Cooking isn’t just a wonderful hobby – it can also become a well-paid job where you get to create delicious dishes for people to enjoy.
If you’re fascinated by cooking or baking, learning how to start a small food business at home is a great way to earn extra money while doing something you enjoy. Like other businesses, a home-based food business requires a lot of research and planning to start. Furthermore, it will require additional permits, inspections, and marketing strategies before you’re allowed to make a sale.
So to help you get started, we’ve listed an 8-step checklist with fundamental tasks for anyone looking to start a successful food business from your home.
1. Carry out detailed market research
The food industry is very competitive. So, it’s important to conduct market research to understand your competitors and the current market.
One of the first steps in conducting detailed market research is determining what your competitors are serving, their portion sizes, how much they’re charging, and what is trending now.
Don’t just read online reports and newspapers. You might also want to attend business networking events such as those run by the Small Business Development Centers, SCORE, and your local Chambers of Commerce. These places give you an overview of the current food industry, insight into your customers, what works, and what doesn’t.
2. Find your niche
After conducting market research, it’s time to determine your niche. This is one of the most important decisions you’ll make before launching a food business at home. Picking the wrong niche can pit you against many other food businesses trying to serve the same food.
Your niche choice determines what you’ll offer your customers and how you will serve them. If you can’t picture your ideal customer at first, you’ll never be able to reach them and make your business a success.
So, you need to think carefully about who your ideal customer is and what they would like for their meals. For example, if your target market is employees of nearby office buildings, you might want to offer them healthy lunch meals, light snacks, coffee, or juices. On the other hand, if your target market is local residents, you need to consider if they have kids or not so that you offer the most appropriate choice for your customer. When you research your customers’ needs, you can keep them happy and satisfied with the price they pay for convenience.
3. Create a proper business plan
Even though you’re only starting as a small business, business planning is a must. A proper business plan is the road map to your success as it details everything from what you’re going to sell to how much it’s going to cost. It also helps you estimate your cost structure and profit margin and create a price strategy.
A common food business plan should include the following points:
- Cost of each serving of food
- Grocery list and cost of each ingredient
- Other necessary costs, such as gas, electricity, water
- Labor expense for your staff if you have one, such as part-time for delivery and cooking
You also need to create a meal plan for each week. Since you’re running a food business, the meal plan is like the backbone of your business. When you have a meal plan, you can easily do your shopping and avoid buying too much or irrelevant ingredients.
You can start with a simple and classic menu with some elementary dishes. Once your business has grown, you can add new items to your menus and try different price points.
4. Choose a business entity
It’s crucial to conduct your business as a legal entity. While home-based food businesses are often built out of a hobby, many entrepreneurs make the mistake of running their business in a casual way. On the other hand, if you manage a legal entity properly, you can separate the company’s liabilities from the assets of the individual owners and file tax returns more accurately. It will also save you from any trouble with the IRS in the long term.
There are different choices, and one or the other will be right for your food business, depending on your circumstances. The most common business entity options for small food businesses include sole proprietorships, LLCs, and co-ops. Other business entity options are partnerships, S-corporations, and C-corporations.
If you’re wondering which type of business entity would suit you best, you can check our articles on business entities to find out:
- LLC vs. LLP vs. Sole Proprietorship: Choosing a Business Structure and Why It Matters
- What Are Pass-Through Entities and Sole Proprietorships?
5. Have the necessary licenses and permission
Each state has rules and regulations that every type of business is expected to follow. You should know these rules and do your best to meet the requirements.
Your first step is determining the rules for a home-based food business in your area. For example, home-based food businesses in California can be certified as commercial kitchens if they meet certain state criteria.
Next, you must ensure that your cooking facilities pass all state food cleanliness requirements. You must also follow safety and health standards established by state-level food and health organizations.
You will need to acquire a business license and a resale license, which will allow you to buy ingredients at wholesale price and tax-free.
6. Invest in equipment and packaging
You might need to purchase specific items to ensure food safety, depending on the laws and regulations of your state. Remember that all your business equipment should be kept separately from your kitchen items.
You should purchase new equipment and kitchenware for your business. Using high-quality equipment can help you prepare your food quicker and more conveniently. Don’t forget to purchase good storage devices for your ingredients and food to protect them from being damaged by humidity, dryness, and bacteria.
Packaging and labeling are important, too. As it serves as a statement to your customers and can increase brand awareness.
7. Mark your presence
Growing and maintaining your online presence is extremely important. Instagram and Facebook are amazing platforms for food entrepreneurs. You can upload attractive photos of your products and services and perhaps include helpful recipes for your audience.
These platforms allow you to interact with your audience through live chats and comments and maintain your social media engagements. Work toward transforming your audience into customers by providing helpful content, attractive photos, and videos, together with friendly service.
You can also use social media to run advertisements, offering them extra discounts or giving out small gifts when they share their experience with you. This is a quick and cost-effective way to attract more customers, as well as maintain a good relationship with your loyal customers.
You might also be interested in:
- 6 Keys to a Successful Business
- Learning Small Business Management Is Not Difficult At All! You Just Need These Tips!
The bottom line
Of course, there’s so much more to consider in running a small food business at home. However, keeping our checklist in hand and following these steps can help you build a solid foundation and start growing your new business.
Starting any new venture might not be as easy as a piece of cake, but in the end, nothing tastes sweeter than victory. So don’t forget to work hard, be consistent, and be ready to face challenges.
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