Starting a Commercial Food Business: A Framework for Success

January 3, 2023

Click here to access the resources referenced in this webinar.

Video Transcript

Well, welcome everyone. My name is Parker Jones, I work for MSU Extension in the Product Center, and I'll get us started today on "Starting a Commercial Food Business: "A Framework for Success." Next slide, please. So we should all be pretty good at Zoom by this point, but just a little bit of housekeeping. In the bottom left hand corner, if you're having audio problems, you can test your speaker and your microphone. Choose the speaker that you want. We're going to direct questions through the Q&A button, which is in the bottom right hand corner. And then, if you have questions that you need to ask to us as presenters that aren't questions about the content, then you can use the chat feature as well. And there's a help desk and a number that you can call if you're having any technical problems. So this webinar is built for you all as food entrepreneurs, as people who support food entrepreneurs, looking at starting a commercial food business. So please do ask questions in the chat or, excuse me, in the Q&A. This webinar will be recorded, you will get this information after the fact. And we'll answer questions in the Q&A as they come, but we're gonna wait until the very end to answer the questions verbally, live, that we don't get to in the chat. And you will be muted as well. The MSU Product Center is part of Michigan State University, and we are an affirmative action, equal-opportunity employer. So know that all the programs, all the work that we do, are open to all without regard to race, color, national origin, sex, and other protected identities. So our reason for existing at the MSU Product Center, our goal, is to accelerate innovation and growth for business, industry, and entrepreneurs in food, ag, and natural resource sectors of the Michigan economy. So what exactly does that mean? Well, we do this through one-on-one business counseling, with innovation counselors like myself and my co-presenters, where we're distributed across the state of Michigan and we know the local food system, we know local economic developers, we know local retailers and distributors, and we help to connect entrepreneurs within this setting, and then also to work one-on-one on their business. So we do product focus work where we're looking at packaging, we're helping with labeling, with regulations. Finance-focused work where we're looking at costing, pricing, financial statement analysis, markups and margins. And then, we also work on marketing of who exactly is your customer, what do they value, and how do you communicate the value of your product to your customer through ways that are strategic and also tactical, like social media. So you can see the impacts that we've had over the last fiscal year. So we've helped create 198 jobs, 128 jobs retained, 77 ventures launched, we've worked with 816 Product Center clients, and we have engaged in 4,830 business counseling sessions. And so, I talked about how we have innovation counselors in the field, we also have a lot of resources on campus. The Food Processing and Innovation Center is a state-of-the-art processing center working with regional, statewide, national, and international food companies on meeting their business goals. We have food scientists who work for us, we have the best packaging school in the nation, regulatory expertise, and a lot of sector-specific expertise as well. So you can see some of the impacts from the Food Crossing and Innovation Center, and the work that we've done has led to owner investments, grants, loans amongst the people who we work with. So this webinar is part of a buildup to the Making It In Michigan Conference and Trade Show. The last time we hosted this was in 2019, and we hosted it in November but we've decided, this next year, to bring it back for the first time in-person since 2019 to April because a lot of the value of the Making It In Michigan Conference and Trade Show is informing those networking connections with distributors who can take on your product, with retailers where you can scale up, go across the region, across the state, into multiple states. And these people tend to be really busy at this time of year, where you have Thanksgiving, you have the holiday rush, so it's not ideal to help onboard our clients to scaling up to host it in November. So we've hosted it in April this next year. So one part is a trade show where we have hundreds of food entrepreneurs innovative, from across the state, engaging with these buyers, with these distributors, with people who come to the trade show, to see what is happening in food. And we also have a great educational sessions lineup, where we have a panel of large scale groceries. You can hear directly from Meijer, you can hear directly from Kroger, distributor panels, you can hear from Cherry Capital Foods, Lipari Food Distributors, Community Grocery, MSU School of Packaging. We've had product economists talk before about different consumer trends. So it's really a great place to learn about how you can go from the scale that your business is, as a food business, into something larger. Next slide, please. So as I said, my name is Parker Jones. I work as a small business counselor with the Product Center. I am based in Traverse City. And I'm joined today with Maria and Jamie, so I'll let y'all introduce yourselves. - Hi everyone, I'm Maria Graziani. I'm a Michigan Good Food Fund Specialist, working with Center for Regional Food Systems at MSU, and an innovation counselor working with clients in southwest Michigan with the Product Center. - Hi everyone, I'm Jamie Rahrig. Just like Maria, I'm a Michigan Good Food Fund Specialist at the MSU Center for Regional Food Systems, and also an innovation counselor with the MSU Product Center. It's great to see a lot of familiar names on today so thank you for joining us. I'm gonna get us kicked off with our agenda. So for this session, we want to talk about why are we doing this session, what it's for. Then, move into defining your concept and audience, managing cost and finances, talk about food safety, and licensing, and product testing that you might