|
Starting A Food Business continued... page 3
Universal Product Code (UPC)
If you plan to sell your product through retail stores, you should plan to display a UPC on the label. This barcode provides a means for automated identification of your product. Brokers, wholesalers and retail buyers will not handle a product without a UPC.
It is your responsibility to obtain a UPC for each product that you produce. The first 6-9 digits are issued by the Uniform Code Council and will be unique to you as a manufacturer. You assign the second 5 digits to designate the product that you produced. Contact the Uniform Code Council to apply for a UPC assignment. There is a fee based on the size of business that you do but the minimum fee for a UPC number is $750.
Uniform Code Council Inc
7887 Washington Village Dr, Suite 300
Dayton, OH 45459
937/435-3870
Business Considerations
Now that you have a product to sell and an understanding of the manufacturing regulations, it is time to go into probably the most difficult, yet most important aspect of starting a food processing business. A majority of companies that go into business go broke the first couple of years and usually it is not because they have a bad product but because the entrepreneurs did not fully understand the market place or the financial realities of the business.
Before entering the food processing business, you should develop a comprehensive business plan. This business plan should include detailed descriptions as to the following;
Organization of the business
The product(s) to be produced
Market analysis and marketing plan
The financial plan
Operational characteristics and management plan
Such a plan can help in determining the feasibility of the enterprise and will likely be required when seeking outside financing. Knowledge in this case is power. Information can make it much easier to overcome various obstacles to entry and financial success, allowing one to reduce the uncertainty in decision-making and thus reduce risk. The two most important areas to be considered as you decide whether or not to enter the food processing business are marketing and finance.
Marketing
The most important marketing consideration is to simply understand your product and its place in the marketplace.
* What are the characteristics of your product which will make it appeal to its target market?
* Who are the constituents of the target market?
* Consider the demographics of your target market? Is the market for your product likely to grow?
* Is the production, distribution and/or promotion of your product seasonal or restricted by geographic or other factors?
An important concern is competition
* What is the availability of the same or similar products?
* Are substitutes available?
* Why would a consumer buy your product rather than that of a competitor?
* How many competitors exist, and what is their size?
* Are competitors willing to protect their market share by cutting prices?
Distribution and promotion of your product are critical concerns;
* Will your product be distributed through direct sales, mail order, wholesalers, specialty shops or larger retailers?
* Do the characteristics of your product fit your distribution channel?
* What is your advertising plan?
* How do you differentiate your product from the competition?
* Which media are you going to use? Do these fit your distribution channel(s)?
* Will you accept the costs of introductory discounts, coupons, slotting fees or other promotional tie-in?
Several questions of a financial matter also arise when developing a marketing plan;
* What will be the price of your product, and will it sell at that price?
* Does the market for like goods exhibit relative price stability?
* Are the costs of producing the product likely to remain relatively stable?
* Can the product be produced, distributed and sold at a profit?
Finances
While help is available in answering questions about financial issues, one is well advised to seek competent professional financial advice when attempting to address the issues below.
The first question to answer is that of the form of business organization: sole proprietorship, partnership, limited liability company or corporation? Each has different characteristics with respect to ease of formation, liability, accounting and tax reporting requirements, ability to raise external capital and succession of ownership. Any organization which has employees, regardless of its form of organization, must meet a number of federal and state reporting and tax requirements. Additional requirements, such as workmen's compensation insurance also exist.
next page...
|
