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Starting Your Food Business The Easy Way

Cottage food laws are designed to make the process of starting a food business much easier, but in some states, it’s still fairly complicated to do. In states like New Mexico, Pennsylvania, and Utah, there isn’t much difference between starting a food business from home or from a commercial kitchen, but fortunately there are few restrictions once your business gets going.  In Washington, the startup process is similarly complicated, but also very restrictive like the “easy” cottage food laws in Florida, Arkansas, and Nebraska.

Whatever the case, if there is no fast and easy way to start your homemade food business, what should you do? As much as we’d like to think that we can draw out a business plan and watch it play out to perfection, the truth is that business is full of surprises… plans never go as planned, and there is no way you can know what will sell until you get into a market and test your product.

Dealing With Adversity

I recently moved to Massachusetts, where it is fairly complicated to start a cottage food operation (known as a “residential kitchen” around here). The goal was to sell my fudge at my town’s farmers market this summer, so in May, I started contacting the town planner, health department, and farmers market manager.

I eventually learned that it would take a minimum of 3 – 4 months to setup a residential kitchen, and it would also cost over $500 in fees before I could make my first sale. In other words, by the time I could sell legally, summer would be over and my town’s farmers market would be shutting down!

Not to be deterred, I started looking for different paths to getting into the farmers market, ideally as quickly, easily, and cheaply as possible. I started looking for commercial kitchens to rent, but that proved difficult and expensive. I even asked if I could sell casually (aka illegally) while setting up my home business (they said no).

That’s when I stumbled upon a near-perfect solution that I would never have expected…

Focus On First Things First

When I visited the farmers market, I noticed that a local church had a bake sale table, which wasn’t surprising since I’m aware that such sales are usually exempt from the food laws. But then it dawned on me: instead of selling for myself, what if I sold at their bake sale?

The more I thought about donating my fudge, the more sense it made. After all, I knew that a primary step in any business is to prove that there is a market for your product. In the end, it doesn’t really matter if I have a business name, license, banner, insurance, certification, etc… what matters is whether or not people will actually buy my fudge at the farmers market. Without market demand, I have no business being there.

The church agreed to allow me to sell at their bake sale table, which meant that all sale proceeds would go to them and I would have to fully donate the ingredients and my time. Although I was guaranteed to lose money by going to the market, it turned out to be a very small investment for the many advantages that it offered:

  • I could use my home kitchen and still legally sell at the farmers market
  • I could start selling immediately, without needing licenses, insurance, training, etc. (though I did take a food handler course online)
  • I could see what it was like to prepare for a market
  • I could bypass labeling requirements (though I did print one sample label for customers to refer to)
  • I could get experience selling face-to-face
  • I could test pricing of my product
  • I could give to my local community
  • Most importantly, I could determine whether people were willing to buy my fudge

The Proof Is In The Pudding Market

Honestly, I didn’t really know what to expect from the market. Since I was paying for ingredients out-of-pocket (fudge is rather expensive), and since the goal was to merely test the business idea, I only made 3 batches of fudge. My predictions ranged from “sell out in an hour” to “sell nothing”, though I thought the latter was fairly unlikely since everyone raves about my fudge.

Despite my extensive involvement in the cottage food industry over the past few years, I could have never predicted what happened at the market last week. I was prepared for the possibility that people would not buy my fudge, but I was quite surprised that almost nobody wanted to try my fudge. I was literally giving away free fudge samples and people were not interested at all. Some parents let their kids try the fudge, but they had no intention of bringing any home.

Although the outcome of the market was quite dismal, it wasn’t all bad. Of the few adults who did try the fudge, all of them liked or loved it, and half of them purchased some. However, after 3 hours at the market, I had only made two sales totaling $10. And to think that I would have had to spend hundreds of dollars to be able to legally sell at this market and learn that!

In hindsight, I can understand the outcome of the market. I already knew that Boston is a “foodie” hub (like the Bay Area and Southern California), meaning that people are more into current food trends, like sugar-free, gluten-free, local food, etc. Also, people coming to a farmers market are likely looking for fresh produce or something healthy to buy. I noticed that at least half of the market-goers completely avoided the bake sale table, but of the adults who did approach it hesitantly (usually following their kids), they were mostly interested in the gluten-free protein bars one lady was selling.

Facing Reality

I am well-aware that there are many things I could do to better promote my fudge at the farmers market, like setup my own booth, use attractive packaging/labeling, create a catchy name, add some signage, offer a variety of flavors, etc. But $10 of sales in 3 hours? At some point, I have to face the facts and realize that there is simply not enough market demand at that venue for a sustainable business. And as long as I’m being realistic, getting into more farmers markets probably wouldn’t help much either. I know that there are some venues where candy sells well in Boston, but farmers markets are simply not the place for fudge.