need for a commercial food business, and then end with some resources. So let's go ahead and get started. So if you're coming to this session as having to... And operated under Cottage Food Law in Michigan, this session is gonna help you go from cottage food to commercial food business, or if you're coming to the session wondering how you can start to sell a product in stores, like groceries or corner stores, you'll learn some basics from this session as well. The MSU Product Center also has an online course that will give you a lot more detail. It is called "Starting a Commercial Food Business," like this session, and you can take the online course at your own pace, on your own time, and we can put that link in the chat. - So when we're looking at a framework for success, it's important to note the difference between entrepreneurs and businesses. So businesses, they have historical sales data, which is the gold of marketing. They have... They know who their customers are, they know how to reach them, they know where they're selling, they know who their value chain partners are, they know their operations and costs because they've done this exact same thing in a very similar context before. Not to say that owning a business is an easy thing to do, but there's a lot of knowns in owning a business with historical sales data. So as an entrepreneur, if you're pre-sales or if you're early sales, you have limited information. So you're trying to make the best assumptions that you can to discover your business model. But regardless of how good your data is, it's not historical sales data in this exact same context. So entrepreneurs are more so in the business of learning. So you want to learn your business model as cheaply as you can, and as quickly as you can, so that you can go to operating your business model and becoming more specialized, operating more so like a traditional business. So for that, it's really important to put your business model to paper. There's different options for this. There's a traditional business plan which has mostly... Mostly a text-based document, where there's a management plan, a financial plan, operations plan, marketing, etc, with financial statements. And if you're gonna get a loan, this is something that bankers are gonna expect from you, is this formal business plan. And this is one way of representing your business model. Representing it to yourself so you can refine it, to your partners, to the people working on your business, and all the people who you're gonna interact with as a commercial food business. Another option is a lean model canvas, which is a one page template, which visually shows how your business model works in between its different pieces. So regardless of... Regardless of which format you use, know that it is really important in being successful to put this to paper in some way so you can see outliers and you can see trends, what works and what doesn't. So this is a positioning statement which is specific to marketing, but it does hold for your overall plan. In general, you're gonna have to answer difficult questions like this, "Buyers in the target market," as you define it, as specifically as possible, "should buy our product "rather than others being offered "and used because blank." Now, a quick question for those of y'all in the audience, how many marketing messages do you think you see a day? You can put this in the Q&A. So marketing messages would be any brand you see, any billboards you see, any logos, ads, anything that you interact with. So if a number's coming up to you, you can put that in the Q&A. Okay, we have 700, that's one. Hundreds. Any more? Hundreds. Yeah. (indistinct) Yeah, great, thank you. The actual number is between 4,000 and 10,000. So we're receiving between four and 10,000 messages a day of people trying to take a little bit of our attention. So you need to be really specific in your positioning statement for your food business because this is the landscape we live in. These are the people, the other businesses, that you're competing with. So for example, a larger group who I've worked with was looking at an alcoholic seltzer product. And so, they were looking at targeting the breakfast occasion, and their target market was, in general, younger people who are busy, work new economy jobs, and are going to brunch but don't really have the time to, say, mix their own mimosa, so they might buy a package product of that. You'll be more successful with a tailored in positioning statement versus saying, "I'm gonna sell food "to people who eat food," right? Next slide. So part of this positioning statement, and part of marketing and operating your business in general, is differentiation. So you are able to sell to your customers because you're unique in certain ways. Certain ways that they value. And so, it's important to note, I say this a little tongue-in-cheek, but you are not Smucker's, right? So the people who are gonna go to the big box store to buy the national brand named product in your category are not your customers, so you do not have to compete with them on price. And you have unique value to your customers. So if you look at the jam in this photo here, I mean maybe you'd pay $25 for this jam or $20 for this jam. You can see the ingredients, you can have a quirky brand, you can have natural ingredients, you can have distinct labeling, you can have great customer service, you can be there interacting with folks as a sales rep, making it more personable. There's all these things that you do to change that value equation so that you connect with your customers in a distinct way. It's important to note that you're connecting with a distinct customer. So there's someone who I work worked a little bit with, talked with them a little bit, about who their customer is. Sold a hot sauce. I asked them, "So who's your customer for your hot sauce "and what makes your hot sauce unique?" These are the questions that you need to answer in your business plan. They said, "Well, Parker, "I sell hot sauce, "it's just a hot sauce, "and people who consume it are people "who need to use hot sauce." So it's not that this is incorrect but if that's what your marketing is tailored to, you're not gonna connect with