Well, it's a sad thing to say, I saw it coming a year ago and now it's here... I'm doing my homework (with my partner in crime, Dave) and going into business with a hot product (3 to start out with). Now since I don't have the $5,000 or so to start the ball rolling, I will need investors. Any tips or hints?
The Almighty $ or How to get Investers
- Thread starter imaguitargod
- Start date
Hillbilly Chili said:
Ok, that's $20 down. Now I need 250 other Hillbillies....
Thanks for the vote of confidence bro!Why $5000 anyway? What's it going to pay for? Do you have any sales figures? What market research have you done? What are the costs involved in making/distributing the products and how much will they sell for? Whats your business plan?
If you're going to get any investors you'll need comprehensive answers to all these questions and more.
If you're going to get any investors you'll need comprehensive answers to all these questions and more.
Getting investors is something you may want to shy away from in the beginning. It can be more trouble than you expect. $5000 is really not a lot to start up a food industry company. We dumpe about 3-4 times that for a complete startup. Most of your costs, as I have stated before will be the stupid legal crap. Make sure when your lawyer shopping, to get one with food industry experience, it'll save you a dumptruck of money. Also insurance, don't skimp. In this lovely world of "sue everybody" just cover your *ss. I would suggest starting as an LLC, as we did. It makes filling out your taxes that much easier. Do you have a co-packer or FDA approved location to produce your stuff? If not, chances are it'll be illegal to make it at home. Check out your local universities, some will help you locate a location for production. These are a couple basic tips to build on. Once again, $5000 is NOT a lot of money for ANY startup company. If you can do it with that, you're already ahead of the game.
Instead of dealing with investors, why not try for a small-business loan to start-up with? We used a couple of small business loans to get our custom shop going(mostly for equipment/tools and some paint/reducers for stock). The bank was very gracious to us, and it was a hell of a lot easier than myself or my friend Jamie going to get personal loans by far.
Agreed, small business loans are very common, and the financing market lately is bending toward the small company start-ups, as many more are succeeding than they used to. John, as Green said, you have to have a comprehensive view of what you'd like to do and how you'd like to do it. Without this, along with a well-written business plan of your specific goals, the bank officers will look at you as if you were a crackhead. Starting up a company is a wonderful thing, as you can call it your own, but it's not something to just start-up after discussing it over a couple of beers. I take it you have looked into all the facets involved starting a business, and the added pleasure of strict additional rules & regulations that govern the food industry? I will answer any questions you may have to the best of my ability, as I wish to see you do well. Just keep in mind, in the food industry, you really have to cover your *ss.
John,
that kinda cash will get you just at the doors of a lawyer, you need trade marks, labels, FDA approved facilities, and most important.. insurance you don't want someone getting sick and then sue you for whathever you got....do your homework
Business loans are good if you give the bank a business plan if not they will laught at you...food biz is wicked man...
that kinda cash will get you just at the doors of a lawyer, you need trade marks, labels, FDA approved facilities, and most important.. insurance you don't want someone getting sick and then sue you for whathever you got....do your homework
Business loans are good if you give the bank a business plan if not they will laught at you...food biz is wicked man...
Marco, I think perhaps a lot of people (no, I'm not siting anyone specifically) have the minor misconception that all you have to do is have an idea and just start a business. There are many different angles to consider. The first and foremost is if the production of your can be made in your home or not. Some (very few) will allow it. If a said state doesn't, it doesn't matter if you become an LLC, Sub-Chapter S, C Corp, etc., if someone wants to sue you, they will easily pierce the corporate veil, and you lose everything you own, as there is no distinction between your personal and business assets. Then comes the overhead. We started by printing our own labels, then, as things grew, the laser cartridges became quite expensive, and we now use Badgerland to do them (greay guys by the way). The next is getting the nutritional breakdown (calories per serving, trans fats, sodium, etc) as an idea will never hit mainstream without it, nor will it without a UPC code, which can be supplied by some co-packers. Then, after you lay out the start up costs, how will you distribute your products? Distributors, if you have a good marketable product will help you, but beware, you may find yourself at their mercy very quickly. Advertising is another wallet-buster. Granted there are many ways of free advertising, but most of it is just local. We just dumped a wad at the NJ Devils, and are now corporate sponsors, we also appear on the backs of their pocket schedules this year, kinda cool, but again, it took money. Most businesses don't make any profits for the first 2-3 years, which is when most throw in the towel due to the lack of fortunes they thought they'd reap. It's a lot of work. The payoff is great however, if it does become successful, as it is something you created, and no one else can lay claim to it.
