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10 must know tips for starting a packaged foods business

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Chris and Caleb, owners of Bearded Brothers.

Chris and Caleb, owners of Bearded Brothers.

Starting a business is never easy, and starting a business in an industry that has a lot of red tape and is highly competitive is even more difficult. When Chris and I launched Bearded Brothers neither one of us know anything about the packaged food industry and very little about running our own business. Everything we have learned, we have learned by doing and by talking to other people that have been through it already.

Here are 10 tips that will help you get your new food business started.

1. Ditch the business plan
Don’t waste your time on overly complex business plans that you will never use. Do, however, know the market well enough to come up with a small marketing plan and a simple growth strategy. It can be as simple as; “We plan on growing our product in the natural channel and get into all Whole Foods locations across the nation.”

2. Have an awesome product
Before you launch make sure you have your recipe nailed down. Don’t launch something mediocre, because it won’t work. Share your recipes with friends and family to get feedback. Before the launch of Bearded Brothers we had eight flavors, but only launched the top four that we determined from a taste testing party we had with friends.

3. Follow the 10% Rule
If you have any chance of succeeding your product needs to be at least 10% better than anything else on the market. It’s going to have to taste better, contain better ingredients; the packaging is even going to have to be better. Bearded Brothers has a compostable package to help set it apart.

4. Don’t compete on price
Set your price so that you will have a 45% Gross Profit Margin selling to a DISTRIBUTOR, not direct to the store. We made the mistake early on of pricing our product as if we were selling direct to the store. Thankfully we realized our error early enough and raised our prices. The important thing here is to charge what your product is actually worth and cover your costs so you will become profitable as quickly as possible.

5. Knock on doors
Launching your product is going to be a full time job. You are going to spend half your time making the product and half the time trying to sell it. When I started Bearded Brothers my mornings were spent making the bars, and afternoons were spent delivering product and visiting store after store to try and get them to carry our product. This persistence paid off to the point other store owners now stumble across our product and call us to place orders without me ever having visited them.

6. Know the local laws
The local laws all vary, but you are going to have to secure several permits to start your food business. Some states allow you to operate out of your home in the early stages, while others will require you to rent commercial kitchen space. There are some places dedicated to just renting out space to startup food companies. Your second option would be to lease from an existing business that has extra space. The two major places you will have to register with are the FDA Reportable Foods Registry and the FDA Food Safety Modernization Act. You may also be required to get a state health inspection in addition to your local inspection.

7. Develop an awesome brand
Don’t just come up with a clever name, but develop a brand around that name. Engage with your new customers online (and at product demos) and build a loyal following of fans. Your goal should be to build a lifestyle brand, not just a product. Bearded Brothers for examples embraces outdoor adventure, health, fitness, and healthy eating.

8. Follow one course until success (FOCUS)
is an acronym coined by Entrepreneur On Fire host Jonathan Lee Dumas. It means your focus should be singular until you reach success in that area. Don’t start trying to branch out and expand your business into other areas until you have truly reached success with your current product. This doesn’t mean you can’t launch new products, it just means they need to fall in in line with what you are currently offering (such as a new flavor, or similar product category), and your focus should remain on growing the brand until it is HUGE (if that is your goal).

9. Have a mentor, or mentors
I have a couple different people I can go to and bounce ideas off of. One is experienced in the industry, and the other is more business minded. It’s important to have other entrepreneurs to look up to and get feedback from. Many times you can learn from their mistakes without having to make them yourself.

10. Network with other companies
Get to know other food companies; reach out to them over email, ask them questions, talk to them at trade shows. When you first start out in the industry you probably won’t know that many fellow food producers, but the longer you are in the game the more people you will meet. It’s helpful to have other fellow food producers to chat with, get advice from, and share resources. Just in the past month I was able to get some recommendations for organic certifying agencies, which saved me hours research time.

Growing your food business will be tough, especially if you have zero experience in the industry. Many times you won’t know where to look for answers. Your best bet is always to ask somebody experienced. You would be surprised at how many people are willing to give you a moment of their time.