any of your customers. You need to know the occasion, the person, the demographic, where they're using it, who they're using it with. The more of that information you get, the more successful you'll be. So historical sales data is the best market information that you can get 'cause you're selling your specific product and the place you wanna sell it to, to who your customers are. But if you don't have this data yet or you need data on new information that you're doing, market research really is key, writing that into your business plan. National reports can be a good guide, knowing what's happening in organic products or functional foods or kombucha, whatever it may be. These things are helpful, but you are not selling kombucha to Americans, you're selling kombucha to specific people in a specific context. So you need to tailor any research you do to your local market. And I find that some of the most effective research is when you get out there and interact with your customers one-on-one, or are looking at where you're making sales and actually doing your research there. So you're putting on your boots and you're going there. If you're looking at opening a bakery, traffic counts near that bakery, that's really helpful. If you're going to sell in the grocery store, actually going to that place, that category, maybe it's the hot sauce aisle, and looking at this context, that's helpful. Look at prices, look at packaging. Selling at the farmer's market, same thing. Go to that farmer's market that you wanna sell to and see what's happening in this competitive context. And this last one is a little bit tongue-in-cheek, but ask friends of friends for feedback. Don't ask your friends because your friends are your friends, and they're biased, but the friends of your friends, they will give you honest feedback on if your website needs improvements, or they don't understand your label, or whatever it may be. And it's important that you build in a margin to your product from the start, and you set a price that you can live on. So for that, you're gonna look at your competitors. For example, you went to the grocery store, you saw what other hot sauces are selling for, you know generally the range that your product could sell for. You need to know your costs, which Maria will talk more about, your fixed costs, your variable costs, and what I'll call hidden costs. A coworker of of mine used to operate a CSA business. They projected they were gonna make all this money doing delivery on CSAs. And then they're operating the business, they saw that they were losing money. And the reason why is they hadn't built in the distribution costs. So that's tons of labor, that's tons of money in gas, which they hadn't considered. So think about the whole flow of your product getting to your customer... Yeah, thank you, Jamie. CSA is "community supported agriculture." So think of the whole flow that brings your product to your customer, and all the activities that take place along the way, and these are potential costs that you need to account for. So you can have a lot of markups across different industries in food. If you're operating a contract manufacturing plant or you're doing distribution, your markup's gonna be a lot lower. Even in packaged food, markups can change a lot. But as a rule of thumb, a 35% minimum markup is a good idea for your products. And Maria will talk more about a total breakeven analysis to help you do that. No one is good at everything, so it's important that you build a team of folks who can help you run your business. Even if you're the only one on the payroll, you have sons or daughters who might be going to school for marketing, you might have an aunt who is an accountant, you might have a friend who is a lawyer, you might be able to buy a few hours of someone's time to help you with some technical aspect of your business, reach out within your networks to get these people to help you run your business, because you are the entrepreneur but it does take a team to do things well. So in summary, you are going to operate a business, and you're gonna sell a product that has distinct product attributes. You're gonna have competitors who offer similar attributes. There's always a competing product, or at least a substitute product, unless you are... I can't even think of an of an example. Unless you're shooting rockets to Mars and you're the first one to do it, then you don't have any competitors. But for everyone else, you do have competitive pressures in your business. So there will be some ways that your business overlaps with the competitive offerings of others, and you need to think about who your customer is and what they value, and look at what you can sustainably provide that your competitors can't. And if you build out your product in this direction, you build out your marketing in this direction, you build out your finances in this direction, you can sustainably compete and get a healthy markup while doing so. So at this point, we'll take questions at the end, but I'll hand it off to you, Maria. - Great, thank you, Parker. So next, we're gonna look at what we do to determine costs, and take a good look at financials so that, as Parker said earlier, you do not miss any potential hidden costs in your business. Questions we might ask, "what are the core inputs for your business? "What are your sales and your other income "that you need to track? "And what are the expenses?" Also, "how do you use these inputs "to continually generate and check in "on your losses and gains? "What is your breakeven and how do you use that "as a tool for growth?" And "what expenses can you keep the closest, "or should you keep the closest, "of eyes upon?" So in the next couple of slides, we are going to take a look at major inputs and expenses to track as part of a food-based business. So why determining your costs and conducting a breakeven is absolutely essential. One, it helps you to determine whether your business is really making profit with your present sales, it helps you to figure out how many units you need to sell to keep afloat, or to make profit. Helps you to set up optimal pricing and promotional strategy to sell more. Helps you evaluate your business, you can communicate