Starting a Food Processing Business in Virginia
Have you ever thought that maybe Grandma’s secret family recipe could make it big?
What about that chili recipe from Uncle Jim? This article can help build on that recipe and provides current information about starting up your own food processing business in Virginia.
You may be surprised to find that it is not the easiest task to set up a food business. Like all businesses, they require careful planning and dedication to be successful. The food business is very unique, in that the food you produce will have a direct effect on your customers’ health and safety. In fact, if a food is improperly processed or stored, it could
cause serious illness or even death. There are many other repercussions as well, including loss of your customers and sales, loss of prestige and reputation, lawsuits resulting in court fees, increased insurance premiums, lowered employee morale, and embarrassment.
Competition in the food business is fierce. It is very difficult to have a product accepted by a major grocery chain or even a nationwide food establishment. Even if your product is loved by family and friends, it may not be a national success. Overall, owning your own food business requires a great deal of commitment, hard work, time, and technical knowledge about food. Luckily, there is a lot of help for those who are just beginning and are looking for some guidance.
Questions to Ask Before Starting
Are you ready to start your own food business? Here are some general questions to ask yourself before getting started:
1. What are my personal characteristics?
2. What type of business plan would I have?
3. Do I have enough time to really commit?
4. What kind of contacts and assistance do I have?
5. What is my financial status and what resources do I have?
6. From where would I pool my labor and how much would it cost?
7. What do the market conditions look like for my product?
Should you quit your existing job? Here are some questions to ask yourself before you quit your job and focus solely on starting a food business:
1. Do you have enough money to get started?
2. Can you live without a steady paycheck?
3. Can you start by running your business only part-time?
4. Do you have a business plan?
5. Can you wait up to 5 years for success?
6. Are you a specialist in your field and known throughout the community?
7. Are you handle your own billing, taxes, and record keeping?
8. Do you have a support system both personally and professionally?
9. Are you self-motivated and confident enough?
There are many resources available to help you plan and start your own food business.
Here is a list of available services:
Virginia Department of Agriculture and Consumer Services (VDACS)
The Virginia Department of Agriculture and Consumer Services (VDACS) is has many
different branches of resources within their department to help get you started. The
Office of Food Safety and Inspection can assist in facility planning and layout, can
authorize a facility for food processing, and will enforce food regulations. The Office of
Marketing Services offers the Virginia’s Finest Trademark Program, Virginia Grown
Program (which assists with direct marketing programs for growers). They also supply
marketing boards, trade event notification, and organic certified programs. The
Agribusiness Developmental Services will help you find a location for your business,
provide assistance with permitting and/or environmental issues, help link you to a source
of financial assistance, and help promote regional cooperation to promote growth. More
information can be found online at http://www.vdacs.virginia.gov/.
Virginia Department of Health
The Virginia Department of Health helps clients in the food industry with defining
needed regulations for your food product. They also help with inspections of your
facility and host regular training workshops for food businesses as well as house
information on food and general environmental services available to businesses. Virginia
Department of Health can be found online at http://www.vdh.state.va.us/.
Food and Drug Administration (FDA)
The Food and Drug Administration is a federal organization created to ensure a safe food
supply and consistent regulations. For more information on regulations at government,
state, and local levels as well as information regarding nutrition, recalls, product approval,
and more. FDA can be found online at http://www.fda.gov/.
United States Department of Agriculture (USDA)
The United States Department of Agriculture (USDA) is another federal agency designed
to help with many facets of agriculture, especially with meat, eggs, and poultry products.
As for programs specific to a food business, USDA has countless services and
information on business development, marketing and trade, laws and regulations, dietary
health, food assistance and safety. More information can be found online at
Virginia Cooperative Extension
Virginia Cooperative Extension holds resources at both the state and local levels and
have personnel to answer questions free of charge for those looking to start their own
food business. There are specialists available in many different areas including, but not
limited to, how to prepare a business plan, technical advice, and product safety testing.
This information and more can be found online at http://www.ext.vt.edu/.
Virginia Department of Business Assistance
Virginia Department of Business Assistance holds information on getting started,
incentives for opening your own business, financing help, and workforce training
workshops. This information can be found at http://www.dba.state.va.us/.
Commonwealth of Virginia
The Commonwealth of Virginia has information on starting and running a business. This
includes the basics to start-up, permit and licensing information, and tax information.
This also includes business resources that come in handy when questions arise. Found
online at http://www.business.virginia.gov/.
Virginia Small Business Development Centers Network
The Virginia Small Business Development Centers Network helps new food businesses
with business counseling, training, and resources. In 2005, over 4600 business owners
and managers received one-on-one counseling. While there are many offices throughout
Virginia willing to help, they can also be found online at http://www.virginiasbdc.org/.
