Lesson 2: Making A Plan
Every business should have a plan. Since you won’t be seeking financing initially, you don’t have to create a 30-page business plan. A couple of pages will do just fine.
In this lesson, we will walk you through the things you should pencil out as you plan your food business so that you have clarity and focus as you go from the drawing board to the cutting board.
Making a Plan
Plan Components (continued)
Customer Relationships
It takes far more work to sell a dozen people one thing than a single person a dozen of the same thing. Volume is important, but not at the expense of quality or viability. As more than one business owner has learned, that single person may be a cash cow now, but they can leave you at a moment’s notice for a competitor.
This is why it’s so important to build a relationship with your customers.
When a customer first learns of your business, it may be a casual interaction. They may have read about you in a social media post or saw you at a street fair. They may have even walked by you a few times without buying. But then, they stopped. Maybe they accepted a free sample. And then they bought something. You gave them a coupon for a percent off their next purchase or a Buy 1, Get 1 offer. They come back, and buy some more.
No matter what business you are in, people buy from people. They don’t buy from a business. They buy from you. And the more personal you can make that experience, the more you can connect to who they are – not only as a customer but as a person – the more loyal they are going to become to you and your products.
As you build your Cottage Food business, remember to create that connection. Create a conversation, ask about their kids or their dog. Remember their anniversaries or other life events. Solicit their feedback and see what else they’d like you to offer. People, whether they buy from you or not, are the cheapest consumer research loop you can create. People have opinions. They want to share them. They want to be able to make a difference and they want to be part of the action. They are also, by far, your best salespeople you’ll ever find.
While you may not be able to offer them shipping on orders, you can invite them to order online, share their experience on social media and tell others about you and your products. Any online encounter – whether it’s a comment on a social media post or an email query on your website – is an opportunity to connect.
Whenever possible, get them to provide you with their email address. Offer something of value in return, such as something free next time they stop by. Build an email list that you can market to. Let them know first about a new product you’re rolling out or that you’ll be in their neighborhood delivery products next Friday and would they like to order something. Ask their opinion about something you’re thinking about introducing. Down the road, if you decide to branch out beyond your Cottage Food kitchen, your most loyal customers will know about this new venture.
Relationships are built over time. Take the time to build them. You just never know who your customer is or how they are connected to others in this great big world of ours.
Return to Main Office
Courses
Introduction
1. Cottage Food Basics
2. The Business Plan
3. Pricing
4. Marketing
5. Food Booths
6. Food Trucks
7. Pop-Ups
8. Brick & Mortar
9. Exit Strategy
Cost Structure/Pricing
One of the hardest things to do – for any creative – is to put a price on your creation. It’s like slapping a price tag on your child. It’s often a labor of love that gets you this far. Little thought was put into making ends meet, or gasp! – making money.
There are two ways to think about your pricing strategy. You can be cost-driven, minimizing costs whenever possible to reach as wide a market as possible, or you can be value-driven, focusing on providing maximum value for the customer. A good example of the latter is a gourmet cupcake business where customers are willing to pay a premium because of the quality and the perception created when the purchase is shared with a friend, coworker or loved one.
Regardless of your value-driven strategy, you need to make sure you not only cover the costs of creating your products, but price your products so they sell and make money. New business owners often make the mistake of setting a price that covers the cost of producing the item and perhaps making a bit of money as a profit, but they forget to factor in the indirect costs of running a business. Things like taxes, vehicle maintenance, equipment repair and replacement, advertising, and, oh, yes, a salary!
The good news is you’re not running a business with huge overhead. It’s just you and your kitchen at this stage. A Cottage Food business will allow you to continually experiment with products and prices until you find the sweet spot where customer demand matches your ability to meet that demand and make a profit after everything is said and done.
From there, you can adjust accordingly and decide if you want to go bigger or are content with a side hustle that allows you to make up to $35,000 a year from your home.
We’ll go into more detail on this in Lesson 3: Pricing.