effectively to investors and partners. And as Parker said again, earlier, it's possible to forget expenses and if they're not planned into your business, it's hard to make a correct projection and analysis. And it helps to determine and quantify the potential loss that could occur in an economic downturn. So some inputs on what is called a cash flow statement. So what you're looking at are screenshots of a 12 month cash flow statement, and conducting... The top one is potentially determining how many sales based on each product that you would have in a month. So if you look at the word "price" with the green arrow heading to the yellow block on that first screenshot, this is in a cash flow projection where you can list all of the products that you make and the price per product. Everything in yellow is an adjustable number, so you could play around with pricing based on the market. So if you sell a mustard, or a whole grain mustard, and on average, you're seeing in stores in our region that mustard sells for 4.99, you can play around with the price. This particular cash flow statement will do a calculation where it's estimating that 900 customers... You'd move around 900 mustards in a month. That number can be adjustable as well based on the clients that you already have. So if you are selling to grocery stores or you're selling at Farmer's market multiple times a week, or you're doing direct sales online, this is where you can adjust based on your current and potentially projecting the number of clients you'd like to be selling to, and your plan to gain sales channels for your product. And you would put in the number of sales per month. This particular cash flow statement is also gonna look at average local regional food sales, which could grow, in a good financial time, nine to 10% per year, and can calculate sales growth for you. When you look at the bottom screenshot, this is actually the top of a cash flow statement, and this is taking to account, on a monthly basis, that sales projection that you just had per item, or in the bottom one, it's actually showing sales channel. So if you are a grocery store, as an example, you may have this divided by category; how much you're making in grocery, how much you're making in produce, how much you're making in frozen, as examples of category sales projections. And then, also taking into account any loans you may get for your business, if you're putting in owner's equity or you have a partner investment in your business, and if you get any grants for your business. This particular cash flow statement is going to calculate that cash on hand at the beginning of the month based on loan proceeds, owner's equity, grants, and also your projected cash sales, which you started to project in that above screenshot, where you're looking at how many products you get out the door per month and sell. So these are multiple major things that need to go on your cash flow statement. As you can see on this one, everything in yellow is adjustable so you can really play around with numbers, and we'll get to how a breakeven can help show these numbers as well, and create a strong projection for your business. Next sheet. So next, we're gonna look at outputs on your cash flow statement. This is where we really wanna take a good, hard look and make sure that we... There are no hidden expenses. I often say to Product Center clients, and clients that I work with, to under... Or over-project with expenses, under-project with income. Just assume you have a lot of expenses. If they end up being less than that, you can always adjust your expenses, particularly getting in the nitty gritty and in the details with staffing. Small businesses usually need to start small with one, two, or possibly three, if possible. What you would wanna pay, what fits into your mission and vision of your business. If you want to pay a good, strong wage and keep staff on, and not have a lot of turnover. And something that I often see startup businesses forget is that payroll comes with withholding tax, your FUTA and your SUTA. So there are costs to conducting payroll and those... You need to project for those costs and getting everyone on a payroll process. Another thing to take a look at is not forgetting if you do have a loan with your business. Loan interest goes into that fixed expense category. It is always separated out from your loan principle on your cash flow statement since those are two separate costs that mean two different things with the loan. And looking at insurance repairs on any part of the business that may happen, projecting for repairs. And also putting money towards advertising dollars, really making sure that you're creating an advertising budget. And car travel costs. Similar to what Parker said, planning distribution. Do you... If you are a food manufacturing company and you've not thought yet about distribution, distribution percentages can be pretty high. If you're planning to do self-distribution, you're gonna have vehicle product stability equipment, so keeping something cold or frozen while in transit, and of course the cost of gas in transit, and the staff time to deliver your product, whether you're delivering to a regional distributor or directly to all of your clients. You need to consider every single cost in that. When you look at the screenshot, the first column where you see the dollar signs that... It's in white, that is startup position. So if you are getting a loan for your business to construct either a production space or a retail space, all of that information can be put there. So if you are pre-buying supplies, if you are prepaying an accountant or a lawyer in the legal cost, if you're paying for a one year lease and a percentage of that upfront, that all needs accounted for as well. That could help, in the long run, determine if you're getting into a new loan, pre-lending with a lender and you have to figure startup costs, you can do that through your cash flow statement. Next slide. And then, finally, breakeven. Jamie, if you'll just keep tapping the forward slowly, we're going through this breakeven calculation. Your breakeven calculation starts with your total fixed cost. That is everything that is not your cost of goods sold. So as