Start Small

Am I disappointed that my first day at market was a failure? Maybe a little, but you can be sure that I am not nearly as disappointed as I would have been if I had spent months and hundreds of dollars to learn this. Besides, I didn’t really lose anything: I gained a ton of knowledge and experience, and I got to take the extra fudge home to share with family and friends. (trust me, they were very excited about this :-)

But this is why it’s so important to start small and flexible, which most cottage food laws allow you to do. I spoke with another vendor at the market who was selling juice drinks. The marketing for this booth was impressive: flashy banner, creative name, good design, custom t-shirt, etc. But as I talked with the employee, I learned that this business was fairly new, and it was struggling. As it turns out, the founders had just opened a brick-and-mortar store in town last fall, and they had no prior experience running a food business. Somehow they determined that the town would want a juice and smoothie bar, and they poured countless hours of their time and tens of thousands of dollars (at least) into this little business. I really feel for this couple (and so many other founders like them), because I know that they put their hopes and dreams into this little business, but it is so hard to start the way they did. I do hope they are ultimately successful, but I also appreciate that the cottage food laws allow people to try a food business without needing to risk their life savings.

How To Start

If your state’s cottage food law makes it easy to start a food business for little time, cost, and effort, by all means take advantage of that and start your business quickly. But if your state makes things more complicated, you can still start quickly without selling illegally.

Nearly every state offers an exemption for bake sales and similar charitable fundraisers. If you are in the early stages of starting your business, try to find a bake sale in your area and offer to sell at it. You can even initiate a bake sale at your own church or social group.

Since you are essentially donating money to a group, it’s certainly a win for them. And as I’ve explained above, it’s a big win for you too, and it can definitely save you money in the long run.

You can also use this method to easily test new products for an existing cottage food operation. This is especially useful for someone who lives in a state that requires extra processes and/or fees to add products to their business.

If it is difficult for you to experiment with an idea for a food business in your state, then ironically enough, the best way to start your food business may be to not start a business at all. By losing money on initial sales, you may prevent yourself from losing much more, and you have a lot to gain from the experience. Once you have proven your business concept, you can move forward with the assurance that your venture will be much more likely to succeed.

Comments

Thank you for sharing your trials. Before I thought (still thinking) of opening a CFO business I was asked by a church goer if I was interested in selling at a church fundraiser. I jumped on it for a good test run) I did have a canopy and tables, bought a small banner ($27 on vistaprint.com using a groupon) and bought inexpensive tshirt From our local craft store (under $4 each). So with just a few start up items, I sold enough to pay for the days cost. So my point is I agree with starting small and look for fundraising bake sales. The CFO process is a bit $ in California, (well my county is $219/yr for a class A), so still thinking but your blog kicked me to just “start” and roll with it. :)

    Great to hear! I’m glad you were able to leverage a bake sale to test the waters first. It sounds like you’re in Santa Clara county, which is the most expensive one, unfortunately.

    Yes you are absoulety correct. I reside in Santa Clara county (heart of Silicon Valley) I was doing some research and discovered it Can cost $99 (if I’m reading it right) to have a booth at one of our city’s farmers market. One would have to sell many bake goods just to break even. So to test my goodies, I’ll continue to seek church bake sales. Do you know other venues or other ways of testing the market without investing too much $?

    It depends on your products and business model, but if you use the markets as a PR opportunity (instead of a profit one), you can collect email addresses and start growing your fanbase, and eventually sell more and more direct to customers. Again, it depends on what you are trying to do. Some people figure out if they can get into a store before they invest in the money to become legal.

I recently moved to DeKalb, IL and I would like to sell some fried foods as well as sandwiches, how do I go about doing this from home? Please advise.

Thank you,

Taylor

Hi David. I have a question in reference to offering my product at some bake sales. If someone loves my product and asks where they can get more, is it appropriate for me to give them a business card and let them know I take orders or am I just judging the popularity of the product (which is still a great idea). I really appreciate your blog and newsletter and both have really helped me. I am doing this alone and it is nice to have the information and support. Thanks!!! – Mardi

    I didn’t add it to this already-long post, but I highly recommend also collecting info from customers (not simply giving them your business card and waiting for them to initiate communication). You don’t need to take orders just yet (it would be illegal), but it is important to communicate with your customers at least once a week about your business’ progress. You can read more about it in this post. But I think that starting as simple as possible is good, so you can add this stuff over time.

Hi David, I’m confused. I’m just starting a salsa business from home in Virginia. I’ve read the Cottage Food Laws for VA and it says (If I’m reading it correctly) that we can ADVERTISE online, but not sell! However, one of the CFOs in VA is actually selling online. Can we sell online or not? I don’t want to do anything illegal which is why I deleted my Etsy account. Thanks Paula

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