Create your own fully baked food business success story
[Special note from StartupNation editors: The following advice is provided by the winner of StartupNation’s Home-Based 100 Yummiest category. She kindly offered to share what’s worked for her with StartupNation community members and we jumped at the opportunity!]
Whether passed down for generations, or whipped up in a flash of creative brilliance, most of us have favorite culinary creations that are just too good to keep to ourselves. If you’ve ever thought about selling your Italian grandmother’s biscotti, or your innovative gluten free cookies, here are a few tips to position yourself for success before you introduce your Yummy creations to the world:
Know what’s on the market
The great thing about food is that everybody eats several times a day – which translates to a lot of opportunity for food entrepreneurs AND a lot of competition. If you’re planning to make your mark on the food world, you’ll want to understand the competitive landscape. Visit a specialty retailer, an independent grocery store, and a supermarket; compare what each offers in your category and think about why a customer would buy the different products. In addition to the basics like taste, price, and convenience, there are other factors to consider: brand, look and feel, whether the product is local, international, or organic. Where might your product fit in? What is your “angle” on the category? Even if you don’t have a direct competitive product, there will be products that are fighting for the same target consumer, so consider them your competition. Other avenues for research include visiting trade shows (such as the Fancy Food Show) and, of course, the internet.
It is easy to get overwhelmed by all the products on the market, but don’t let the previous research phase get you into “paralysis by analysis”! Just view the process as an input into helping you create the best product you can and stay focused on how you can improve on what you’ve seen, or fill a market void – chances are, you’ll think of many ways to do it better!
Know your future customer
If you plan to sell your product in a store, your first customer is the store buyer. Whether you envision selling your product at a chain like Whole Foods, or an independent local store, you’ll need to interface with a retail buyer to understand their policies, purchasing schedule, margins, and any other requirements they have. It is always good to research this before you introduce your own product. Contacting the retailers to inquire about their process for accepting new products will be invaluable as you bring your own product to market. For example, Whole Foods has a very long list of ingredients that are not acceptable in their stores –don’t spoil your dream of selling to them by not knowing what is on that list!
The consumer is your other customer – whether they buy the product at a store or directly from you on the internet, put yourself in their mindset and define how your product will fit into their life. Be as specific as you can!
Understand distribution and pricing
Getting your product to a customer is obviously very important, as is selling your product for the right price. In the early stages of a food business, many entrepreneurs deliver their product directly to local stores. As you scale, however, this is impractical and you may want to work with a distributor. In some cases, stores will only purchase your product if you sell tahrough a distributor. Many distributors have a 20-30% margin (and most retailers have a 40% margin) – you’ll want to take this into account (on top of your cost of goods) if you are aiming to hit a particular retail price and, of course, make your business financially viable. Similarly, if you plan to sell your product on the internet, make sure to factor in those shipping costs!