Michael Adams Green Mountain Mustard and Gredio

Michael Adams, Owner
Green Mountain Mustard & Gredio

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How Much Does it Cost to Start a Food Business

How much does it cost to start a food business?

It seems to always come down to money when you want to start a food business. But why?

Because money is a tough subject.

Every time financials come up, you’re bound for a super headache.It’s hard to know how much you need, where it’s going to come from, and how long you’ve got before you’re out of money. Finding start-up funds is not the same as making delicious food, so I’ll make this quick and painless for you.

Before I get too deep, I want to bring something up.

For some of you, money may be a touchy subject – especially if you’ve got to put a roof over your head and food on the table for your family. That requires a certain amount of cash and then you have to find a way to fund your business. But, starting a food business doesn’t mean millions of dollars to fit up a brand-new kitchen. It’s doable with a couple of thousand dollars – or even a couple hundred if you’re thrifty.

The best way to explain start-ups is to compare the three food companies I’ve started. This gives you a better idea of how to fund your own companies.

In My Own Experience

I’ve started three food companies – and all three were completely different financial strategies. Here’s how they all played out:

1st Company: Adams’ Cookie House

I was 15 when I started my first company selling chocolate chip cookies on Fridays in front of a hair salon in town. I got the money for my first few batches from my parents. I didn’t get an allowance, so there wasn’t too much money to my name.

2nd Company: Eddie’s Energy Bars

Two years later, I launched an energy bar company. This time, I had enough money from working retail during high school to start this company. It was self-funded for 3.5 years and I never took a loan.

3rd Company: Green Mountain Mustard

The money I earned from Eddie’s Energy Bars went into Green Mountain Mustard, so you could say this was self-funded as well.

As you can see, my three food business were self-funded. (What bank is going to loan a 17 year-old kid money these days?). That means food business don’t take too much to get up and running, right? Maybe. Here’s a quick breakdown of what you’ll need to get going:

What do you need to get started?

checklist to start food business

Honestly, not that much. Here’s a short (not all-inclusive) list:

  • Food Licenses ($100-$500) ← don’t skip these!

  • State Business Registration Fees ($100)

  • Opening a Bank Account ($50)

  • Product Liability Insurance ($500-$1,000/year)

  • Recipe Process Approval ($70-$100/recipe)

  • Ingredients

  • Labels and Packaging

  • Kitchen Tools & Equipment (misc)

  • Website ($1,000)

  • Business cards ($50)

  • Sales sheets ($20)

How much money does a typical food business spend to start-up?

I priced a couple of things out above. For my three companies, I started with $50, $300, and $4,000. And believe me, was I cheap. I only did what I needed to do. As I grew I got insurance, process approvals and such. But to test if I had a product people loved, it didn’t cost too much.

If I had to throw a ball-park price for starting your food company, I’d go with $3,000 – $5,000. This assumes you pay a college student to help you design packaging and your website. It also assumes you have limited equipment needs.

Should you need to invest in your own kitchen, this number is going to be significantly higher.

Can you start for less money?

You don’t need all the bells and whistles. Hold off on the fancy packaging design until you get some cash – or do it yourself. I would absolutely get your licenses and fees in-line. That’s non-negotiable. Everything else is up to you: buy used equipment, get templated business cards, etc.

With a (very) rough idea of start-up costs, you’re probably wondering where the money is going to come from, right? Let’s take a look at several ways you could secure your start-up capital.

Where to Find Your Start-up Capital

Pile of money for your food startup

1. Self-Funded

While I don’t have the stats, I would bet this is how the majority of small food businesses are started. Using cash from your checking account (or shared account if you’re married) is easy and quick.

2. Bank Loan

Only do this if you need to purchase a large piece of equipment to get your production started. The bank will likely want you to have some skin in the game. Be prepared to put 20-30% of your cash down before the bank will even look at your application.

3. Credit Card

Have you read the stories about food business launching on three – five credit cards? Yep – it’s true. And it’s financially risky. Credit cards carry high interest rates and you may not be able to pay them off on time. If you can, avoid this funding source.

