You have recently started a food business and you’re following your heart. You’re supplying Harvey Nicks, Selfridges and a splattering of independents. Your brand has been talked about in the press and your friends are all saying you’ve done well. But here’s the catch: annual sales are about £50k (if you’re lucky) and you are running the business from your spare bedroom.
This is the real world for the majority of food entrepreneurs I meet. I know what it’s like… I’ve been there with Gü and I’m doing it all over again with Bessant & Drury’s, the new coconut dairy brand. Why? Because we have this crazy dream that one day we’re going to be the next Red Bull and we’re going to be rich and famous.
I have huge admiration for these people and, having spent the past 12 months coaching a few of them, there are recurring themes. How can they get from £50k annual sales (unsustainable) to £250k (the beginnings of something)?
Start-ups tend to go for premium sectors but - to borrow airline terminology - go for premium economy, not first or business class. A premium of about 50% over the economy seats is about right, but a 200% premium (where a lot of my clients seem to be) is too much. Deliver a product that’s three times better than the competition at only a 50% premium and you stand a chance.
You can be price competitive with quite a small business. Unit costs of production in food fall quickly as long as you can run a machine for a full day. If you really understand your suppliers’ cost drivers, you can get some spectacular savings, which drives your business model.
To get to £250k sales, most businesses need a big supermarket chain stocking their products. You’re not going to get any scale unless you do, so don’t get snooty about ‘damaging your brand’.
Successful entrepreneurs work 168-hour weeks… and they are really good at running on a shoestring. I met a woman recently who was supplying her brand to Tesco, Waitrose and Sainsbury’s, working out of her Battersea flat without any support and had just filmed and aired a TV ad costing £20k in total.
Once you break the first £250k, there’s a whole new set of challenges. But at least you can move out of the spare room…