A few weeks ago we looked at how lowering your ingredient and packaging costs can result in higher profits for your business! Today, we’re going to go over two more main areas that can be optimized to lower your overall costs: manufacturing/operations and distribution.
Lower Your Manufacturing & Operations Costs
Use a co-packer
Manufacturing food products can be highly expensive — especially if you’re a new business that is just starting out. Not only do you have to consider the costs of ingredients and packaging (as well as day to day business costs), you have to take into consideration manufacturing costs as well.
While state cottage laws allow small businesses to use a home kitchen to manufacture low-risk products (baked goods, candies, etc.), scaling up your business to sell your products in retail stores means you will need the use of an FDA licensed kitchen.
According to the FDA Good Manufacturing Practice Requirements, any food produced intended to sell to consumers must be “produced under safe and sanitary conditions.” That means that all kitchens, equipment, storage facilities and warehouses that you use must adhere to FDA regulations.
As a small business, renting or building an industrial kitchen and filling it with the proper equipment (ovens, mixers, countertops, etc.) may be well out of your budget. In that case, using a co-packer may work for you!
A co-packer is a company that manufactures and packages products for clients. Not only do co-packers save help small businesses save money by providing the necessary setting and equipment for manufacturing, but they also save your business time by taking over all of the production duties.
If you’re wondering if a co-packer is right for your small business, check out this article here!
But although co-packers can help streamline the manufacturing process, they may not be right for every small business. Turning over the production of your product to someone else may result in the loss of integrity for your product (especially if you’re a true artisan).
Co-packers also usually require a minimum batch size to start production, which may be too large and costly for a fledgling business.
In that case, a better alternative might be shared kitchens.
Use a shared kitchen or culinary incubator
Shared commercial kitchens (also known as commissary kitchens) are the perfect solution for small and artisan business owners. Not only do they allow you to retain full control over every aspect of the manufacturing process, but they also provide a fully FDA licensed space at a much lower cost than creating a kitchen yourself.
Many commissary kitchens also provide educational incubator programs, which teach entrepreneurs how to reduce their start-up risks and scale up their food businesses in a professional kitchen. Many of these kitchens, such as Hot Bread Kitchen in NYC or KitchenCru in Portland, offer support for small business owners as well.
To find a shared commercial kitchen near you, try The Kitchen Door!
Maximize your time
Whether you choose to use a co-packer, rent out a shared kitchen, or create your own FDA licensed facility, maximizing your time is an essential step to increasing your profits.
To put it simply:
The less time it takes you to make your product, the more of your product you can make.
So how can you make the most of your time and run your business more effectively and efficiently? Here are a few ideas.
Mass produce your products. Unless small batch production is a cornerstone of your business and your products, mass producing your products will allow you to do more in the same amount of time.
To start mass producing your products you will need to scale up your recipe. Just think about it this way. If you’re using an old family recipe for slow-cooked gourmet spaghetti sauce that takes 4 hours to make and results in 10 jars, you may only be able to make a total of 30–40 jars a day.
Just by tripling the size of your recipe, you would be able to increase your production by 300% (that’s now 90–120 jars). Increasing the scale of your recipe by an even higher percentage would allow for much more efficient manufacturing.
Automate your business. Unless you are a large food brand, odds are you won’t be automating the actual manufacturing and packaging of your products anytime soon. But there are still ways to automate the operations of your business that will leave you with more time to focus on other things (and therefore grow your profits!). Here are a few of the more tedious areas of your business that could be taken care of through automation.
●Payroll: If you have employees, using an automatic payroll system will take care of this monthly duty more quickly than doing it yourself.
●Social media: Posting on social media can use up a lot of time (especially if you let yourself get distracted by looking at other accounts!). Using a program like Buffer allows you to batch schedule posts leaving you time to do other things.
●Expenses: organizing expenses is one of the most time-consuming aspects of any business. Companies like Shoeboxed let you quickly take snapshots of receipts and organize them, so you won’t spend extra time come tax season trying to get everything under control.
These are just a few areas that can be easily automated. To create even more efficiency in your business, pay attention to the administrative and operational duties that take the most of your time and see if there’s a program out there that can help make it easier!
Lower Your Distribution Costs
Distribution is an area of running a food business that can take up a lot of time and money. For most small business owners it can become almost a full-time job.
If you distribute your product yourself, you will have to be responsible for not only storing and shipping your product but negotiating with stores and fulfilling any orders that come in. Passing these duties off to a distributor can make a massive difference in the time it takes you to run your business.
Using a distributor like Pod Foods not only makes it easy to deal with the shipping, warehousing, and distributing of your product (they can do it all for you!), they also make it easier for vendors to find you. You can also easily keep track of orders and easily see which stores are carrying your products.
Shifting distribution duties to another company allows you more time to focus on the growth of your business.
