I'm trying to keep my business, my triplets, and my waistline under control. I excel at one of those, fail at another one of those, and one is a work in progress. Which is which is day dependant.

Saturday, November 14, 2009

Epic Food Fail

I recently read somewhere that most food businesses fail within 2 years, and then something like 75% of the remaining ones fail in the third year. Scary, scary stuff when you consider the amount of time, emotional energy, and general blood/sweat/tears which goes into food businesses. There's just a huge amount of financial and administrative start-up when it comes to food - staggering, really when you consider too the emotional nature of food. Makes you wonder why anyone would start a food business in the first place.

I've recently met someone who has been trying to get a food business off the ground for about a year. For blogging's sake we'll call this guy Hercules. Hercules has paid an enormous sum for a food technologist to help him develop the recipes for his product. In a way I understand that - he didn't have the food skills so he outsourced. Once he got the recipe, he's spent months and months and months "in development." So creating labels, trying to secure a commercial kitchen, trying to secure some large equipment for mass-production and so on and so forth. In all this time he hasn't found a way to standardise his method and so for now, it's all pretty labour-intensive.

In chatting with Hercules a few weeks ago, I asked him a simple question. "So," says I, "have you got any existing customers? How are you getting this product out there?"

Hercules had no answer for me. He'd managed to sell a couple of boxes worth of product, but that's it. He was so hung up on HOW he was going to produce thousands of these things, he'd forgotten that someone needed to actually BUY thousands of these things. The feedback he had gotten thus far is that a) the product had too much sugar (it's a 'health food' product) and b) it was priced far too high to be viable for most shops to stock. In the months since he'd gotten that feedback, he'd made no effort to alter the recipe or re-cost to see if he could lower the price. What he DID do was stress out a lot, research equipment a lot, make a lot of phone calls, and work himself into a lather.

Here's the kicker. The product has a 9 MONTH shelf life. So theoretically he could hire a friend or two, bust out thousands of his products, and then go out and sell, sell, sell - in the hopes that selling would lead to more orders and so on and so forth. That idea did not occur to him.

I then met another couple embarking on their own food business adventure. They both quit their (lucrative) jobs in IT at the same time - after the female half of the partnership had spent ONE YEAR researching this scheme. They then had a) no income for either of them and b) no places to sell their product. The very first time I met them (and this is after a YEAR of research, remember) the male partner said to me, "What is this about a registered kitchen? Everywhere we go the people tell us we need a registered kitchen!"

I then met a third couple, who also had spent a YEAR researching and developing their business. By the time I met them they were 6 months, spent over $100k and basically desperate to find clients and customers. They had done no formal advertising (that I knew of) to get their business going. Instead the 100K was spent on very beautiful packaging, a super-whizz-bang website, and god knows what else. They never made it past the 9 month mark, and as far as I know (over a year and a few months later) have yet to even sell the remaining assets of the business.

Now I'm not going to sit here and say I've got it all right - because believe me, I haven't. I've made some pretty MAJOR mistakes along the way - including not allowing for the provision of a salary for me right from the beginning, not having a realistic advertising budget, and so on. But, I also DID NOT spend a year "researching," I also didn't spend any money on ultra-glam packaging, and while I DID spend money on a website, it doesn't also have the functionality of making my dinner and doing my kids' homework.

Here, then, are a couple of common mistakes I have noticed that novice food business owners make:

1. They believe their friends when they say, "OMG! This tastes awesome! You could totally sell these and make money!" Your friends are lovely people. They want to please you. They probably DO think your product tastes great, but they are NOT the people you will be selling to in the long term.

2. They start spending a boat load of money they do not have on stuff they do not need, at least initially. Hint: Your business cards do not need to have a voice-activated microchip in them for you to seem legit.

3. They forget about the importance of having customers. Actually getting people INTO their business - to buy the stuff they're making.

4. They make no financial, emotional, or time allowance for the lag time between when you set up the business and when it might actually start to make you some money you can keep.

5. They forget what business they are actually in. I actually learned this lesson in culinary school - that a business owner should wake up every morning and say, "What business am I in?" and if the answer is convoluted - "I run a cafe slash cooking school slash wholesale business slash apron company" then they have no REAL idea of what their core business is. If their reply is simple - "I make and sell artisan bread," then chances are they have a much clearer idea of their business and their strengths.

