Introduction to Starting a Small Food Business for Food

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Introduction to Starting a Small Food Business for Food

Transcript Of Introduction to Starting a Small Food Business for Food

Introduction to Starting a Small Food Business for Food Entrepreneurs

Food Business Guide
Introduc0on
Groundwork for Business Success
• Vison • Planning • Business Plan
Planning Product and Produc0on
• Food Safety Plan • Development • HACCP • FSMA
Produc0on
• Package and Label • Quality Assurance • Paperwork
Additonal Resources

Table of Contents
Introduction..................................................................................................................................... 4 Groundwork for Business Success.................................................................................................. 5
Vision… and Revision ................................................................................................................ 5 Preparing for the Road Ahead..................................................................................................... 5 Business Plan .............................................................................................................................. 7
Narrative ................................................................................................................................. 7 Market Analysis ...................................................................................................................... 8 Business Classification ........................................................................................................... 9 Planning Product and Production.................................................................................................. 13 Food Safety Plan ....................................................................................................................... 13 Facility .................................................................................................................................. 15 Good Manufacturing Practices (GMPs) (21 CFR 110.000 and 105 CMR 500.000) .......... 18 Development ............................................................................................................................. 19 HACCP ..................................................................................................................................... 20 FSMA and You ......................................................................................................................... 21 Production ..................................................................................................................................... 21 Package & Label ....................................................................................................................... 21 Quality Assurance ..................................................................................................................... 23 Paperwork ................................................................................................................................. 24 Additional Resources .................................................................................................................... 24

Introduction
Do you have an idea for a new food product and want to start a business to make and sell it?
This guide intends to outline important considerations a Massachusetts food business owner must consider as they take a food product idea to market.
This guide is food safety focused and intended for food products sold on store shelves (retail and wholesale products) not for food trucks, restaurants, food stands, and bakeries. Food Service businesses such as those listed above should consult the Massachusetts MDPH retail food page.
The University of Massachusetts Extension office serves the commonwealth by providing • Short course trainings related to food science • Food Science research support • Access to the Pilot Plant for research and development
The Pilot Plant at the flagship campus in Amherst, Massachusetts holds a number of specialized industrial equipment pieces to conduct research that may assist businesses in their product or process development.
There are many elements to starting a food business. Among these elements are a number of regulations and governing agencies aiming to protect consumers and businesses alike.
Bite by bite, this website will help guide you and your enterprise to success. Before you start committing time, effort and money into this venture it is highly recommended that you take a moment to gage the road ahead. Think and thoroughly consider what you want to happen and how you will get there. Writing down your goals and define your expectations for your business.
This guide can be downloaded in the Additional Resources section below.

Groundwork for Business Success
Vision… and Revision
Before starting any in-depth analysis or research take half of an hour to inventory your idea and your current expectations for your product:
• Describe your product as it might entice a consumer. What sets it apart from other products of the same type?
• Where do you see this product being sold? What need is it satisfying for your audience?
• Describe your product as you would see it as a consumer on the shelf. What packaging is there? What does the label say?
Having a clear vision for your product will help you better seek and advocate for the resources you need to make it happen. Moving forward, it is likely that you will have to adapt your vision of your product to food safety regulation and business feasibility.
Preparing for the Road Ahead Owning your own business is a thrilling enterprise. You are your own boss and can join many others taking pride in the goods they market. Before taking the next step into entrepreneurship consider the following:
Business Development: Successfully growing a food product from an idea to a sellable item and then into a brand involves making informed choices about goals and parameters for the business itself. Such choices require thought and planning.
• Business Plan - Writing a business plan-a document detailing the human, financial, and ideological organization of the entity- can seem to be a large undertaking but clear goals guide you in the right direction, and will help define your business in the eyes of a regulatory agency.
• What is the business goal? – Is this a business you are hoping to build and sell once it gets big or something you plan to invest in until your retirement? Some of these decisions will influence how you will invest for your product development.
• Understand the business: There are several business considerations that should be accounted for before, during and after the product development. Often times, the product development will need to be adjusted based on business shifts. Examples include: formula costs, product claim deliverables, shelf life expectations, etc.
There are resources available to help new business through this process, such as Small Business Association- Starting a Business. Franklin County Community Development Corporation Tools and Resources for Business Planning

Expenses: There are a variety of expenses associated with a food product and it is important to be mindful of these finances from the beginning of your product development. Some examples include:
• Labor – There will be many hours invested in sorting out the technical and business logistics.
• Product – Ingredient costs, packaging costs (primary and secondary) • Operation – Equipment investments or equipment rental fees, processing yield lost
during production, processing parameters, storage fees for ingredients, distribution costs (i.e. frozen trucks are significantly more costly than ambient trucks), insurance.
Product Development: The primary goal of a new food product is to deliver a delicious product that satisfies a consumer need. In addition, it needs to be compliant to the regulatory policies and safe for consumers to eat.
• Regulation - Be sure to you research which federal governing agency your product will follow (i.e. USDA vs FDA). In addition, it is important to understand what regulatory requirements your product will need to follow. Note: Different processed foods have different regulatory requirements.
• Safety – Foods need to be prepared to ensure that they are free from microbial, chemical and physical health.

