Starting a food Business from scratch: Subscriber Questions from Marekting Food Online Youtube channel

Posted by Damian Roberti on

Hey guys. All right, I've got a great QA session coming up. I've got a handful of questions and I'm going to hop right into it right now. Let's get started.

This is Damien again from marketing food online because we're having a great day as always. And before we get started, if you are new into the channel, this is Marquis food online. I bring together a bunch of fantastic food business resources to help you get your food business, either on retail store shelves or online, or create a food product and get them up and running. So if you are not subscribed as always, you can hit that magical red button on the corner there and hit the subscription button, and you can check out all of our videos. We've got about 500 plus videos to help you create your food business. And again, if you're wondering what the heck, all this stuff is behind me my son has a couple of YouTube channels and this is our YouTube room. We're in the process of shooting some videos.

So I've got a bunch of lights and shelves and stuff like that back there. So sorry about that for right now. I want to get into some of these questions. I've got a particular question, and this is actually a really great question from a subscriber in regards to the cottage food law. Most of the food businesses that I actually helped with as far as my clients are concerned with my consulting are those that are utilizing the cottage food law. And that is actually the laws that allow you to create food products at home. And you can sell them locally some States very few, but some States actually allow you as well to sell online. So if you're looking to start a food business from home, you actually kind of fall underneath. What's known as cottage food law. Now, this is a great question because it can be a little bit confusing to let you know, the cottage food laws by state will vary. Looking for more info checkout the daily meal website for great stories and food recipes.

It is not something that is a blanket across every state. It's always the same. The States create the laws of, of the types of foods that they will allow through the cottage food law. But as it trickles down into the cities and the counties, they can actually create ordinances and other additional rules or regulations in those cities and counties that you also have to abide by. So just keep that in mind as you go to get your license, or if you get your permit, or if you get an inspection or used to get signed up with the department of agriculture or the health department, all of those different things come into play. And it's not really exactly one particular law that follows every single state. So I'm going to use just the my subscribers first names. I won't get into any last names, but this is from Anna.

And it's actually a great, like I said, a wonderful question. She said, so if I operate as a cottage food producer, the registration gives me permission to sell without a business license. But if I decide to form a corporation, why do I need to follow cottage food laws displaying? This is actually in regards to displaying personal information name and addresses on the label. A really quick recap. If you're producing a food product from your home, there's certain bits of information that must be on the label. And again, that mostly varies by state. And when it comes to the labeling, it's pretty much the same across all States, but it does have a few States at various to the extent of the information. A lot of times the address is there for a reason. And it's actually there for traceability in case someone were to get sick, or if they have an issue and they need to find out where was this produced, or where was it made? Beyond meat is changing the way we eat checkout these CRAZY recipes.

You got to have some address on there so they can contact the manufacturer, which is you. Okay. So here's the thing. When it comes to putting information, contact information on labels of products produced in a home you would have to follow the cottage food laws, and it normally dictates an address such as your home address. As far as the origin of the production of the process of where it's made. Okay. Now the thing is when you become a business, whether or not you're under cottage, food, law, or any other types of laws regulations, you want to make sure that you are licensed a licensed business because you need to get your tax information as well from the state, you need to form a company. And there's a reason for that. And it really boils down to liability because in order for you to get food producers, liability insurance, you need to be a business in order for that to happen. Whole Foods is changing so many flavors with new lines of foods.

Most States will require you to have a business license. Some States do not. Now, is that an optional thing that you can do? Yes. In some States when you don't have it required by the state. I personally, as my recommendation, and this is just my opinion, you need to incorporate yourself to separate yourself. You should not be operating a food business of any kind from your home where you've got no legal fallback and insurance to protect yourself. For instance, if you do not create yourself as a format of business of any kind, and you don't have insurance and you're utilizing cottage food law, and you're following all the rules and regulations that are in your specific state. If somebody were to get sick, you could lose your house. You could lose everything you own because they will Sue you personally. That's the reality of it. Food Recipes from the Pros.

Now, if you want to create a LLC or C Corp or S-corp, however you want to do that, I would recommend you do that. So you get protection. Insurance companies will not write a policy unless you traditionally have yourself incorporated. If you're just making cookies and breads, it's some things from your house and you're selling them at little local events. That's always good and dandy, but there will come a time when the potentially you can have someone Sue you. And if they do, and you're not a business separated from a business entity and separate from personal, you could lose everything that you have. So whether or not your state requires it, it's going to be up to you to make the decision to protect yourself. That's why I always try to recommend for the most case, most part, if you're working from home, still figure out a way to get yourself as a business entity and then personal, separate.

