There's a lot of potential for startups in the packaged food market, a multibillion-dollar industry valued at nearly $997 billion in 2020. Last year, consumer spending on packaged goods grew by 19%. As a new online food business operating from home, even carving out a very small niche for yourself in this industry could mean a significant profit.
But how do you break into the food industry? If you're not sure where to start, it can seem overwhelming. There's more to it than simply brewing amazing kombucha or baking killer chocolate chip cookies.
You need to do significant market research and business planning before you can start selling your food products. This article will walk you through the steps to starting an online food business from home and all the steps you need to take to building a delicious brand.
Launching Your Online Food Business
It takes a lot of hard work and research to start a successful online food brand. As you prepare to launch your home business, here are some important things to keep in mind.
Choose a Niche for Your Business
As a food entrepreneur, the first thing you need to do is select the type of food your business will focus on. Have friends and family told you how much they love your granola? Do your colleagues beg you to bring your famous baked goods to every office party? Are you the grill guy during every holiday barbecue?
If you need a business idea, go with something you already know how to make well when launching a food business. You'll be more likely to find success this way.
Pick the Perfect Name
Now that you know what your area of culinary expertise will be, you need a business name that reflects your product and your brand personality. In most states, there are legal requirements you need to meet when naming a business so check your local laws and databases of existing businesses.
Select a Business Structure
There are four main types of business entities you'll choose from when launching your food brand: sole proprietorships, partnerships, corporations, and limited liability companies (LLC). Each legal structure operates differently when it comes to taxes, personal liabilities, funding, and other important areas. Research these business types to determine which one best fits the needs of your new business.
Write a Business Plan
No matter what industry you're in, your business plan will be your most important document. This document will drive your business from day one and influence all the decisions that you make. It will keep you focused on all of your goals — both short- and long-term. Investors, banks, clients, landlords, and others along the way might also want to review your business plan.
Choose Your Business Model
Determine how your business will operate and how you plan to sell your food items to customers. Will you sell direct-to-consumer or focus on wholesale orders to retailers? Will you offer a subscription service? Will you sell from your own e-commerce platform, Amazon, or both? Do you want to sell your products through grocery stores and other local businesses and at farmers' markets? Decide which model works best for your particular audience.
Establish Funding
Before spending any money, establish a budget for your new business. Also, decide how you will obtain these funds for your project. Will they come from your own pocket? Will you take out a loan or a line of credit? Will you seek investors?
Obtain Your Licenses and Permits
Every state — and sometimes your city or county — will require its own business licenses and permits that vary based on your industry, so check your local laws. If you decide to operate a food truck or work as a caterer, you'll need separate licenses for these, as well.
Don't forget your regulatory requirements to sell food items, including a food handler's license and a health and safety inspection of your kitchen and packaging facility. Check with the FDA and your state health department on specific requirements. Also, some states have cottage food laws, which allow you to sell certain low-risk homemade foods made in unlicensed kitchens directly to consumers.
Purchase (or Rent) the Right Equipment
The equipment needed to launch your food business will largely be determined by the type of food you need. You'll need access to a wide range of tools from large kitchen appliances (e.g., ovens, stoves, grills, microwaves) to smaller pieces (e.g., knives, tongs, pots, and pans). And don't forget about cold storage appliances, like refrigerators and walk-in freezers, and work surfaces, like countertops.
If you can't afford to purchase all the equipment you need or your needs are greater than your home kitchen can store, consider renting a commercial kitchen, which should come with all of these appliances.
Source the Ingredients You'll Need
If you're making food items in small batches, wholesale club stores like Costco or Sam's Club are great for sourcing ingredients for your items. If you're producing on a larger scale, though, you'll need to seek out larger wholesalers to buy from.
Design Attractive Packaging and Labeling
Your food's packaging has two jobs: It needs to be eye-catching and attractive and should draw in consumers. Your labeling also needs to convey any important information about your product, including your brand name, tagline, and website. It should also include nutritional and allergen information. There are certain legal requirements your label should meet. Check with the FDA to determine what information to include.
Determine Pricing for Your Products or Services
There's no single method to pricing food products. It's important to understand the cost of your products or services. Include the cost of ingredients, equipment, overhead, marketing, rental fees, and anything that contributes to the creation and sale of your products. Then, look at the prices of similar items on the market and conduct a consumer analysis to figure out how much they're willing to pay.
Study Your Competition
To be successful, it's important that you understand what other businesses in your field are doing. Identify your competitors' strengths and weaknesses and figure out how you stand next to them. When you look at your biggest competition, what are some areas where you can improve if you want to remain competitive?
Promote Your Online Food Business
As you promote your online food business, you need to understand where your target audience is most likely to find your products. In addition to a well-designed website and e-commerce site, you'll want to establish social media accounts to connect with consumers. Facebook and Instagram, which heavily rely on images and engagement with followers, will be especially useful if you're selling food.
Create interesting, dynamic content to show that you're an expert in the kitchen. Do this by creating a fun, informative blog on your website, writing for other sites, and sharing how-to videos on YouTube.
Determine the Best Way to Ship Orders
Shipping is one of the most important pieces of an online food business. No matter where you're shipping an order, you want to make sure it arrives fresh, intact, and tasting great.
You need to package your food in a way so that it doesn't get crushed while out for delivery. And if you're shipping perishable goods, you need to find an easy and inexpensive way to insulate and refrigerate items as you ship them.
Let Skynova Help You Grow Your Online Food Brand
As you launch your home-based online food business, let Skynova help you build your brand. Our comprehensive accounting platform offers businesses everything they need to track and manage their financial activities. Our software products and templates create a one-stop shop for small business owners like you by establishing a centralized hub for all of your bookkeeping needs.
Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with federal, state, and local laws regarding food handling and safety before making any decisions about your business.