4. Friends and Family

Your food business could definitely get launched with a small loan from family and friends. They’re more likely to give you $5,000 than $50,000. A couple words of wisdom: write up a contract, pay your friend interest, and write a one-page business plan.

5. Use Kickstarter (or Another Crowd-Funding Source)

Kickstarter allows you publish your idea to the masses with a quick video. Then, friends can invest as little as a $1 in your fledgling venture. The catch? If you don’t reach your fundraising goal, you don’t get any of the money raised.

5. Savings/401K

This is the personally-funded part. If you’ve got the money in your checking or savings account, this is the best way to get your food business started. Why? You don’t have to pay anyone back but yourself!

6. SBA Loan or Micro-Loan

The Small Business Administration is on your side. And so are the local economic groups by you. Look at the eligibility requirements before you apply to make sure you qualify. These loan programs may require a bit more planning, but it’ll be worth it when you start to run your business.

7. Business Plan Competition

Relatively new to the scene, business plan competitions are a great way to not only get exposure for your idea, but get some serious cash if you win. Many business plan competitions have at least $5,000 up for grabs. And if you don’t win, there may be someone in the audience interested in giving your company a shot.

Getting cash to start your business can be a challenging hurdle to jump. Hopefully with these seven ways, you’ll have plenty of options to get going. If you’re struggling, don’t give up. Once you get past the question of how you’re going to fund your company, it’ll be a huge weight lifted off your food business chest.

Pro Tip: Don’t waste your money until your business plan and product strategy are in place. Poorly spent business funds are a big reason business go out of business.

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30 Comments on this post

  1. AUTHORClaire

    on July 10, 2013 at 2:22 am - Reply

    Hi there,

    Came across this site via a Facebook link. I’m in Australia and wondering what you mean by “Recipe process approval”? Not a term I’ve come across before. Could you explain please?

    Thanks
    C

    • AUTHORmichael

      on July 10, 2013 at 11:57 pm - Reply

      Hi Claire – sure no problem! In the states, if you make acidified foods, like mustard, salad dressing, jam, etc, or if you handle meat products, you have to have the process for making your product approved. It’s to make sure your product is processed correctly – like heating to a high enough temperature, packaging in the correct materials, making sure your product’s pH is at or below a certain level, etc. I get my recipes approved by Cornell in New York. Here’s the form if you’re interested: http://smadc.com/farmRESOR/acidfoods/Cornell%20Submission%20Form.pdf

      Hope this helps! What Facebook group posted a link to my blog?

  2. AUTHORSuryo

    on September 23, 2013 at 12:25 pm - Reply

    Hey great article! been contemplating on starting a food product for quite some time now. I was wondering – what would i do i need to do in order to make the product have a long shelf life?

    I’m googling but i cant seem to find it..

    • AUTHORmichael

      on September 23, 2013 at 4:47 pm - Reply

      Hi Suryo,

      What are you planning to make? What’s your shelf life right now? I’m no food scientist, but I’ll help as best I can. Feel free to email me, too — michael [at] gredio [dot] com

  3. AUTHORMarina

    on February 22, 2014 at 5:21 pm - Reply

    Thank you so much for the information. Can you tell me the best way to package dry baking mixes that are based in ground sunflower and flax seeds? Those seeds are oily and I am concerned about the shelf life of my future product. thank you!

    • AUTHORmichael

      on February 27, 2014 at 8:07 pm - Reply

      Hi Marina! You’ve definitely got some food science problems on your hands. I’d look into commercial grinders that grind oily seeds. This is a little beyond my scope of knowledge, honestly. As for packaging, a dry baking mix can just go in a plastic bag, but most go in a bag, then a box. Does that help?

  4. AUTHORAaron Couch

    on October 2, 2014 at 2:00 am - Reply

    Extremely helpfull article thanks.

    • AUTHORmichael

      on October 2, 2014 at 6:20 pm - Reply

      You’re welcome, Aaron! Good luck with your food business!

  5. AUTHORIsaac W.

    on March 21, 2015 at 5:06 pm - Reply

    I have been planning to start a food truck. I have my menu and concept but the business part I am lost on. I am in GA and need to get some advice on where to begin.

