Since the lockdown in August, the number of Instagram DMs and emails I received from people starting new, home-based food businesses increased by at least triple. Around 90% of them ask me for advice on how to increase their brand presence and sales; the other 10% is a combination of collaboration proposal and price shopping for my services.
In this article, I have put together some important things you should keep in mind before you start trading. I have seen so many people doing it completely wrong, which can also cause legal issues. So if you are clueless about this, a student wanting to take your passion for baking as an extra source of income or legitimately wanting to set up a long-term, home-based food business during this challenging time, I advise you read all the aspects I will be covering... So you don't get into trouble.
1. Rules & Food Control Plan
Just because you have all the equipment and resources to start your home-based muffin business does not mean you can start selling it! How clean and safe is the space you are preparing the food for the customers? Where and how will you store it? Where will the ingredients be stored? How will you make sure your own food (to consume) will not be mixed (or contaminated) with the food you are storing to sell?
There are literally so many questions like these where you need answers for. And most importantly, you need a Food Control Plan. If you are unsure what this is, visit the link here.
If your food goes bad and someone becomes very sick, you are reliable for it. And as a food business, this may happen but your job is to minimise this as much as possible. From talking to these people who emailed me, almost all of them could not answer any of these questions.
Oh, also look into the National Programme.
2. Are you selling via Facebook or Instagram?
There is a high chance you are breaking a lot of laws, including the ones I mentioned above. I have also seen many people selling food on the Facebook Marketplace but most of them are not registered.
This also makes me assume that they are not even paying any taxes.
So if you are doing this already, pause this action for now.
3. Register as a Proper Business
If you are a service-based freelancer, often being a sole trader can be more beneficial but as a food business, you should be operating as a proper company. There are many resources out there for you to research but if you want a brief step-to-step, visit here.
4. Tax & GST
You. Have. To. Pay. Taxes.
I was utterly shocked at people who did not even consider taxes while they are selling their food products; the number of people who weren't paying taxes I found out via email conversation reaches tens of people!
Look, if you are selling a cinnamon rolls box for $30, that $30 does not go into your pocket - that price includes tax and GST. Just visit IRD if you want to learn more about it.
And here is a tip: create two more online bank accounts on top of your main cheque account for your business; name one account TAX and the other, GST. Pick a day of the week (or a month) and allocate 15% of the money you received to your GST account and 28% to your TAX account. So when the tax period comes, you are not short on cash and you know exactly how much you have to pay.
Well, if you know how to do your own expenses, you can reduce the amount you pay. That is why I recommend you study accounting basics.
5. Have a Strategic Business Plan
Business is hard! It's very very very hard. If it was easy, there would be millionaires literally everywhere, right? To minimise the mistakes you will be making and increase the efficiency of your business' growth, a strategic business plan is strongly recommended.
As part of this plan, you need to have an overall vision, milestones and cascading goals. A typical strategic business plan is anywhere between 30 to 60 pages so do not assume this as like a kid's 5-slide PowerPoint presentation.
The main benefit of having this plan is you will be able to track where your business is at constantly and you will be able to make better decisions to grow your business more efficiently.
6. Research & Ask If Not Sure
If you have a feeling of "am I doing this right?" or "I am not sure if I should be doing this.", there is a high chance what you are doing is wrong and can get you into trouble.
In the end, it is your business and you should be doing your own research. So spend some good time doing more, high-quality research and follow all the right procedures before you start selling your food products from home.
I completely understand that everyone wants to make more money, especially during a time like this. However, your effort to make that extra few $100s per month by operating with no rules followed can get you into trouble. In addition, you can also damage someone else's health because of your lack of knowledge in food safety.
If you are unsure or have any questions, get in touch with me.
And no, I don't offer free consultations nor trials.
Founder & Editor | Say Seowon Song
I run Caramel, a New Zealand leading consulting and creative agency helping hospitality and food businesses grow. I also teach people and am involved in other businesses in the technology and hospitality industries.