Business Plan
With goals and expectations in hand, a Business plan is the written document detailing how those goals will be achieved.
The U.S. Small Business Association (SBA) aims to assist small businesses through access to capital and developmental resources. They define a business plan as “an essential roadmap for business success. This living document generally projects 3-5 years ahead and outlines the route a company intends to take to grow revenues.” (SBA.gov)
Narrative
• An executive summary of your business • Description of your company and product- including what state and federal licensure may
be required on both the business and food safety ends • Organization of the business- leadership division/structure • Analysis of Market • Plan of Production, Distribution • Marketing Plan • Financial Plan • Sales estimates including all assumptions • Additional Needs or Costs for your business- Loans, Insurance, Taxes,
Remember, your business plan is a living document; continually update it as your business grows. More details about business planning, marketing resources and food production resources can be found at:
• Small Business Association: Writing a Business Plan • MDAR Food Processors Resource Manual • Massachusetts Small Business Development Center Network • UMASS Libraries Business Research Guide

Market Analysis Before you plan details of how you will create your product, it is advisable that you first verify that your product concept is viable on today’s market:
Is it worth the effort? • Do people want to buy it • Will they pay the price it will cost to make it?
To answer this question, conduct an Analysis of Market Potential.
Such analysis may start as a simple trip to several grocery stores and specialty markets. Find existing products that are similar to your concept and see how much they cost, review the ingredient statements, observe the product claims and flavors offered. Follow up by asking those around you how much they would pay for your product.
Determining the optimal price point that accounts for the competitive space, consumers’ willingness to spend and will help cover your final costs will be a balancing act. Understanding the product price point will help with determining the budget parameters including margins, slotting fees, formula, overall quality of product, and packaging costs. A niche for your product will assist making some of these choices.
A more sophisticated analysis can be conducted using consumer insight databases. Databases can provide information that can guide how you market or develop your product. Including:
• Market Share • Target Consumer Profiles • Current Trends
There are many to choose from, all slightly different. Food Science Extension recommends thorough business planning and does not endorse any specific or particular database. The following is a non-exhaustive list:
• Product Launch Analytics • Mintel Oxygen and Mintel Food and Drink • MarketResearch.com • IBIS World Industry Reports
Some require a fee for use, but note that often academic institutional libraries may have subscriptions for their cardholders. These reports are free from the UMass Business Library.
The UMass Amherst Library is open to the public and invites public use of its collection and services. All Massachusetts residents are granted full book-borrowing privileges at the UMass Library. Most of the Library’s collections of over 400 subscription databases are available to the public on a walk-in basis. This includes many business research databases, such as those listed above.

For more information on Market Analysis • Small Business Association’s Market Analysis page • UMASS Library Community Resources Guide • UMASS Library Entrepreneur Research Page • FCCDC- Business Counseling
Financial Planning
As touched on in the previous section the financials set a business apart from a hobby. Ultimately you strive to break even and then make a profit, but to start requires an input of money- this is called capital.
Funding can be found in various ways with various degrees of success: • Personal Savings • Family Loans • Bank Loans • Investors • SBA- Loans • Business Loans or microloans from small business incubators, towns- FCCDC, • Crowd Funding websites (kickstarter, indiegogo,)
No matter your vehicle or combination of vehicles, getting the money to start your business off right is challenging. This guide does not intend to exhaust and explain all options and avenues; a financial advisor or even a small business counselor will give you advice best tailored to your business and financial needs.
Information about obtaining loans, filing and understanding self-employed taxes, and choosing a Liability Insurance option is beyond the expertise of this guide. Learn more about them at the following:
• Small Business Association- Filing Taxes • Small Business Association- Loans • Franklin County Community Development Corporation- Risk Management • Franklin County Community Development Corporation- Business planning
Business Classification
The legal and administrative organization of your business is key to its success –how it is managed, what regulations apply? To support drafting this portion of your business plan, it will be advantageous to consult a lawyer early on. To familiarize yourself with the health department classifications continue reading.
The degree of connection your business has with the end consumer influences what local, state, or federal licensure you may have to apply for and which levels of Health Department (Local, State, and Federal) will inspect your production facility.

License names vary by town, check with your town to determine which town license may be required.

Figure 1 organizes the differences between the two classifications of business- Retail and Wholesale.

Wholesale Food Business
• Sells product to other businesses • Inspected & Liscenced by MDPH Food Procteion Program • Observe 105 CMR 500.000 • Businesses include: • Milk Pasteuriza0on • Dairy Products • Seafood • Food Processing (including Meat and
Poultry) • Food Warehouses • Food Distribu0on Centers • Wholesale Residen0al Kitchens • BoUled Water • Carbonated Beverages

Retail Food Business
• Sells Directly to Consumer as primary funciton • Inspected & Liscenced by Local (or County) Board of Health •  Observe 105 CMR 590.000 • Businesses Include: • Farmer's Market Vendors that sell food
products and processed foods (Market Vendors that sell Fresh Produce, Unprocessed Honey, Maple Syrup and Fresh eggs do not need a Retail Food Permit from Local Board of Health) • Retail Residen0al Kitchens • Restaurants • Mobile Food Units • Food Stores • Catering • Temporary Food Opera0ons

Figure 1- Wholesale vs. Retail Food Business ChartAdapted from the MDPH FPP: Starting a Wholesale Food Business Brochure
Wholesale Food Business In the state of Massachusetts, a wholesale food business is one which sells food products, but not directly to the consumer. This applies to businesses that might sell to a specialty food store or boutique. As such, a wholesale food business must have a license to operate from the Department of Public Health’s Food Protection Program.
Your business will be considered wholesale and will need to apply for a Wholesale Food Business license if any of the following apply:
q You operate out of a Residential Kitchen, but do not sell directly to consumer ( A Wholesale Residential Kitchen)
q You process food in any way q You contract with a Co-Packer (your business is considered a distributor) q Milk Pasteurization q Dairy Products q Seafood (including transport) q Food Warehouses q Food Distribution Centers q Bottled Water q Carbonated Beverages
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