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5 Costly Mistakes New Food Entrepreneurs Make (And How to Avoid Them)

Posted by Jill Beaman on April 27, 2018

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You have a recipe that everyone loves. Friends and family have told you over and over how great your food is, that you could make a killing selling it. Maybe you’ve even dreamed up the perfect name for your barbecue sauce or cookie dough. You can see the product design in your head. You are ready to make the dream a reality.

Hold on just one second before you spend that money on printing labels and buying equipment. You could be making one of many costly mistakes made by first-time food entrepreneurs... These mistakes can set the production of your product back months, or even years.

Watch out for these five most common mistakes as you work toward bringing your unique product to market.

1. The Wrong Packaging and Labeling

How you package your food is about more than just appealing to consumers; it also has to follow strict Food and Drug Administration regulations. If your label doesn’t follow FDA rules, they can pull it off the shelves immediately (or it may never even make it to the shelves). To be sure your label is correct, educate yourself on the legal requirements and work with a graphic designer who has experience designing food labels.

You also need to be knowledgeable about how your type of product is typically packaged. Go to the grocery store to check out competitors to get an initial idea. Be sure your packaging and label design will stand out from the crowd, but be sensible. Also remember your product has to fit on grocery store shelves or grocers won’t stock it, so avoid packaging that is too tall or too wide for example.

There are a lot of mistakes that can be made in regards to packaging and labeling so it’s critical to do the research, learn the requirements, perform tests, and ultimately make smart not just interesting or creative choices.

2. Unnecessary Expenses Related to Ingredient Costs

If you intend to make a profit, your ingredients need to be cost-effective. Otherwise your profit margins will be too small and your business will be unsustainable. Do your research and shop around because you may be able to get the same ingredient for less through a different source or buying in bulk. Explore all your options before settling on a product in order to increase your profitability.

Some food brands are unique simply because of the high quality or type of ingredients being used, but keep in mind that you can still have organic or high quality ingredients with an awareness of your options. No matter what the product, doing your homework will leave more money in your pocket, so take this step very seriously before investing in costly, more convenient ingredients.

3. Not Enough Research 

Knowing your consumer is vital in knowing how to package and sell your product. Getting feedback from your community will tell you who your typical customer will be and what those people like about what you’re offering as well as what you could change. Gathering this information in the beginning stages will save you money and time as well as help shape it into the best version of itself before you bring it to market.

Once you’ve shaped your product based on peer review, seek feedback from retail buyers, the people who buy products for grocery stores. If retail buyers don’t like your product and don’t think it will sell, then it will never hit grocery store shelves.

4. Lack of Financial Education 

It’s important to understand exactly how much it costs to sell your product, also known as Cost of Goods Sold (COGS).

Common COGS include:

  • Packaging
  • Ingredients,
  • Production time
  • Distribution costs
  • Marketing
  • Cost of renting a commercial kitchen
  • Extra costs built in to cover mistakes like bad batches or broken merchandise

Always give yourself enough margin to cover all expenses, including unexpected ones, by also understanding profit margins and break evens.


Pro tip: If you feel like you’re more comfortable in the kitchen than you are with a spreadsheet, either hire someone who can help you effectively predict and plan for expenses, or invest in your own education by taking classes on the subject..

>> Learn more about Getting Your Recipe to Market

 

5. Unrealistic Expectations

As a food entrepreneur, your role is to make, distribute, sell, and promote your food product, but unfortunately your job isn’t done when your product hits the grocery store shelf. After you’ve made it to market, in order for your business to grow, you might need to consider outsourcing parts of your business to contractors. For instance, you can hire a co-packer or get help with distribution. Always weigh the costs and benefits of outsourcing before paying a contractor to help.                             

It’s exciting work, being a food entrepreneur, but one costly mistake can bring your whole business down. By planning ahead and knowing your product inside and out, you can avoid these common mistakes and be a successful business owner.

If you’re serious about being a food entrepreneur, consider Getting Your Recipe to Market , a 14 week course that will help you produce, promote, and profit from your new food venture. 

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Topics: Small Business, Starting a Business, Food