for food establishments and producers. If you need some Google help, search "[my city] health department]" "[my county] health department]" and if that search returns unfruitful, then search for "[my city] cottage food laws" "cottage food laws [my city / my county]" because small producers will 90% of the time be allowed to create small batches of what are considered "non-hazardous foods" in a home kitchen with little to no oversight. WHAT THIS MEANS: You will most likely be able to bake cookies, cupcakes, make a hot sauce, MAYBE a soup, basically anything that is heated / cooked and can be left out and still be fine. There is almost zero chance your sushi delivery service will be allowed. Fun fact, you cannot serve raw bacon, but under some cottage food laws, cooked bacon is fine because it is turned into a "jerky" classification. So you need to read. I'm not a lawyer, I just like paperwork. Don't be an idiot.
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Licensing of some sort will be a key part of you starting to get out there. Theres a semi-good chance you can sell on FB, to friends family, at a school bake sale, or even through Etsy / your own online shop without getting any kind of official letter or licensing requirements. SWAT isn't coming because you're selling grandmas cookies on Etsy, so breathe and relax. If you go to a craft show, farmers market, etc, that is when the licensing comes into play, but putting that time and effort / money into it will put you lightyears ahead of everyone else doing it out of their house. Also, fees tend to be pretty low, so you can test your idea from SOMEONE WHO IS EXCHANGING MONEY FOR YOUR GOODS AND DOES NOT CARE ABOUT YOUR FEELINGS. Everyones family / spouse / friends won't really be too keen to tell you "Yo dawg, this is garbage sauce / cupcake / icing / soup" so gathering feedback on what works cheaply before you use student loans on your hot sauce idea is a good thing. Few dollars up front to keep you from doing something dumb.
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If you are going to go through the trouble of going through licensing to go to a farmers market, etc., then please, child, have a seat and start collecting feedback. Make your product better. It's not hard. "Hey, free half cookie for an email for a survey, and when we launch, we will email you a 30% off coupon." It's not hard, survey money and google forms are free. Mailchimp is free for small accounts. Do the work, otherwise throw your money away at a strip club.
Part 3: Liability and the business
You've now established that grandma wasn't lying to you, and your bacon jerky business is viable, and you're starting to see an increase in orders. Here's what to do next, now that you've "proven the concept" beyond people who will lie to you.
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Get an LLC / Corp. Use something like Gust Launch, Clerky, or Stripe Atlas. <--- Use google. No links. Time to use your big boy pants. Open a new tab. An LLC / Corp will allow you to set up a business bank account, so when something goes wrong (it will), you can separate your personal life from the business. It's less than $1,000, and worth every penny.
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Get a business bank account. Credit unions are dope, but big banks work too. Also, cash is fine, but the more credit cards you process, the better. Different schools of thought on this, I just like not having to deal with cash. Some banks charge you a cash handling fee over a certain cash deposit limit (true story). I found a trick to get around this. Go to a check cashing / payday loan place, buy a money order (free usually), then deposit the money order. It's not cash. Just my $.02.
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BUY BUSINESS INSURANCE.... It's cheap. We paid like $100 a month for $500k in coverage if memory serves me right, and scaled up based on what the client needed through umbrella policies. Our truck insurance for business was like $300 a month on the commercial vehicle. You're dealing with food, and people can get sick. Just do it. When it saves your ass down the road, message me and you can buy me a 2 for $3 Rockstar from 7-11 as a thank you.
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WTF are you actually selling is a big thing, and regulations will play a pretty big part of this, because it may fall under some OTHER, LARGER authority. There was a post recently for someone who wanted to repackage cheese as part of a cheese of the month box. Bro, FDA and USDA are all over that. There are several agencies I would never want to run afoul of, FBI, IRS, SEC, and FDA. Seriously, you'll get smacked harder than a toddler falling out of a shopping cart if you anger any of those agencies. Use Google. Heres an example. Friend of mine wanted to start a meal prep company, and wanted to do fresh juices. Seems simple because fresh juice places are everywhere right? Not. According to FDA regulations, even for small producers, any part of a "fresh juice" derived from "any part of the fresh vegetable / fruit" was supposed to be handled and cared for according to HCAAP and be pasteurized. Now, fun fact.... Making fresh juice "to order" does not fall under these categories because it would be intended for "immediate consumption." So as long as the meal prep guys made food ahead of time, but only made the juice and bottled it same day, it would fall under these guidelines, and wouldn't be tied to a whole host of regulations and expense. Leave it overnight? Nahh, can't do it. Same day? Totally fine. LEARN TO READ, BECAUSE A SMALL CHANGE COULD SAVE YOU. I've already decided I wouldn't do good in prison, so I don't want to go to jail.
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You'll need a corporate structure and an EIN most likely for official licenses and for tax reporting. If you're selling online, something like TaxJar is a godsend. You'll need this also if you connect to your POS system to get paid and make that monnnaaayyyyyyy....
