July 16, 2012
With all the talk last week of Cottage Food Laws, you may be thinking that starting a home-based food business from your own kitchen sounds just about perfect. Before you take the leap though there are 6 things you should consider:
1. Does your state allow commercial production in home kitchens and, if so, what are the stipulations? Ok, this may sound obvious but it’s something you need to check if you know. Currently 31 states have Cottage Food Laws and six more have laws pending in legislation (click here for more information about these states and their specific regulations). You must live in one of these states in order to make food at home for sale elsewhere. Even if you do live in one of those states you need to know that specific state’s requirements and stipulations. Some states limit the types of food that can be prepared from a home kitchen while others may place a maximum annual gross sales limit on home-based food businesses. Be sure you clearly understand the laws in your state before starting out. Click here for more information about these states and their specific regulations.
2. What are your costs? Starting that food business you’ve always dreamed about might sound great on the surface but you want to make sure that you’ll actually make money. Before starting any food business you should estimate your costs to determine if your anticipated sales can cover these costs. You should include things like start-up costs such as paying for any business licenses or health permits you may need, fixed costs such as a monthly cell phone plan if you want to have a separate business phone number, and variable costs like the cost of your raw ingredients.
3. Who is your target market? Think about your product and determine who would be the most likely to purchase it. If you plan on making traditional Swedish Buns then your target market might be anyone who is Swedish or who has been to Sweden. If you plan on making cupcakes then your target market might be moms with a birthday party to plan or office workers seeking a 3pm sugar pick-me-up.
4. Where Will You Sell Your Products? Once you know who your target market is you can determine where might be the best place to sell your products. There are more avenues than ever before for food entrepreneurs including farmers’ markets and festivals, selling wholesale to gift stores and specialty markets, offering your products for delivery for special events, or selling online through websites like Etsy.com or Foodzie.com (again, each state has specfic regulations about where homemade food can and cannot be sold so be sure to check your local requirements carefully).
5. Is this really something you want to bring into your home? Not having to rent commercial kitchen space is a huge cost savings to small food businesses when you’re first starting out but you need to think long and hard about whether you really want to bring all that production into your own home kitchen. Consider whether you have the space and refrigeration to store raw ingredients and whether you really want to try and balance home and business cooking from the same kitchen.
6. Is this something you’re allowed to bring into your home? Even if your state allows for home-based food businesses, your city, town, or neighborhood association may not allow it. Local ordinances vary widely so you need to make sure that your local laws or even your homeowner’s association doesn’t prohibit you from starting up out of your home kitchen.