Whether it’s the secret family hot sauce recipe or a selection of your tried and true cookies, starting an online food business from your home can be complicated. From gathering supplies to ensuring you’re legally compliant, there’s a lot to consider.
We’ve broken down the process into 8 simple steps. We’ll dive into the most important things you need to do to get set up and ensure your at-home food business is compliant, safe, and profitable.
8 Steps to Start an Online Food Business
1. Know the Local Regulations
In comparison to other at-home businesses, selling food out of your home requires a bit more forethought and planning. That’s because, regardless of your location, governments have strict rules and regulations around food safety and hazards. These are often known as cottage food laws.
To get started selling food from home, most governments will, at minimum, require you to have:
•A local business license
•Some form of kitchen inspection or food testing done by an official, usually annually
•A zoning permit for your at-home kitchen
There may also be limits on the type of food you can make and sell from your home and the total amount of profits you can earn from an at-home food business in a year.
For instance, some places only allow the sale of shelf-stable foods like canned products and candies, whereas others may even allow full meals and perishable goods to be sold from a home.
2. Set Up Your Workspace
After you’ve ensured you can be fully compliant with local laws, you’ll want to ensure you have the space, equipment, and supplies necessary to handle orders in your home kitchen. Unless you plan on only using your kitchen for the business, you should also find a system for switching between home cooking and business cooking easily.
For instance, if you plan on starting up a cheesecake business, you might need additional fridge space to keep the cheesecakes once they’ve been prepared. While it may not be a good idea to go out and spend a ton of money retrofitting your kitchen, you should think through the logistics of the setup before you begin (and make your housemates angry).
Any new business venture usually requires some upfront investments and an at-home food business is no different, but you don’t need to spend a fortune. Figure out the must-haves (more cold storage options like coolers or a small dorm fridge, additional baking pan, or canning equipment) and work with what you’ve got. You can always scale up later!
3. Source Ingredients and Packaging
To ensure you always have the supplies you need ready to go when orders come through, it’s important to build and maintain a great relationship with a trustworthy and reliable supplier. Depending on the type of product you are selling, you may be able to get all your materials from a single supplier, or you may need to source from several.
For smaller operations, the easiest option is to seek out a wholesaler in your town. If you’re unsure, ask restaurants and other food businesses where they get their supplies. Often these may require membership fees or proof of business to use, but can be worth it for high quality supplies at more affordable pricing – which means more profit for you.
As you’re working with food, it’s essential to do your research when it comes to your supply chain. One bad batch of food could sour your reputation and ruin your business. Look for transparency in the supply chain, as well as reviews from other customers to get a sense of how a supplier operates, and don’t be afraid to switch if you feel the quality isn’t there.
4. Plan It Out
No matter if you’re a hobbyist just looking to make some extra money or an entrepreneur looking to grow, you want a general plan for your business. This can be as complex as a formal business plan that can be used to get business loans or external financing, to as simple as a one-page document that covers the essentials.
We suggest starting small and simple, you only need to document the most crucial. This includes your supplier information, how you’ll track and maintain business finances (be sure to keep these separate from personal finances for tax purposes), and any important information around cottage laws in your area – in case anyone asks.
At this point, you’ll also want to start to plan your pricing structure. As a small, local business, you may be more flexible in pricing by the order, but you’ll still want to have a good idea of how much to charge in order to turn a profit. You’ll want to factor in the costs of the ingredients, the packing/shipping supplies, and your time in order to come up with a fair price.
5. Figure Out an Distribution System
Depending on the food you plan to sell, there are a couple of ways you might approach an ordering and distribution system, including batch cooking a bunch to be ready for orders, making food as it’s ordered, or having a set delivery/pick up day each week for food.
For instance, if you are producing things with stable shelf life, like hot sauce, honey, or canned jams, you may be able to batch cook a bunch to be ready to sell at a moment’s notice. It’s often more time-efficient to do large batches at once, especially if it will keep for quite a while. Just be sure to carefully label and FIFO (first in, first out) your batches, to ensure freshness.
However, if you are cooking or baking perishable food, then you’re a bit more limited. You can either choose to make orders as they come in, which can be inefficient, or have set delivery/pickup days each week to help batch your baking. You might, for example, choose to have Saturday mornings as a delivery day where you drop off all orders for the week.
Since chances are you’ll be focused on local selling, you’ll want to define your location – especially if you’re doing deliveries. This might include limiting deliveries to a ten mile radius, but offering pick up options for those farther away that may still want to order. For shelf stable, you can also offer shipping, but be sure to check local laws around shipping food.
6. Launch Your Webstore
Once you’ve developed your brand voice in a marketable way, it’s time to set up your webstore. You want customers to easily be able to find your store information and be able to get in touch. There are two best options for small local businesses: a full website or selling through social media.
We recommend a full website as it will allow you to have a custom design, as well as take payments directly through your site, although it can be a bit more work to set up and maintain. There are a number of easy website builders you can use to set up a site, which often only cost around $100 a year to maintain.
The other option which is popular with small local businesses is to sell to your audience directly through social media – particularly Facebook and Instagram. This is a good option if you have rotating products (i.e. flavor of the week cheesecakes), as you can easily post new products, without having to continually update the website.
However you do it, you should include general information about your products, including specialty information about the ingredients (vegan, gluten free, etc). You’ll also want information about who you are and why customers should buy from you. If you have testimonials (even from friends and family), include them on your page, as this helps build customer trust.
7. Set Up a Payment System
After you’ve nailed down your branding and set up a website to market and sell to customers, it’s time to think about the payment logistics. As a small business owner, it’s crucial to have a secure and easily accessible payment system for customers.
8. Start Selling
So you’ve developed your products, figured out your payment system, and have set up a website. Now it’s time to launch your business. For food-based home businesses, word of mouth and positive reviews will be the key to success, so don’t be afraid to keep it small to ensure the quality is maintained, especially in the beginning.
Start with who you know. Get the word out to friends and family in the area to see if they’d be interested in trying out your products. You can also use social media to boost your audience by sharing on community pages or tagging others to increase exposure.
Additionally, don’t forget about marketing in your community. You can post flyers about your new business at community centers, grocery stores, or ask other business owners to share your information.
