Managing The Business
Do
- Know if you have the personality to be a successful entrepreneur—i.e. self-starter, lots of energy, hard worker
- Work from a business plan and continually update it
- Be flexible and organized
- Commit the necessary time to the business
- Form a team with your banker, accountant, and lawyer
- Recognize your management strengths and weaknesses compensating when necessary with personnel, advisors, consultants
- Contact your state and local economic development representatives to determine available resources, regulations, taxes, zoning restrictions
- Determine how you can personally cut costs, serve the customer, improve productivity, and innovate
- Define each person's responsibilities clearly, including if it's a family business
- Allow decisions to be made by employees closest to the information
- Keep updated with skills and knowledge
- Have more than one supplier for all key components (ingredients, packaging, mailing service) in case of price or supply problems
Don't
- Begin without establishing goals and objectives
- Make common business plan errors—too long, no indication of management skills, no recognition of competition
- Resist change when it is necessary to further success
- Lose sight of your mission
- Lose sight of the fact that financial success is the bottom line
- Be afraid to take necessary risks
- Forget to obtain insurance coverage
- Assume you know the best legal structure for your business. Research it.
- Buy an existing business without researching it with the help of a lawyer
- Buy a franchise without shopping around for the best investment
- Grow too quickly—plan it carefully
- Be afraid of learning and sharing through networking
Marketing Your Product
Do
- Know your competition
- Know your competitive edge by comparing your products' strengths and weaknesses against the competitor's
- Anticipate customer needs and fill them
- Look for low-cost advertising and promotional methods
- Consider nutritional labeling even if exempt, unless the nutrition facts will hamper sales
- Start out with markets close to home and work out gradually
- Make your products indispensable to your customer
- Market any customer service you're capable of delivering
- Always be thinking of new marketing ideas
- Figure out your break-even price
- Recognize the demographics of your market
- Use the demographics to target your market
- Evaluate all marketing efforts when completed
- Learn how to write an effective news release
- Prepare for sales presentations to buyers
Don't
- Lose touch with your customers
- Gloss over your company's weaknesses—know how you're going to market around them
- Lose sight of your marketing strategy
- Continue to market products that aren't selling well
- Work without a marketing budget
- Forget to budget for advertising and promotional needs
- Lose sight of changing market trends
- Under price your product or out price yourself from the market
- Forget to track your monthly sales and compare to previous year
- Forget to compare actual sales to projected sales
- Limit how you might market your product for other uses in order to expand the market
- Choose a location that will not provide the necessary traffic or expansion possibilities
- Allow poor packaging to adversely effect sales
- Lose touch with good media contacts
- Forget to review trade publications specific to your segment of the food industry
Producing Your Product
Do
- Compare the costs of processing your product yourself in a rented commercial kitchen or using a co-packer versus establishing a processing facility
- Recognize that packaging can make the first sale but product quality will encourage repeat sales
- Co-op buy ingredients and packaging materials with other processors to reduce your unit cost
- Determine a "food-safe" processing method
- Consider hidden costs in buying used equipment
- Establish a quality control program including a Hazard Analysis Critical Control Point (HACCP) program
- Eliminate unnecessary production steps
- Consider adding a UPC code if you might market to stores with scanning equipment
- Consider ingredient substitution if an existing ingredient is unavailable or too expensive
- Make necessary ingredient substitutions gradually so product uniformity is retained
- Take advantage of accelerated shelf life studies through CSU
- Use code lots for recall purposes
Don't
- Buy expensive equipment or buildings at start-up
- Choose ingredients that are sometimes unavailable
- Take chances with food safety
- Buy ingredients from grocery stores—find a less expensive commercial source
- Hesitate to ask large suppliers for needed information and service
- Set up a working relationship with a co-packer without an acceptable written contract
- Complete shelf life tests with ingredients and packaging different from what you market
- Forget to redo shelf life tests if you change the formulation or packaging
- Allow your product uniformity to change, causing consumer rejection
- Overlook all product changes that may adversely effect sales—microbial, color, flavor, textural, separation
- Forget to keep lot samples (ingredient and finished product) for quality control and legal reasons
- Underestimate the need for tamper proof packaging
Financing Your Business
Do
- Establish banking relationships prior to needing a loan
- Find lenders receptive to small business
- Apply to more than one bank for a loan
- Provide financials to all investors, including when they are family and friends
- Reinvest profits in the business when starting up
- Keep accurate financials
- Do cash flow projections
- Determine available private and public sector funds
- Contact your state and local economic development representatives to determine potential grants, loans, bonds, tax benefits
- Base financial assumptions on the data in the financial statements
- Plan funding strategies far in advance
- If applicable, investigate finance programs available for minorities and women
Don't
- Miss out on free financial counseling and financial packaging available through government sources, i.e. SBDC (Small Business Development Centers), SCORE (Service Corps of Retired Executives)
- Allow accounts receivable to build up
- Lose control over accounts payable
- Underestimate fixed asset needs
- Overpay yourself
- Underpay your management team
- Undercapitalize
- Overspend in any one area of the business
- Improperly structure debt service resulting in an inability to cover principal and interest payments on time with revenue
- Assume buying is always the best option—consider leasing
- Be financially illiterate—understand the balance sheet, profit and loss statement, key ratios, i.e. current, debt to equity, inventory turnover
- Overlook the perspectives of different finance partners in the deal
Do: Remember the help you received and pass it on!
Enjoy what you're doing!
Enjoy what you're doing!
For further information:
Colorado Department of Agriculture - Markets Division
305 Interlocken Parkway
Broomfield, CO 80021
Ph. (303) 869-9174
Fax (303) 466-8515