I hear something like this a lot:
Hi David, I’m thinking of starting my business making XYZ cottage food products, but my only concern is that my state limits my sales to $5K/$10K/$20K/$50K per year. I really want to work from home, but I don’t want to get my business off the ground and then hit a brick wall. Should I just skip the cottage food law and look for a commercial kitchen?
The short answer is “no”.
But here’s the thing: I completely get it. Before I got involved in this industry (or in the business/startup world), that’s what I was thinking. A few years ago, I was making grand plans for my chocolate chip cookie business, scaling it up in my mind to the national level (I wrote a business plan and everything). This website also started that way: my friend and I had big ambitions for a homemade food marketplace, and we built the marketplace to scale to hundreds-of-thousands of users before we even had one.
Starting a business is an exciting time. When we’re in the planning stages, it’s easy for us entrepreneurs to imagine where this business could take us. We know our product is excellent, and our family/friends tell us “you should sell this”. We imagine everything that could happen, and quite frankly, a lot of things could happen. And the last thing we would want is for our growth be limited, right?
Well, here’s a little dose of reality that I was forced to swallow: business plans don’t go as planned. I once spoke with a (now) CFO who initially went the commercial route and used her startup capital to mass produce 10,000 jars of jelly (her copacker’s minimum batch size), which her detailed business plan estimated would sell in a month through her market connections. Eventually, most of the jelly went bad and she threw away thousands of jars along with her business.
I’m not saying you’ll mass produce product before it’s reasonable, and I’m not saying that your business won’t be successful. What I’m trying to say is:
Don’t worry about your 1,000th sale on Day Zero.
You need to be focused on your first sale. There are enough barriers to entering the food space as it is — massive competition, spoilage, market availability — make everything as easy for yourself as possible. If necessary, I would personally change my menus and venues to cater to the cottage food law, simply so I could gain experience selling in the food industry before diving into a non-cottage-food business plan. Don’t let a potential future limitation (like a sales limit) sabotage your business before it takes off, or worse, prevent it from starting in the first place.
Even with the advantages of the cottage food law, making that first $5K of sales is harder than you think, and it will probably take longer than you think. But if you do happen to find that making $5K is a piece of cake, that’s a great problem to have! Be grateful that you’re in the minority of food startups who have found enough market demand to sustain their passion. Once you hit the sales limit, you’ve proven your business concept — now you’re ready to scale.