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Something that I've seen brought up here countless times is "well I'm getting busy but my mom / wife / grandma needs to cook in the kitchen," or the good problem to have, "I'm busy with orders because the local news station picked it up and I can't make it fast enough." You're going to want to start investigating what are called "commissary kitchens" or "rentable commercial kitchens" and again, use the googles. [my city / county] commissary kitchens. There are a ton in almost every major city (except Vegas, dunno why). Or search for "kitchens for rent by the hour." You'll get access to larger / better equipment, usually rentable all-in by the hour, so it'll help you plan and budget, because earlier you did all the recipe and timing cards so you know how long it will take (see, I'm not a complete idiot).
Part 4: Launching
HOOOLLLLYYYYYYYYY SHHHHHIIIIIITTTTTTTTTTT..... You're ready to go big time, and are listening to "All I do is win" on repeat on your speakers and standing in your front yard shooting your not-a-flamethrower in the sky. Some things you should start to think about:
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Branding is big. Have you secured the .com? You need to. There are different schools of thought on if different TLD's are okay. I say no, personally, and I won't pick a name if the .com isn't available. Work on a decent label or branding sticker. Packaging is key as well. For bottles, check out SKS Bottle. For boxes check out U-Line. You might be able to find someone cheaper locally, because shipping is a huge expense of heavy boxes / packaging (supplier to you). Check out StickerMule, Lightning Labels, or google "label suppliers." If you want the non-shiny labels, look for "matte" labels.
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Social will be major. Not only for being able to launch your own brand, but if you ever decide to go into retail, or distribute. It's common sense in this day and age. I will tell you, that if you have a product that is consumer based, show them how to use it. Hot sauce? Start making recipes and posting them with your hot sauce. Cookies? Show different ways cookies can be given as gifts. Interact with people celebrating things. Pay attention to holidays. Bacon jerky? Go to a NASCAR event, biker rally, take pics, and interact. Give samples away. Go where your target market is.
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Distribution. Take a listen to "Major Distribution" by 50 Cent. Great hype song. Or Go Getter by Young Jeezy. You're now the Columbians trying to get your hot sauce crack into as many hands as you can. You're selling online, spending hours packaging each bottle with care, printing labels, while you child is crying and your wife is burning rice for the 6th night in a row. Your hands smell like Kraft packaging. Bubble wrap is your defacto blanket....
STOP READING HERE BECAUSE THIS IS SEMI-SELF PROMOTIONAL BECAUSE I AM GIVING TIPS RELATED TO WHAT I DO. LOOK FOR THE NEXT SET OF ALL CAPS TO SKIP THIS ENTIRELY.
A regular distributor will take your product, buy it, and resell it. They may add it to their product catalog, maybe a "hey, Massive Diablo Hot Sauce is a new sauce we are carrying, want to try it?" "Nahhhhh..." "Okay, normal hot sauce it is then." You are the owner of your hot sauce. You're the owner of your packaged cookies. You're the owner of your gluten free, purple yam potato chip. You care the most. You can go the traditional distribution route, and it can happen, but for someone to want to pick you up, you need traction. That's where a food 3PL comes into play (which is a grossly underserved market imho). You pay to rent space in a warehouse, usually by the pallet or half pallet size, pay monthly, and then you pay each order sent out. You need to make sure the numbers work for this.
You're now shipping orders more efficiently, and most likely taking advantage of their shipping discounts because of volume. Straight forward, we plug our own account details into ShipStation for FedEx and get even better rates because of the volume we do. The more you ship, if you have a loading dock, etc. all play into your rates.
Now, you've offloaded the task of shipping to someone else, and are free to focus on sales, growing the business. If you move to a co-packer (more below), your co-packer is sending your stuff to us in bulk, and we are shipping, basically moving you out of the equation almost entirely. You'll need someone who tracks lot numbers, shipment dates, and more in case of a recall, and who got what in an inventory management system (we do, hence the tech background). Temp, shelf life, FIFO, expiration dates, and breakage all are things you need to consider when working with someone.
OKAY YOU CAN KEEP READING NOW THAT YOU'VE SKIPPED THE SELF PROMOTION (KIND OF) PART
- Co-packers will save your sanity, your relationships, and keep you from smelling like chocolate chips or ghost peppers on date night. Because you've done your starards manual, and updated it based on tweaks, you can start searching for a co-packer. Google the meaning. It's not hard. Don't ask me what a co-packer is. Youre going to want to look at things like capacity, non-disclosure agreements, secrecy, length in business, and packaging capabilities. I know of one place here in Vegas that will do cookies, in different sizes, and will package several different ways. Not everyone will. Look for things like turn around time, lead time, graphics capabilities, and more. I'm sure I'm forgetting something, but if I think of it, see the comments.
Congrats!!!!!!! You've now made the next Tabasco, Auntie Ann's Pretzels, Chips Ahoy, Sriracha, Fresh Squeezed Juice conglomerate. I expect to see all of you on store shelves, and if this helped, send me some food. I'll eat it, or my girlfriend will.
Quesadillas are sandwiches. Fight me. See you in the comments.