    • AUTHORmichael

      on April 1, 2015 at 10:26 pm - Reply

      Hey Isaac,

      Congrats on starting a food truck. Is there anything specific I can help with?

  6. AUTHORKaren

    on August 4, 2015 at 9:55 pm - Reply

    I like to open a fish and chips,
    Do I still need to download,
    Cornell Scheduled Process. Form.

    • AUTHORmichael

      on August 5, 2015 at 1:00 am - Reply

      Hi Karen! If you’re opening up a restaurant, you don’t need the scheduled process. But, you do need your space inspected by many state and federal organizations. Good luck with opening!

  7. AUTHORAnthony

    on November 22, 2015 at 10:24 pm - Reply

    I am 56 years old and for a long time have wanted to open up my own pizza shop, but had no money to operate the business. Now I have come into money and do not know how much it will cost. I am looking at $200.000 to start.. So instead of me using my own money what can I do to get money to open my restaurant without using my whole $200.000 to start?

    • AUTHORmichael

      on November 23, 2015 at 1:10 am - Reply

      Hi Anthony — opening a pizza place sounds like a lot of fun. If if you have collateral, you could look at a low interest bank loan backed by the Small Business Administration. You could also Kickstarted for a portion of the start up costs, or you could invest half your money and raise half the money. You could also find a financial partner to go in 50/50 with you. Lots of options – good luck!

  8. AUTHORRichard

    on December 9, 2015 at 1:06 am - Reply

    I’m looking at starting a food stand as a summer job, and selling fancy popcorn (salted caramel, chocolate drizzle, etc.) and was wondering how I could raise money for it. My effective money now is $0, and my prospective money from my parents is the same (I’m 15). Any help would be greatly appreciated, clueless in the matter. Fantastic article, by the way.

    • AUTHORmichael

      on December 9, 2015 at 12:03 pm - Reply

      He Richard — thanks for reading my blog! Starting with $0 dollars is tough. I think you have two options: You could use a platform like Kickstarter or IndieGoGo (your parents may need to help you because I think you have to be 18) to raise what you need from family and friends, facebook friends, etc. Then, you’d reward them with popcorn, for example. The other option is to get a job to make what you need. I worked at a party store when I was 16-18 to fund my energy bar company. Then, I worked full-time for marketing firms for 3 years to fund my mustard company. Good luck, man! — Michael

  9. AUTHORcellfood indonesia

    on December 26, 2015 at 8:11 am - Reply

    Pretty great post. I just stumbled upon your blog and
    wanted to mention that I’ve really loved surfing around your blog posts.
    After all I’ll be subscribing to your rss feed and I am hoping you write again soon!

    • AUTHORmichael

      on December 30, 2015 at 11:32 am - Reply

      Thanks for visiting. Glad you’re finding all the information you need here!

  10. AUTHORQolayah Shekina

    on January 6, 2016 at 3:43 am - Reply

    I am in the planning stages of trying to start a small Cafe. Something where I can sell mostly Teas, some coffee, baked goods, cold drink and a few snacks. I’m planning on using my tax refund and my job to fund it. Do you have any adviceand or tips?

    • AUTHORmichael

      on January 6, 2016 at 12:20 pm - Reply

      Hi Qolayah,

      Thanks for reading the blog — As for opening up your cafe, I’d make sure you’re well funded and have several months of working capital in the bank. I’d also make sure you have a great team in place — it’s all about the people. And make a great product (which it looks like you do already!) Good luck!

  11. AUTHORAbi

    on May 13, 2016 at 5:08 am - Reply

    Hi,
    Just found you’ I’m from NZ and wanting to start selling mayonnaise and mustard amongst other things with my ketogenic food company! My sister is in nut butter food production and she is freaked out about he fact I want to sell Mayo! Cause of raw eggs! How do you get it safe and certified?

