Food entrepreneurs: Jumping in with eyes wide closed!
What to think about before creating a food product
Do you love the idea of developing a food product, designing the packaging and website? You are not alone. It’s fun, creative and gives you bragging rights.
News travels fast about the entrepreneur whose business was acquired by a corporate giant for millions of dollars. Sadly, that’s an exception. On the flip side, we never hear about the thousands of entrepreneurs who have tried and failed, often at great financial cost.
So tread carefully. Like a novice cliff diver who doesn’t bother to check how deep the water is, entrepreneurs often leap before they look. Before jumping in, they should answer two questions.
Why are you doing this?
The top five reasons I’ve heard are:
“My friends love my product and say I should sell it to Loblaws.”
First of all, your friends love your product because they like you. Secondly, they have no idea what you will have to sacrifice to launch it commercially. The chances of a Loblaws listing are slim.
“I want to make money and sell my company to a big corporation.”
There are so many costs in a food business. For the first few years, expenses exceed sales. It can take years to break even and make a profit. Getting to a point where a corporation would be interested, or even know about your product, takes money and rapid sales growth.
“I want to help people.”
This is about making you feel good because you’re contributing and making a difference. There are much easier and less risky ways to do that.
“There’s nothing like my product in the market.”
There are thousands of innovative products in the market today. If it doesn’t exist, there can be a good reason. Others may have tried and failed without you knowing.
“I want a challenge.”
You will certainly get that! It’s absolutely a challenge to start a food business, one that can quickly drain your finances. A variety of skills are needed, from business strategy, planning, accounting, operations and human resources to sourcing and procurement, pricing, product development, labelling and food regulations, food safety, copywriting, French translation, marketing and sales. Frankly, there should be a university degree for it.
How much money do you have?
To build a profitable and sustainable brand will require funds in the mid to high six figures.
To save your sanity and hard-earned money, here are some suggestions:
If you don’t have practical experience in accounting and business management, take some business courses. These skills are essential to build a successful business.
Work for a food brand. Cutting your teeth in an established business, at someone else’s expense, is a perfect learning experience. Entrepreneurs with CPG experience have greater potential for commercial success, but they still make mistakes.
Don’t quit your day job, unless you have unlimited financial resources. When your business starts to gain traction, it’s a good time to quit your job so you can focus on growing the business.
And lastly, I can’t emphasize enough the importance of developing a plan. Take your time. Do exhaustive research. Listen to experienced people who challenge your assumptions and thinking.
What is my motivation for writing this? I want to help people. If I can stop entrepreneurs from jumping in not prepared, I will feel gratified.