Virginia Tech Department of Food Safety and Technology
The Virginia Tech Department of Food Safety and Technology will help provide testing
of food products and provide technical guidance on safety and regulatory issues
governing food products. They also conduct Better Process Control School workshops
which are necessary for acidified food producers, provide guidance on reformulation of
your product, and will assist with compliance with regulatory agencies.
Marketing, Promotion, and Advertising
Marketing, promotion, and advertising all have different meanings. Marketing involves
1. Determining the customers who will buy your product and what they want or need.
2. Supplying your customers with goods or services to satisfy these wants and needs.
3. Doing all of this at a price that shows a profit but that your customers will still pay for.
Promotion is the communications aspect of marketing that informs the public or your potential customers about the product. Examples of this can include written publicity, news releases, demonstrations or talks to local groups, posters, free samples, displays, brochures, and more. Take advantage of these promotion opportunities. If you are asked to donate some of your food products for community charity events, ask for recognition of the event programs. As your business grows you may be asked to donate more frequently. Remember, don’t feel like you have to donate, you can politely decline those you do not wish to support or do not feel will help to advance your business.
Advertising is a paid promotion. A newspaper or radio station may be interested in featuring a story about your product. You may have to pay a fee for the publicity in the news media. When you pay for newspaper or radio time you can say exactly what you want to about your product, provided what you say is allowed by law. Advertising is not the first thing you should think about when marketing your product. The overall marketing plan should come first.
The Marketing Plan
Marketing includes all of the decisions involved in creating a new business. Before starting you should define and ensure that you understand the basic marketing aspects of your product. This includes the product features, a target audience, competition, demand, pricing, cost of manufacturing (facility, utilities, ingredients, packaging, licensing and government fees), and other indirect costs (advertising, phones, postage, transportation, insurance). You always want to consider the product in relation to your customers. What do they need? Who are they? Think about what they like, what they dislike, their income, and their education.
What needs do your customers have that will make your product appeal them? They may want to save time, money, work, or energy. They may purchase only high quality items or receive special services. Your business should try and meet these needs.
You also need a way, through promotion and advertising, to get the word about your product to your customers. What do your customers do for fun? Can you advertise there? How are you best able to reach them and tell them about your product? For example, if you advertise your expensive catered dinners in a shopping guide that features garage sale ads, you may be targeting the wrong type of customer.
A great resource in helping define a marketing plan comes from the Virginia Tech Business Technology Center. It is part of Virginia Tech's statewide economic development support activities and it provides confidential strategic planning and business development assistance to individual entrepreneurs and businesses seeking to enhance their competitive position. Services provided include market research, market opportunity assessment, competitive analysis, market strategy development, and business plan development. More information can be found at http://www.pamplin.vt.edu/btc.
Setting a good foundation by working diligently and covering all the bases when setting up your marketing and business plans pays off in the long-run. It has been shown the more up-front homework done for new businesses the more success that business will have in the market. Make a marketing plan with realistic goals and leave enough time for those goals to be accomplished. You should not expect to be an instant hit. Developing a solid marketing plan will help you to understand where your product fits into the target market.
Figuring Expenses and Developing a Budget
There are many expenses in starting a food business that may not initially come to mind. A business has two types of expenses which include fixed expenses and variable expenses. Fixed expenses mean that the expense will not vary over time, for example, rent for your processing facility. Fixed expenses also include annual expenses such as equipment, license fees, etc. The other expense is known as variable expense, which will vary with each payment including utility bills, ingredient costs, transportation costs, supplies, promotion, etc. It is very important that when setting up an expense report that your business expenses are kept separate from personal and family expenses. This way, record keeping and tax preparation can be kept separate as well. Below is a list of typical expenses associate with starting your own food business:
When estimating the cost of food ingredients you will need to base the estimate on batch size. List all of the ingredients needed and compare prices for all of those ingredients from both grocery stores and wholesale outlets. Make sure to keep your product at top quality with the least expensive ingredients. Never sacrifice the quality of your product, but keep in mind that ingredients bought in bulk have a lower cost per unit. There can be snags with new businesses, as some ingredients are perishable and it may be hard to keep large quantities in proper storage. Also, buying prepared foods, such as chopped nuts or dehydrated ingredients, can reduce your cost by saving time during preparation.
Labor is a large part of expense that many people overlook. You may not expect, at first, to include yourself in salary distribution. Though this is a fine solution, remember that other employees, assistants, delivery people, and others expect to receive a salary. Start by figuring how much time is worth to you. This could be minimum wage or more. A good deal of time will be needed for developing the business, transportation, purchasing, record keeping, etc. Ensure that you set a fair wage for those who are working for you, even if you are not paying yourself.
When considering transportation costs you need to take into account how much you will
be doing. For example, are you going to deliver your product? If so, gasoline and
automobile repairs need to be added into transportation costs. Another question to ask
yourself is will you need special temperature controls for your product? Is it a product
that has to remain refrigerated? If so, a special vehicle may be needed. All of these
factors must be taken into account when deciding costs necessary for transportation