Problems to avoid when starting a food manufacturing business

Seeing an opportunity for a food product is just the first step. Proper planning is essential for success.

Business plans are composed of many parts and they serve as a road map in development. A tool to measure success, business plans should be written in a manner that will allow potential investors to understand the scope and potential of the venture.

Many businesses just get started and do not really have a true focus or plan. Correspondingly, a great number of food entrepreneurs try to bite off more than they can chew when starting out. Beginning with one or two products will help reduce this problem. From a solid base the product line can be increased as interest increases.

Another positive aspect of starting at a smaller scale is work processes and flow of materials can be developed more easily. Business plans should include sourcing and storing of raw ingredients, equipment needs, production techniques and final stages including warehousing, distribution and store placement methods.

Other components expressed in your business plan include, labor needs and management. Financial matters of any new venture should consider (and express) start-up costs, long-term capital needs, pricing and projections of profit and loss (operating statement). A balance sheet should list the assets, liabilities and owner equity for the coming three years. This viability test can help to avoid financial embarrassment or wasted effort. Make it work on paper before rushing into operations.

Vital to any new food product launch is scaling up your proven recipe to a commercial scale. What works in the home kitchen may not with an increase batch volume. When the recipe is fine-tuned it will allow for a boost of economy of scale and should increase profitability.

Michigan State University Extension educators working with the on campus resources of the MSU Product Center can assist with this process.

Related articles in this series:

Understanding business start-up costs

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