you saw on the last slide, that is all of your fixed expenses. So you're taking that total fixed cost and then you're dividing it by a number that's made up of several things. First is your total gross sales. So this is your projected gross sales based on, what we looked at, the price of all of your products, how much you're gonna move per month, your loan proceeds, your owner's equity, your grant proceeds. So you're gonna subtract those total sales by your total variable costs, and this is actually your projected cost of goods sold. So COGS, or cost of good sold, is what it costs you to make your product, so that's all of the inputs. As an example, if you're doing a mustard, it's your mustard seed, it's your oil, if you have eggs in your product, the preservation, the jar, the label, the lid, everything you need to actually produce that product. Often, in grocery sales and product manufacturing, COGS can be pretty high. It could be 70% of your sales. But you're taking that total variable cost subtracted from your total costs, you're gonna divide both of those by your total fixed costs. Jamie, if you'll keep scrolling on that. So you're gonna divide that by your total sales, again, your gross sales, you take that number of those three things, total sales minus total variable costs divided by the total sales, you're gonna take that number and divide it by your total fixed cost. I've given you an example down here. We've got total sales of 15,000 minus 4,500 in variable costs, divided by that 15,000. Take that number and divide it by your total fixed cost is 11,400. And we did this on a monthly basis. Your monthly breakeven is 16,286. You need to gross sales, per month, of 16,286 to breakeven. That means to cover all of the fixed and variable expenses of your business. You can do a breakeven on a monthly basis or you can take total numbers of your annual business and do an annual breakeven to see how much you need to make in a year. As you can see, these are really getting into the details and really utilizing the information of your cash flow statement. And I want everyone to know, on the webinar, that we are going to provide a link today that's a document in an open, public Google folder that's got some breakeven analysis worksheets for you. So if you wanna practice break even analysis, you wanna see these calculations, you can grab that resource after the webinar. - Thank you, Maria, and thank you, Parker. Now, that we've talked about the business plan, and cashflow worksheet, and financials that are needed to operate a successful commercial food business, I wanna talk about a viable business model and get into a little more details on knowing your customers and value proposition. So if these terms are new to you, and what Maria and Parker have been talking about are new to you, again, I highly recommend you go online and watch the "starting a commercial food business" online course for a lot more details. And thank you for putting the questions in the Q&A and in the chat, we appreciate that. So on the considering if you have a viable business model, this is so important. Lots of people come to us and say, "My grandma's potato salad is the best in the world "and I wanna manufacture it." You've seen a little bit about what is needed to operate a full business, but there's a lot more to consider too. So when we think about the sections of a business plan, I've been told by lots of lenders that the market analysis section is one of the most important pieces that is in there and, oftentimes, we don't do it justice when we're writing our business plans. Analyzing your market, considering your target customers, strategies for your brand and your marketing, are crucial to ensuring that your business will be competitive and succeeds. To know if you have a viable business model, you'll also need to look at yourself, you, the business owner, and identify your strength and weaknesses, just like Parker had mentioned, the importance of having a team. So if you know that sales is not your thing, maybe you're more of an introvert, then you know that you're gonna need to bring on somebody onto your team who can help you with sales, right? And go and do the talking. A viable business model means that your product is clearly defined and scalable, so you and your team can produce as much as the market demands. So if you get an enormous order from a grocery retailer, you need to know that you can scale to that level, that you can produce and manufacture enough to meet that demand. You also need to understand your customers and deliver to them the product that they are looking for. So let's break down customers a little bit more and talk about customer segmentation. When you consider how you're going to market your product, you must understand customer segmentation, which means breaking down your potential customers by groups. That will help you define your target audience. You need to think about what common characteristics that they share. For example, gender, or age, race, ethnicity, maybe geographic location. Maybe you just wanna stay in Michigan or maybe you just wanna sell within your local city, that's okay. Or maybe you wanna go national or international. You need to think about that audience as well. Maybe your target audience, target customer, is an athlete and you're doing something with sports. What kind of health benefits might they be looking for and what will you do to reach them? Are they on Facebook or maybe they're only on Instagram? And really, segment and break down how to look at your customers to allow you to target your messages, to appeal to them the most, and establish really good, strong relationships with your customers. And expanding a little bit around what Parker was talking about brand positioning, let's talk about value proposition. So besides knowing your audience, it's crucial that you know what your value proposition is, which means it tells us why your business is relevant, why someone would want to purchase your product. It explains the benefits that your product provides besides being delicious, or the best potato salad out there on the market. Maybe it tastes just like your grandma made it and that's going to pull emotion to your customers, and really