From commissioning packaging designs to recruiting staff, starting a new food or beverage brand can be costly. So, where should you spend and where should you save? We get the financial lowdown from those who have successfully trodden the start-up path.
How much should you invest in a start-up?โ
This is a big question, and likely one that most start-ups will want to know the answer to. However, the investment at the start-up stage will vary enormously, depending on the type of product youโre launching.
Itโs also important to understand that start-up costs will be split into pre-opening and post-opening costs. Pre-opening start-up costs refer to the costs required to establish the business and include things such as packaging design. Post-opening costs meanwhile refer to costs incurred upon the opening of the business such as advertising and promotional activities.
So, what should you spend your money on?
Invest in your brandโ
Once you have your product and youโre ready to take it to market, youโll need to decide on how you want it to look, and this is worth the investment as itโs the first thing a customer will see. Plus thereโs a strong chance it will be the deciding factor on whether a purchase is made or not. So, how do you go about finding the right packaging for you and your brand? The answerโฆ research.
โI heavily researched,โ said Fan Yang, founder of plant-based snack brand, Other Foods, at the recent Bread & Jam event in London. โI was constantly on Pinterest and conducting research on packaging and branding. I was going to different supermarkets and retailers to see how brands had made it. And I created a mood board of what I wanted the brand and the packaging to look like.โ
And this extends to your website. For many brands, their website is their shop window, so make it look good. But this doesnโt have to cost the earth when youโre only starting out.
โThe average cost for a Shopify website is twenty grand,โ says Mike Stevens, founder of sustainability consultancy firm, Stevens.Earth. But there are plenty of alternatives to the professional website builders.
โI spent one thousand,โ says Yang. โAnd I just asked for a holding page. I wanted to test the market and see if I received any orders because if the idea does not work then it’s not worth any money.โ
And once your brand has proven to be successful, then you can further develop, and invest in your site, with the money made from sales.
โWe wanted to start with a professional website and the ability to take orders,โ says Nirali Mankodi, co-founder of confectionery brand, Superfoodio. โBut as weโve grown, weโve added things. Weโve spent more as weโve needed to.โ
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Distributing your productโ
Deciding how and where you want to distribute your product is a big decision, particularly as there are multiple options available, in terms of distribution channels. Many start-ups, and established food and beverage manufacturers, use wholesalersโ, as they function as the link between manufacturers and retailers, making selling at scale more easily achievable.
However, wholesalers are not the only option available.
โWe knew we wanted to scale quickly,โ said Mankodi.ย โSo, our first step was to find an outsource partner that had all of the certification and would allow us to grow in scale and would allow for more capacity than what we initially required.โ
Maintaining a career while establishing a start-upโ
If youโre concerned about costs and the potential financial risks, you could establish your business while maintaining your existing job. This will ensure you have a reliable income while also investing money into your new business venture.
โWe actually started manufacturing ourselves,โ explains Dan Featherstone, founder of snack brand, Made for Drink. โIโve got three kids and a mortgage, but I really wanted to start this business. So, I started it as a project. I was nervous about taking the plunge and starting a business, but this was the way that I could get going. And I was literally cooking and producing the product at home, but I thought if I could qualify my idea by taking it to a pub or a local shop then I could prove myself. And I actually ended up taking it to Heston Blumenthalโs Fat Duck Group and, long story short, they loved it.โ
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Think before investing in premisesโ
Depending on your circumstances, investing in premises to operate your business may be necessary. But donโt assume that it is. Consider what you need the space for and decide if it’s an unavoidable cost before making the commitment.
โComing from a corporate background, I was used to working in an office and having a team around me,โ says Mankodi. โBut for Superfoodio and journey weโve been on – weโve been through lockdowns in COVID – we actually realised that we didnโt need that space โ we could use co-working spaces and working from home.โ
Should you recruit staff straight away?โ
This is an important decision as employees will be one of the biggest overheads your company will have. However, if you need them and you donโt have them then youโll struggle to produce your products. So, when should you recruit staff for your start-up?
โI would say, if you feel like itโs too much and you need help then thatโs the point at which you take people on,โ says Yang.
โYou might think you need a big team, but you can start small and build up,โ adds Mankodi.
And there are options available that mean you donโt need to recruit full-time staff immediately.
โI took on freelancers and paid them an hourly rate,โ says Yang.
Starting a new business can be challenging, but it can also offer great rewards, so good luck and enjoy the ride!ย