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Okay. as far as the label is concerned and you're still, if you have to abide by the cottage food law in your state every state is different, like I mentioned, but they're going to require some type of address. And normally you can't put a PO box because that's not where your product is produced. So you have to end up putting your home address as the address of the production of the product. Okay. So, like I said, this is just for informational purposes. Every state is different. Okay. so double-check with your specific County and city, and then figuring out what is recommended and what they require. Okay. Requirements and recommendations are two totally different things. I personally would never take a chance on doing that when I first started we actually had a retail bakery, which is, of course not from home.

It was a complete retail bakery that we had breads and gelato and other things sandwiches. We had a whole thing at Italian bakery, my wife and I had. So that was obviously a different separate physical address because it was a business. And then after we had closed that, and then transitioned it to selling locally, before we went back into another commercial place it, I incorporated myself immediately and then made sure I had insurance because I, I wanted to protect my fairly, so definitely recommend doing that. Okay. So yeah, the next thing I have up here, this is a great, another great question. You guys have actually been sending some really good questions and I'm glad you're asking them, by the way. If you're still watching the video, let me know down below. If you have any other questions, I love answering your questions and creating these videos with you.

You guys asking these things because a lot of subscribers ask you the same questions. Okay. This one was really good that I got it just recently. Okay. There is. Okay. So this gentleman is actually, he has a hot pepper sauce that he's been doing from his home. So he grows the hot peppers. He actually makes the hot sauce from scratch. He's, he's been doing it now for about eight years and his friends and family love the sauces and he's actually had such great feedback. Of course, that's what normally food businesses get. When you first start from home, it's all that feedback and that motivates you to start your business, which I highly recommend you do. So he wants to know he wants to get into a co-packer and have him do it for him. But what's the, no that he doesn't have any sales history.

Okay. So really quick rundown co-packers and private label companies don't necessarily always require that it's not a requirement for them just to produce a product. The co-packer is there to keep us in mind. They're there to bring together the ingredients, the packaging, the labeling, and make for you a food product of some kind. Okay. But they don't always require if that's something that they say, okay, well, we don't do business with you. If you haven't sold $100,000 worth of hot sauce, what they're going to say is, okay, yes, we can make the hot sauce, but you have to buy 10,000 bottles at a time. There are not as many small batch run producers of food products as there are large. And what I mean by that is there's co-packers and private labels. There's a handful of them that can produce smaller runs of product.

And what I mean by that is 500 bottles, maybe, maybe 800 bottles, maybe even 200 bottles. They can do it on a smaller scale. And for you, and I'll use just this first name, Jim Jim, down in the description, I will put a list. There is actually, I have a handful of this four different co-packers of courses. You know there is a company there's actually two that come to mind right now that I will put in down in the description and you can click on that link and they actually make small batch runs of hot sauces, and they actually can formulate it for you utilizing of course your recipe, or they have actually preexisting recipes for hot sauces and they just put your name on it. So it's actually a great idea. My iPhone I've looked into this because we're always looking to expand our business, our other grocery, our food business online and hot sauces are a great way.

It's very inexpensive. But you'll be very interested to check that link down in there and I'll put it on there. There's two companies that I'll put. So to answer the question, you, they don't necessarily require a sales history. Okay. they're going to just set up a minimum for you and then it, then normally that'll be quite a few of front, a few hundred to a couple of thousand to start. And very few companies will do only a couple hundred or so, but yes, they do do it for you. And if you've got a recipe, as you mentioned here, it looks like in your, in your thing, you've been working on it for a few years. They can definitely take that recipe and formulate it and put it into the bottles with your label. And you're good to go from there though.

I would recommend you can do a little research and contact them first. Don't place an order yet, because if you don't have a grocery store, if you don't have interests like online, if you don't have an online a website, if you're not selling to Amazon FBA or going through like a whole foods or a grocery store like Kroger or something of that effect, don't dump your money into buying a bunch of them that are going to sit there in your house. And you're going to wonder, how do I sell them? You got to steer up interest first, stir up interest in at first and maybe even get some orders or POS and then have your co-packer make it for you and ship it to the company. Okay. So that is definitely the route I would recommend because if you dump money into it, it can be sitting there and you're not doing anything with it.