    • AUTHORmichael

      on May 16, 2016 at 11:40 am - Reply

      Hi Abi,

      Congrats on wanting to starting a food business! While I don’t know the NZ food regulations, you’re going to want to talk to a food scientist or food process authority before you start selling your mayo. To combat any possible chance of salmonella, our eggs are heated to 195F — essentially pasteurizing them. Good luck with your products!

      — Michael

  12. AUTHORDustin

    on May 20, 2016 at 6:17 am - Reply

    These numbers seem very low. If you want to do it properly you are enjoying going to have to pay a design agency around $10,000 to create your brand and logo for two skus to start. Plus you want to hire these design Profesional as you most likely won’t realize all the things that are required to be on your packaging especially if it’s being produced in a federal facility. Then if you want to order in packaging you usually are looking at a 15,000 order minimum in bags or boxes or whatever style packaging you decide. This would cost $2,300 ish per sku plus the one time plate fee for each sku from the printers which is around $2,500 per design. Plus sending the product out for nutritional testing which is around $750 per product. Your packaging is the most important aspect, distributors won’t take you on if they don’t feel your packaging stands out. So don’t hire a college student, hire proffersionals. We learned this the hard way and ordered in 30000 bags with a cheap design and even though we had a partner with all his food products in the major retail stores, they still wouldn’t take us on until we changed the packaging. That was a wasted of $7,000 for plate fee and bags. Invest in packaging design first and foremost.

    • AUTHORmichael

      on May 20, 2016 at 11:44 am - Reply

      Hey Dustin,

      Thank you for your comments. You do need to spend more money to have a professionally designed food product. However, the majority of my readers don’t have the cash you suggest to invest in the packaging in branding. Everyone needs to start somewhere. It took my 6 years before I built my business big enough to spend $6k on a rebrand (which yes, did increase my sales). There are several ways to get a food product off the ground — everyone has to work within their means – wether that’s homemade jam or a national brand right out of the gate. Thanks for reading and contributing your thoughts to my article.

      — Michael

  13. AUTHORShrikan

    on December 31, 2016 at 5:25 am - Reply

    I want to start packaged food business. How should i guage the demand? How would i know how much to produce in order to meet the demand? How to set up distribution channel and how to increase sales? Can this kind of business be bootstrapped?

    • AUTHORmichael

      on December 31, 2016 at 12:45 pm - Reply

      Hi Shrikan,

      Thank you for reading my blog. There are a lot of resources on this blog to help with the questions you’re asking. I also have a course and a couple ebooks that will help you.

      Michael

  14. AUTHORMaria M. Valdez

    on May 7, 2017 at 12:43 am - Reply

    Hello Michael,

    I agree with the other readers. Your blog is very helpful! I am planning to start selling a gluten-free coffee cake, some salsas an Ceviche. Does this sound too ambitious? What are the three top advices that come to your mind right now? Thank you for reading me!

    • AUTHORmichael

      on May 10, 2017 at 11:05 am - Reply

      Thanks, Maria! My only recommendation is that you have some cohesiveness in your product line or stick to one thing and do it incredibly well! Plus, always keep your costs in touch and review every three months or so to make sure you’re on track.

  15. AUTHORRobert

    on August 7, 2017 at 12:22 pm - Reply

    Noticed your brand on shelves and find your story/backstory inspiring for people like me who want to know how to start from nothing ! Currently in Process Review with Cornell and in mid-licensing phase here in RI and am curious to know your thoughts on naming…I needed a name and needed it fast otherwise I risked holding things up (didn’t realize “ramp up” time once you actually decide to “do it”!) so I went with a name that made sense from a branding perspective but still not 100% sure of it. Here’s my question: Do you know if I can give my product a different name than the one I filed with the RI Sec. of State office…is that what “dab” or “Doing Business As” means? Sorry for long post and really like yours blog!

    • AUTHORmichael

      on August 9, 2017 at 10:47 pm - Reply

      Hi Robert,

      While I’m not a lawyer, you could have an LLC that’s registered with the state, and then a DBA tradename, too. So, it’d be ABC, LLC DBA YOUR FOOD CO. — that could work, or just register another company name – I have a couple.

      Good luck and thanks for reading my blog!

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