In 2015, United States food-related startups collectively raised over $2 billion in venture capital, so it’s logical to think starting a food business should not be too difficult. However when you look at the types of operations getting seed money, you’ll see the majority of funds are going to food e-commerce, Blue Apron and Hello Fresh raised $135 million and $126 million respectively, and food technology (for a good overview of all the players refer to this graphic from Rosenheim Advisers). So, if you are a small food production operation like us, you may not even be on the VC radar screen and the competition for capital is much, much more fierce.
To improve your chances for success and attract customer interest and potential investors in your food products and concepts, this is what we learned during our start-up of Metropolitan Dinners:
- Fine tune your concept(s) until it’s crystal clear in your mind and can be easily articulated - It’s OK to fumble about trying to explain your product and how it works at first, however, a fine-tuned concept statement will help you analyze how effective you’re going to be. Suan Robertson of Ideastogo gives a good departure point for concept generation, “Start with Killer Insights. An insight should be one of the following things: A clearly stated, compelling belief, a truth about your consumer’s life, or a state of being that’s true for your consumer. “ [Link to Article]
- Take the time to write a rigorous fact-based business plan. There are all sorts or templates available on the web (we used Liveplan, www.liveplan.com as it allowed us to edit drafts together in real time) - share it with a few people you can trust to give you honest feedback, and who have strong business backgrounds. Be sure to incorporate their ideas and recommendations. We shared ours with two former CEO’s, a number of former marketing colleagues, and two attorneys.
- Try to get to know your intended audience like the back of your hand and test your product/concept as best you can – a bit of armchair research with family and friends might help set you up for success, but we believe their emotional support is more important (especially at the beginning). As Eric Ries, author of “The Lean Startup” says, “Most entrepreneurs don't need as many customers as they think. A lot of people think 10 is too few for a sample. But if all 10 refused a product, why is that not enough?” [Link to Article]
- Be emotionally prepared for some initial financial shocks - there is nothing more damaging to a business and your credit rating than being midstream and realizing you are undercapitalized and without financial recourse. To help you assess your risk and do some better planning, we recommend looking at the links provided in this article by Aaron Anders in Inc. Magazine.
- Develop a fallback plan – the “failure is not option” approach makes for a great sound bite, but you need to have options if things don’t go according to plan. As Jerry Jao wrote in Entrepreneur, “Planning for failure doesn’t make you negative or paranoid. It makes you smart. First, there's a huge difference between preparing for failure and thinking you’re going to fail.” [Link to Article]
- Be adaptable - don’t be slavish to your own beliefs. Watch and listen to your customer and be prepared to make changes whenever and wherever necessary. According to Avi Levine of the Digital Professional Institute, business owners should “use social media to get feedback from customers. With social media, feedback about a product or service, the purchasing experience or customer service can be gathered as simple as tweeting or posting a question about [it on Facebook]”. [Link to Article]
- Eliminate wishful thinking - be brutally honest with yourself and your partners about products and processes that aren’t working. Have the courage to stop making and doing the things that are a drag on your business.
- If you have the opportunity, establish a one-on-one relationship with your service and product suppliers – it will give them greater incentive to help you succeed and support you during the challenging moments of getting everything off the ground. As Susan Konig of allBusiness points out “A really good supplier can steer you toward the best-selling goods and services — or those with the highest potential — and thereby increase your sales. What’s more, if you’re able to build and sustain relationships with suppliers that are also profitable for them, they’re more likely to work to make sure your business does well too.” [Link to Article]
- Actively seek out and engage good employees and pay them accordingly – you will spend more money combatting turnover if you don’t pay a compelling wage. Also, take the time to orient and train employees without overwhelming them as described in this National Restaurant Association guide.
- And lastly, if you’re in a partnership, be supportive of one another but know how to communicate your likes, dislikes, concerns and ideas effectively - there will be “ugly” moments, but confrontation is part of the business model. Marla Tabaka of Inc. gives 10 great guidelines for dealing with confrontation. Her first recommendation focuses on managing anger: “Anger will muddle the truth, so allow time to let some of the emotion settle and think about what you really want. Begin at the end. When this conversation is over, what change, commitment, or outcome do you desire? Also determine what you're willing to give to make it happen.”
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