So kind of, you've got to create some issues first family and friends by the way is good. Give me wrong. That's a great, great a place to experiment with your product, but in the mall, run, your family and friends are not going to buy $800, 800 bottles with your hot sauce, obviously. So you don't want to dump your money into that just yet. Okay. And let me go down here. Let me go down there. Okay. So here's another great question. I'll do one more that I'll wrap up this video. Okay. So from one of my one of my other subjects, or she had a question, this was in regards to the pricing video. I did a video recently in regards to I'm sorry about that. In regards to a pricing, how to figure out the price of your food product.

Now, this is the question was pretty simple and to the point, and it's good. It's a good question. But it was a little more difficult to answer and I'll explain. So if a product costs me a dollar, not including the labor, how much should I sell it for? I can't tell you the answer to that magical question, but I will. I will, I will explain why I can't tell you that. Okay. So this could be the very, the reason why is, is if a product costs you a dollar, right? And you you want to sell it. You want to figure out how much can I actually put it as a retail price, a couple of questions. Are you taking the product once it's done and shipping it to a food distributor who will then turn around and sell it to retailers because your costs and what you're going to send it to the wholesaler or the distributor is going to have a big factor.

They have to have a margin for themselves before they even ship it out to the region. Okay? Now, if it costs you a dollar and you have a website and you sell it online, you're not selling on eBay and Etsy or Amazon, you're selling it on your website. How much did you sell it for? Well, it's going to be dependent upon the fees that are involved with the website. When you create a website, you have to have a hosting company every month you pay, you're paying for the hosting. Okay? Now that needs to come into play and as well, any other expense that you use from marketing promoting or whatever, you may be doing it through. The website is going to be your business. It's going to cost you money. So if it costs you a dollar and you could potentially sell it for 10 or even a hundred, I don't know what the product is.

So you would need to figure out what is the retailer, the product, what's the price range in the marketplace for that product? Just because it costs you a dollar doesn't mean you're going to sell it for a hundred because the rest of the other people are selling it for 10. You could potentially sell it for 10 or sell it just below that and still make money. But then you have a fee of shipping. How are you going to ship it to your customers? You got to charge them for that. Are you gonna give them free shipping? You can give them free shipping and include some of that money in the retail price. I do that with a lot of products. I give free shipping, but I just raised the rates, no price. And it covers my shipping. Okay. But the other way is, are you going to make it and then sell it directly to the retailer?

Okay. You're not going to go through the middleman of a food distributor. You're going to sell it to a retail store. That's totally different than how much are you going to sell it for? How, how much could you get it for a wholesale? But you go directly to a retailer. Who's going to then Mark it up. So there's either going to be a middleman and then the retailer, right? That's you the middleman that if the distributor and then the retailer or you and your customer online. Yeah, yeah. The other fourth, the one, two, three, four, I guess that's the fourth example. The fourth example would be is what are you doing if you sell it on Etsy or eBay or Amazon? Guess what? There's fees involved with that too. So how do you figure out a retail price? When Amazon's taking 15%, then you got to ship it to them, by the way, then eBay.

What about Etsy? Etsy? It takes a, I think it's five or 7%, whatever. It may be a five. They raised it reasonably. They take 5% of the fee. Okay. So now determining the retail prices, it's going to be a challenge again, because you got it for a buck and you make it for a buck. That's good. That's great. But that's not the, that's not the final step is you need to figure out how much are all these other fees gonna impact your retail price. If you sell it for $10, how much of that is actually going to be profit? Because then you've got fees from Amazon. And by the way, when you have a transaction take place online, you need to have a company that, that processes the transaction, Stripe, PayPal, and about three or four others. My company with the six stores that we have, we have two different we have PayPal and Stripe.

They also, they take care of all the transactions for us, but we have to pay them. So it's really not a simple question to answer, but definitely you could come up with an answer. You've got to figure out how are you selling it? That's the trick. So I hope that explains it the best I could do as far as explanation for it. But it's, it's really kind of tricky and challenging depending upon how you're actually presenting the pro product to your customers. And I gave you a handful of different examples. So check out which one is actually best for you and go from there. So if you guys have any questions about the questions I just answered, let me know down below, and I'll see you guys on the next video, take care.


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