resonate with them. "Yeah, I remember my grandma made good potato salads, "so I wanna buy that brand too." It brings that level of emotion to your customer. So just think about some of these questions as you go to develop your own value proposition for your business. What makes your product stand out? Why would a customer want to buy your product over another? So again, we all have... All businesses have a competitor in the market. Some people will say "it's the best out there "and there's no competitors," but we all have competitors. There's millions of products on the shelf and in the cooler space in a store that someone could choose over your product, so what would make someone buy yours over another? And then, what problem can your product help a customer solve? For example, maybe you have a gluten-free product, and they are gluten-free, and that's what they're looking for. That's the problem that you're trying to help them solve. And I see some great information in the chat too, thank you so much. Okay, so now that we've talked about that, again, that marketing section of the business plan is so important, but so is licensing and regulation. And this is really what takes somebody from cottage food to a commercial food business. So first, if you have not yet registered your business with the State of Michigan Licensing and Regulation, or LARA, you can go online and do that. You'll have to make a decision on what type of business you want to start. Do you want to run a limited liability company, an LLC? Do you wanna operate under a sole proprietorship? Or maybe you wanna have a nonprofit? If you don't know, there's lots of information on LARA, or if you have access to an attorney, you can also talk to them. You can apply for your business license yourself, you don't have to have an attorney but an attorney can help if you want that help. Next, you'll also have to consider a food business license, and that is through the Michigan Department of Agriculture and Rural Development, or MDARD. And a lot of people who make a product, like a sauce, or chips, or a beverage, fall under MDARD's wholesale food license. And depending on how much you sell each year, you might have to have a limited wholesale processor license or a wholesale food processor license. Other businesses like food trucks might need another license called a special transitory food license. So we'll put links in the chat and in our resource document that we'll share after this session ends, along with the recording of today's session for some links for you to go investigate that further. The other important criteria is if you want to sell into stores, like a grocery store, you're going to have to process in a licensed commercial kitchen, and those are available throughout our state. We have incubator kitchens, where you can go in and rent the space. You also might find a church, or a local senior center, or a school will allow you to use their licensed commercial kitchen, maybe for pay, maybe for free if you're fortunate, to use that space and process under their commercial license. And something else really important to consider is food safety. Over... Almost 50 million Americans get sick from foodborne illness every year, and we don't want that to be from your product. So taking food safety certification, or potentially even more than one food safety certification, depending on your product, is critical to make sure that you understand all of the steps to keep us all safe. One of the basic classes, and that a lot of the kitchens will require that you take, is called "ServSafe." ServSafe is a training and certification program. You take a course, take a test, and then your certification is good for five years, and it is often required by those kitchens for you to be able to process there. It is the basic information that you can learn to prevent foodborne illness. You'll learn how to handle personal hygiene with you or your employees, you'll learn about bacteria and viruses that can make people sick, and ways to prevent contamination and protocols for keeping food safe, and you will probably, after taking the class, never look at the food that you make or that you eat at someone else's house the same again. You learn a lot in that class. Another class is called Hazard Analysis Critical Control Point, or we'll say HACCP. HACCP is a deeper dive into food safety and it's important for foods that are riskier, and might cause greater risk with foodborne illness, including fresh pressed juice, seafood, and meats. Another class that you might need to take if you're making soups, or salsas, or pickled products is called Better Process Control School. And our team at the product center can help you identify what type of classes that you might need, as well as the inspectors with the State of Michigan. And then last, one of the important things you can do too is to create standard operating procedures. This is a step-by-step guide to figure out how you process your product. Excuse me, excuse me. If you walk through these steps and really go into detail, you're gonna be able to notice those points where you could potentially cause someone harm, whether it's cooking to the proper temperature, hand-washing, wearing gloves, changing gloves, all of those details. All right, and I'll pass it back to Maria. - Great, so after you started to consider all of your food safety aspects to food product manufacturing, and your licensure and your regulation, and your business finances, and you've got that all in place, the next thing to look at is labeling and nutrition facts on your food product. So we probably have several of you on the webinar that have maybe been through PAR, or nutrition facts labeling. We do provide that service through the Product Center at Michigan State. There are requirements for your label and your first go-to is MDARD. I just put a link to labeling requirements. If your product fits into an FDA category, you may have more regulation in terms of making claims on your product that would be regulated by the FDA, not just MDARD. But the basic requirements for food products, not making any medical claims, are your nutrition facts. So this is an analysis of your recipe per serving, which provides things like