1. Not having a Business Plan: Putting a plan in writing helps you think out all the issues, problems and opportunities you will face. In the business plan, have a realistic budget for the first year. Include distribution and other sales objectives.
  1. Being Undercapitalized: Plan on loses for two or three years. Discuss with your banker your business plan. Understand how much the bank is willing to lend. Shop the banks, get a calling officer that has influence with the credit committee. Meet quarterly, if not monthly with your banker. Tell the banker all the news – good and bad.
  1. Brokers & Distributors: Understand how to manage brokers and distributors. Talk to them monthly, visit them at least once a year and ask for a “distribution and sales review” when arranging the meeting, so they can be prepared.
  1. Manufacturing: A company in the food industry should have at least $2 million in sales before beginning to manufacture their products. There are hidden costs in manufacturing that can sink a small company. Find a good co-packer (NASFT, IDDBA can help) and be there when your products are being run, so you know the correct formulae and ingredients are being used.
  1. Pricing: Price the products to succeed. Aim for a 40% -50% gross profit margin. If you need to start lower because of the co-packing costs, then increase pricing yearly. Give up some sales to maintain a margin that will allow you to market and promote. Yearly price increases should be the inflation rate plus.
  1. Employees: Hire good people. Turnover is very expensive and enervating. Pay a good salary/wage to start and add bonuses based on performance and sales or profitability.
  1. Accountant: Hire a good accountant and produce monthly financial statements. They are a good way to face reality.
  1. SKUs: Review your products yearly and when new products are added, decide what sku’s to eliminate based on sales and profitability.
  1. Packaging: In the food industry, packaging is an important component of the marketing process. If the package is not attractive, or looks dated, the product will not sell up to expected levels.
  1. The 5 P’s of Marketing: They are product, packaging, pricing, promotion, and placement. The product must be good quality for where it is positioned. Packing must reflect well on the product. It must be priced to reflect the quality and positioning of the product (specialty, main line, economy, etc. Promotions should fit with the quality and positioning. Finally, placement on the shelf is important. If it is difficult to find, sales will be low.


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