John,
i am totally agreeing with you, we pretty much did the same things you just wrote (except for the corporate sponsor of the Devil's
) Distributors are great, but they will lay down the price for you, leaving you with a little margin of profit. That's why we do a lot of Festivals and other shows to contemplate the difference and bring in retail profits but very tiring especially if you have a day job 9-5 mon-fri like everyone else.
I tried to make the stuff myself (i had to get the certification of manufacturing first) but let me tell you.....IT IS TONS of work, especially if you have to make 200-300 bottles a week and your dayjob, speeping 3 hours a night and feeling like a mack truck went on top of me. Thats why we went by co-packer, much easier ..
. Overhead can kill you easily and quickly. Labels are NOT cheap and so is the UPC codes. PROFITS..?? haha ask me in few years....
Guys make the homework first.. it ain't good if you don't have fun at it.....
just my 2 cents....
i am totally agreeing with you, we pretty much did the same things you just wrote (except for the corporate sponsor of the Devil's
) Distributors are great, but they will lay down the price for you, leaving you with a little margin of profit. That's why we do a lot of Festivals and other shows to contemplate the difference and bring in retail profits but very tiring especially if you have a day job 9-5 mon-fri like everyone else.I tried to make the stuff myself (i had to get the certification of manufacturing first) but let me tell you.....IT IS TONS of work, especially if you have to make 200-300 bottles a week and your dayjob, speeping 3 hours a night and feeling like a mack truck went on top of me. Thats why we went by co-packer, much easier ..
. Overhead can kill you easily and quickly. Labels are NOT cheap and so is the UPC codes. PROFITS..?? haha ask me in few years....Guys make the homework first.. it ain't good if you don't have fun at it.....
just my 2 cents....
Man, sounds like deja vu. We do our own marketing and all that as well. Yeah, it's a lot more work, but we're having fun at it as well. The way we look at it is once it stops being fun, we shut the door, look back, and say, "Man, that was a good ride". We kind of do the same thing with the festivals, but more in the order of Defcon Days (always indoors, no inclement weather...Oh yeah, and it's always at a bar). Myself and the wife both have 9-5 jobs as well, so I truly understand the lack of energy sometimes. Weekends? What are those?
Yep, we are gathering all the info on pricing and cost of materials, and FDA approval and so on and so fourth (the reposting of the warnings and advice is always appreciated though). I recently went back into the archives here and re-read all the business end posts (I must say, Defcon is the man for always posting great info on that end...not to say the rest of you guys dont, but John's a real trooper when it comes to that stuff).
The $5,000 was just a top of my head estimate and will be much more refined soon. Dave and I are working out the details of the business plan on a daily basis so we will have that to present to people when shopping it around (can we say non-disclosure agreement?). No way are we going with doing this in our kitchen with a coffee grinder . We will be going with a co-packer.
The small business loan sounds good (does one actually have to pay that back if done through a corperation or LLC? Say we file for bankruptcy and such?)
The $5,000 was just a top of my head estimate and will be much more refined soon. Dave and I are working out the details of the business plan on a daily basis so we will have that to present to people when shopping it around (can we say non-disclosure agreement?). No way are we going with doing this in our kitchen with a coffee grinder
. We will be going with a co-packer.The small business loan sounds good (does one actually have to pay that back if done through a corperation or LLC? Say we file for bankruptcy and such?)
imaguitargod said:
they will take anything collateral you gave them.
not scaring you....just advising you at whats awaiting for you, and trust me is fun as John said but when the fun is over, you just better stop and look at something else.
Oh! Collateral, I seriously forgot about that! That might be a slight problem.marcosauces said:
Banker: So, what kind of collateral are you using for this loan?
Jon: I have a 1975 AMC Gremlin. Its green.
Dave: I have this pen...it's a Bic and blue.
marcosauces said:
Like that pink elephant in the corner over there....oh god he's spotted me! Run!
imaguitargod said:Oh! Collateral, I seriously forgot about that! That might be a slight problem.
Banker: So, what kind of collateral are you using for this loan?
Jon: I have a 1975 AMC Gremlin. Its green.
Dave: I have this pen...it's a Bic and blue.
Like that pink elephant in the corner over there....oh god he's spotted me! Run!
You really scare me sometimes...