Starting a Food Business When You Have No Money

If you have entrepreneurial dreams, but no money, a food related business may be the answer.

Although food businesses come with more regulation than opening a gift shop or starting an errand service, there are plenty of ways to save money while getting a food business off the ground. Here are some of the money-saving tips I followed when I started my Specialty Food (dry mixes) Business, and some others that I learned along the journey.

Licenses and Permits:

This is not the place scrimp and save money. Make sure your business is legal by getting all the required licenses and permits. Spending a little money up front is worth it to avoid the legal headaches of getting caught without the correct paperwork. Besides, paying for all these licenses is still cheaper than a good lawyer’s retainer fee!

• Business licenses. Most states require a State, or Master business license. Many municipalities also require a license. These fees are usually quite reasonable and will probably be less than $150 total.
• Legal entity. I highly recommend that you form either a LLC or a S-corp when starting a food business. Operating your business as an entity separate from you (unlike operating as a sole proprietor) will legally protect you and your personal assets in the event that your business is sued. This may be your biggest expense when starting a food business, but if you do the paperwork yourself it will still be less than $500 – much less in some states.
• Insurance. Liability insurance is a must when preparing food products for sale. You should have at least $2,000,000 in coverage. Shop around for policy quotes. When I first started I received quotes from $500 a year to $5000 a year, and everything in between.
• Permits. Depending on the laws in your state and the food products you are preparing, you may need permits from the local health department and/or your state Department of Agriculture. Even so, these permits are usually less than $200.

Equipment:

Although you may have visions of mixing pounds of dough in a 60-gallon commercial mixer or filling packages of dry goods with an automatic hopper system, almost any food business can be started without specialized equipment. Start small and save your dollars until sales volume warrants equipment purchases a necessity, not a nice-to-have.

Even if you aren’t looking for specialized equipment, purchasing new measuring cups/spoons, baking dishes, bulk storage containers and the like can add up to hundreds of dollars quickly. Look for inexpensive equipment at dollar stores, estate sales, your local Goodwill, and yard sales.

If you need something not usually found in a home kitchen, like a soup cooker or a heavy-duty blender, search ebay or Craigslist for restaurant liquidation sales.

Supplies:

You can save hundreds of dollars – in the long run – by purchasing your product supplies in bulk. For example, when I ran my Specialty Food Business, many of our products included instant minced onion as an ingredient. To purchase a pound of this product at the grocery store costs about $6.00, but when purchased in bulk cost about half that amount. Of course, I had to purchase 50 pounds at a time. While the per pound cost was much less, instead of having $6.00 tied up in supplies, I had almost $200 tied up in supplies. That was fine when we were selling a lot, but when we were just starting out it made more sense to spend the six dollars.

Purchase as many of your supplies locally as possible. Visit restaurant supply stores if there are any in your area, or purchase at the local Costco or Sam’s Club. Many grocery stores and health food stores will also order products in bulk for you at a lower price. Instead of purchasing 25 one-pound bags of rice, see if your local grocery store would order you a case of rice, or one 25-pound bag of rice. When your sales increase order 500 pounds or more directly from a wholesaler or distributor.

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