calorie, fat, cholesterol, sodium, carbohydrates, and protein, along with some vitamin breakdown, and is required on a food product. And this is what we call "nutrition facts" at the Product Center. We can help you with nutrition facts analysis. You need to list the ingredients on your product, any allergens, you need to have the net quantity of your product, how many ounces are in the product, and you need to have the name and brand of your product on the label. And in some cases, you need to have an address of where the food is manufactured. And the food safety of all of that is that all of the potential buyers of your product know exactly what is in your product. If your product needs to be traced to you as the manufacturer, then anyone who purchased your product can trace the manufacturing location of the product. These are all important to food safety. So next slide. So let's talk a little bit about PAR, because PAR can be such a mystery to food manufacturers. PAR stands for Process Authority Review and it is the protocol to ensure food safety and determine the product's shelf stability. Recipe ingredients, the procedure to make the product, the water content, the packaging, the product storage are all a part of the PAR process and need to be known. The PAR protocol is based on the Food and Drug Administration's guidelines in the Code of Federal Regulation, particularly 21 CFR Part 114, concerning acidified foods, and Part 113, which has low acid foods. So it's important to understand if your product needs a PAR review and certification. This can only be done by a Process Authority person who is an expert in thermal processing for low acid foods, foods that are hermetically sealed, and this person has expert knowledge in the processing of acidified foods. So at the MSU Product Center, the PAR process is, first, to communicate with your Product Center counselor and if you don't have one, we highly recommend that you get on our main page, which we'll provide the link to, to request to become a client of the Product Center. Then you have to submit the PAR forms, which, I just described, are in detail, your recipe and packaging and storage. And then, we review that product, we do the required testing, the Process Authority completely evaluate your recipe and the lab tests, and then your product is classified, which is connected to the FDA guidelines, your product classification. Next slide. So why do PAR for your product? Great question, right? The PAR process really is important if you potentially have an acidified food or a low acid food. You really want to... You really will be required to have a PAR process and classification to... For your product to be considered food safe. The documentation will be required by MDARD inspections in your kitchen and to get your food out there, particularly to commercial and wholesale buyers. So some more details on the PAR process. Once you go through PAR and you get a PAR recipe, you cannot change or alter the ingredients or the process in your recipe, what's on your PAR classification. You would have to go through PAR again and get a new review and classification if you plan on changing your recipe. And a little more detail of what I said in the last slide. Some of the tests that a Process Authority agent will do is pH and/or the water activity test. This will help determine your classification based on those FDA regulations. And then, finally, the last slide. So how to prepare for PAR. You need to have your recipe standardized. As I just said, you cannot change your recipe after you've already submitted and got PAR classification. You'd have to go through the process again. So you wanna make sure that you have your ingredient details completely worked out, whether it's fresh, frozen, manufactured, the brand names of all your ingredients, how much, and you would not be able to change those. You wanna make sure that you have your ingredient amounts measured by weight, meaning grams, ounces or pounds, not household measurements of cups, teaspoons, and tablespoons. You wanna make sure that you are completely clear and confirmed on your process of production. The procedure of making, packing, temperature controls, and storing your product are all required in the PAR review process. And then, second, after all of that is done and your recipe is ready, you wanna ensure that you are communicating with your Product Center counselor and that you are getting the emails. There's a lot of back and forth email between the PAR process, the Process Authority Reviewer, the lab, the Product Center counselor, to you. They may ask questions, they may come back for clarification, and there may be parts of your recipe that need changed in order to get the PAR classification. Certainly, your innovation counselor, like myself, Jamie, Parker, we can all answer those questions as a part of the PAR process, so that's what we're there for. Any concerns, any changes, any understandings you need about the PAR process, we're your liaison throughout that process. So I now wanna summarize, we've provided a lot of information today, which is really exciting. A lot of the framework that you have to go through to really get a commercially viable food or food product off the ground and into stores for a quick review and visual. First thing we talked about are your food product. Get it lab tested, make sure it's food safe and properly labeled. Next is your business model. Make sure that your concept is well-defined, potentially using something like a lean model canvas, and making sure that you really know, and approve, and can work within your business model. Third is your audience. Make sure you're selling to those that want your product and that your pricing is what sells and is competitive in the marketplace. And then, finally, you finances. Using a spreadsheet, and checking it, and utilizing it weekly, conducting a breakeven analysis, and making sure you understand all of your potential expenses and all of your potential sales. - Thank you, Maria. All right, we do have time for some questions, and I saw someone has their hand raised. Let's see if... Kristen, if we unmute you, do you want to ask your question? - It looks like she said yes, if we can. - Okay. All