6. They don't 'research' what is involved in a food business beyond just making something tasty - the permits, the infrastructure, the customers, the demands on your money and time. The 'romance' of owning a food business makes them forget stuff like needing to pay for overheads. Simply being able to MAKE a yummy item does not make you able to sell that product to the general public.

7. They have delusions of grandeur and this clouds the real issues. In the case of Hercules, he believes in his product SO much, he's not listening to the real feedback he's getting from potential customers. He's so convinced his product is the best ever (and healthy faith IS a good thing, to a point) that he cannot actually see his real problem in getting it off the ground: customers.

8. They either a) give over every living breathing moment to the business, to the detriment of all else, or b) they decide they NEED to have XYZ amount of time off every week and so they don't devote enough time to it. Also known as working too much IN your business versus ON your business, or not working either IN or ON enough.

9. They get desperate and start to discount, offer free stuff, and basically whore either themselves or their product around in a desperate bid to make some short-term cash flow. All this does it make your customers aware that a) you're cheap and b) you're negotiable.

10. Food businesses are NOT about flavour, colour, feeding people, promoting a certain region, 'helping' people with food issues, happiness, education or pushing a certain philosophy (eg Slow Food). Food businesses are about one thing and one thing only: money. Everyone goes INTO food businesses for the love. The ones that come OUT of it do so because of money. Basically it doesn't matter if your cupcakes bring on instant orgasm or your bread makes people fall in love. If it's not earning you any money (or at least paying it's own bills after a reasonable amount of time), you need to get out and save yourself.

I realise all of this sounds kinda negative. Of course there are some wildly successful food businesses that started right on someone's kitchen table. Businesses that made NO money for several months or years. Businesses that were the owner's ideal dream and that dream now employs 300 people across 6 states. But those businesses are rare. Very rare.

So if I had one bit of advice to give any potential food business owner, it's this: Do it with the love, but for the money. Because without the money, your love will only last so long.

And, for anyone reading this and wondering about my own food business - I did it for the love, and hoped the money would follow. It hasn't quite followed as much or as quickly as I'd like, but in the space of 2 years the business is doing pretty darn well, thanks very much. :) Hey, it's still around - and not in the red - so this in itself is an achievement.

5 comments:

Claire - Matching Pegs said...

Em, I think your achievements are extremely impressive.

Since we worked together all those years ago, you have clearly made so many changes, and had a plan/dream to keep you focused.

I think lots of people forget to think about what they are fundamentally trying to do - in business and also in life.

My whole design degree was really about...
a) working out what the problem actually is
b)coming up with possible solutions - always refocusing on the problem that needed solving.

These fairly generic problem solving skills (breaking down the problem and developing a plan) are really useful.

Sometimes we all just need to sit down with a piece of paper and work out what our goals are - saves a lot of time in the long run.

nice said...
This comment has been removed by a blog administrator.
emzeegee & the hungry three said...

Thanks Claire - I think you make a good point there, that lessons in one area of life can be adapted to other areas of life. I see so many friends wondering what the hell they should do with their lives (even if they have a successful career already) and NONE has taken the time to just 'take stock' of themselves. Food for thought. (pun intended!)

M

Heidi said...

I know of 3 different women who have quit their full-time steady day jobs to sell crafts on Etsy since summer, all cases of your #1. Poor gals get no more than 1-3 sales the first week and then nada for the next 5 months. They're selling things like knit baby hats. I can make a darn cute baby hat and it takes me two hours. I cannot possibly understand why they'd quit their jobs when they cannot survive on their hubby's income alone before seeing if it was going work or not. I wish I had that kind of confidence, but I'm glad I don't.

emzeegee & the hungry three said...

Heidi,

I never thought about how some of these pitfalls may happen to non-food businesses, but I think your etsy example is a perfect one. I actually love the IDEA of etsy, but every time I go there I'm totally overwhelmed by what I think it an over saturated market place. I'm also surprised that they would quite FULL TIME gig to basically do a part-time craft.

I think we've all got lessons to learn!

M