right. - (indistinct) Can you hear me? - Yes, hi. - Hi, how are you? If... If we were to, say, rent commercial kitchen space from a local church or some location like that, is there potential liability on that church, or wherever we rent from, for like if there's any recalls for your product? - Parker, Maria, do you want... Either of you wanna take this one? Want me to take it? - If you could. - Okay. So there would be liability. They would have have to have liability insurance, and you, as a food business owner, should have your own food liability insurance. When you complete your application to be a wholesale food business, you would be a licensed business through the state of Michigan, you would include their address down, and so there would be liability on both of you. Would be my expectation, but I don't work in insurance and I'm not an attorney. Anybody else have any other comments there? - That sounds right, Jamie. You don't have any other thing to add. - Okay, yeah, so if you were concerned about your church being potentially liable, then that would definitely be a conversation with you and you could definitely bring in an attorney to make sure that they're safe and you're safe as a business owner. Thanks, Kristen. - We do have a question in the chat that Parker provided an answer to about "you can't sell your..." The question was asked, "You can't sell your frozen product "without a shelf life study, "is that correct?" And Parker responded, "Michigan Department of Ag and Rural Development requires "that the shelf life be noted "as seven days on a refrigerated product's label. "An exception to this as if a food lab test shows "that it has a longer shelf life "than a seven day minimum." There's no one easy answer as it pertains to any product. Your relationship with MDARD, and what you're producing, and what type of product you're producing is gonna determine shelf life. And particularly with frozen products, they're all different. If you're not working with any meat or dairy, developing a frozen product, that's very different than if you are doing cut and frozen vegetables or cut and frozen meat products. So there's no one answer for a product. Some frozen products which are just fruit based, like a Popsicle, or have no agricultural product in it may have much longer natural shelf lives and require less regulation. You want to make sure that you have a relationship with the food safety inspector on your product and your ability to sell it, particularly into a wholesale market. - Great, are there any other questions? I did see one question around the services offered through MSU extension. MSU Extension has hundreds of employees that work in areas from 4-H to the type of work that Parker, Maria, Kendra, and I do with the Product Center, from agriculture innovations and food products, in all kinds of different areas. So Maria's mentioned there's no one list, but if you were interested in becoming a client of the Product Center, there is a $50 fee to register and sign up, and then I always say you get an unlimited lifetime of services through that. Things like PAR, or Process Authority Review, and getting nutrition facts (indistinct) labels, there are additional fees for specific services. But when you work with your innovation counselor, that's a one time fee. And Jenny a... Or Jenny asks, "Who could help with proper packaging?" The innovation counselor team, like us, we can help you get started, and then potentially help you find a connection with somebody if you have a specific packaging need, or maybe you want to go compostable. We can potentially put you in contact with some of the businesses, hopefully in Michigan or around the country, who could help you source. And we are getting to the end of our time, so I'm gonna scroll ahead to make sure that we have time to share these resources with you. As Parker had mentioned at the beginning of this session, we are offering nearly monthly webinars leading up to Making It In Michigan, which, again, is gonna be April 20th in Lansing. We will have upcoming webinars around what it means to be a vendor. If you want to have a table and you're completely ready for retail by April 20th, what that might mean, and what you can look for. So look for information in the Product Center, either on our Facebook page or website for that event coming up. We also have a partnership with Michigan Economic Development Corporation and Michigan Department of Agriculture to offer a live in-person Meet The Buyers session during Making It In Michigan, so we want to host a webinar in March to talk about how to get ready to meet with a buyer. And then, again, please save the date for April 20th. There are education sessions in the morning and the vendor trade show, and then Meet The Buyers in the afternoon. There'll also be a pitch event if you think you'll be ready to give your pitch by then, we'd be happy to have you apply. Registration will open in January. And again, please follow us on Facebook and the Product Center webpage to learn more. If you have questions and are already a client of the Product Center, go ahead and connect with your innovation counselor now. And if you're not, please go ahead and sign up. And we have shared in the link a Google folder that you should have access to. We'll also make sure in a follow up email that includes the recording as well as the transcript, which takes about 12 days to transcribe, so look in a couple weeks for that email from us that includes the list of these resources as well as the template for the breakeven analysis Maria created. And we would really appreciate it if you would take our quick two question survey. I know we get asked to do a lot of surveys but two questions, you can do it. So either take a picture of the QR code here or click the link in the chat. And just to summarize, the webinar has been recorded, and again, you will receive that in an email in the next couple of weeks. In the meantime, please don't hesitate to reach out, and we're glad that you were all here today. Thank you. Thanks everyone, thanks for coming. - Yeah, thank you. - Thank you. - Great job everybody. Wanna end this webinar. - Thank you. - Looks like I missed a question. Somebody had their hand up. - Oh, that's a...