If you’re up to your neck in your year-end financials like I am (and still hungover from the holiday sales rush), you’ve probably started to ask yourself questions about your business’ sales forecast in 2021. Of course, if you ask any business advisor, you should have been planning for 2021 in July. Well, such is the life of a small business owner — you get around to things months later.
As I look toward 2021, I’d like to share 5 areas for growth in your food business. I shared a few other strategies this past summer, but after I crunched some numbers and talked a few people, I’ve revised the list below. I also added some analysis tips below to help you make better business decisions as the new year approaches.
You may be selling through these channels already, but some of you might have an epiphany. :) Before we get to the ideas, though, let’s walk through a short process to actually do the analysis for your food business (come on, what else are you doing on New Year’s Day?) This is going to help you identify where to push forward and where to cut back.
How to Quickly Analyze Your Food Business Financials:
I hate to say it, but you’re going to have to get friendly with Microsoft Excel. I know, I know, you don’t want to. But, you should. There are plenty of online classes you can take. Or, you can get a lot of reports from QuickBooks.
The first step is to get a handle on how your sales are split up. Maybe you split it up just like me. Or, you have less sales channels. Either way, assemble that list and attach a sales number to it. Basically, what you’re trying to do here is make mini income statements for each sales channel: Sales, COGS, GPM, OPEX, and NPM. (Holy acronyms!)
Here’s an example (numbers are made up):
This shows you that you’ve got quite the profitable sales channel. I know the numbers are made up, however. This exercise will help you identity the most profitable sales channels. It’s nice to have an inflated sales number, but at the end of the day, did you make any money? For example, we did a show once where we sold $3,600 in product. The cash injection was downright awesome, but we profited $450. For four days worth of work. Oy vey.
To get real, I’ve complied my sales channel percentages for 2016 (you should do this, too). It doesn’t go into six mini income statements because I know you don’t want to read that. But, this exercise will help you see where your sales are coming from. It’s one step-up from having your sales as one number. This is a little more granular.
My Sales Channels Last Year:
- Retail Sales (Direct): 29.72%
- Retail Sales (Distributor): 8.28%
- Online Sales: 18.25%
- Events Sales: 39.09%
- Food Service: 1.88%
- Shipping Income: 3.05%
Note: I won’t get into showing you six income statements.
What do you take from this data?
Well, I see opportunity. I see where time and energy need to be invested. But, I also see where I may not focus (ie. our small distributors). What Green Mountain Mustard needs to do is grow our direct retail presence and support it with a sales strategy that highlights some of the new distribution channels below. I also see growth in food service if we can start to move volume each month (more on that below).
Of note also, our event sales were comprised of a very profitable farmer’s market and 6 other events in the second half of the year. While these events take time and energy, they are great for cash flow. I’m sure you know exactly what I’m talking about.
Anyway, enough about my rambling. Where are you going to grow in 2017? Here’s 5 ideas for you to noodle on.
5 Sales Channels to Grow Your Food Business:
Area #1: Private Label
Private label is where you brand your product (or a slight variation) with another retailer’s packaging. For example, Whole Food’s 365 Everyday brand is private label. Price Chopper’s Market 32 and Central Market brands are private label. And Fresh Market branded goods are private label. See? HUGE accounts doing HUGE volume.
To grow this area of your business, there’s an entire trade show devoted to private label sales. I was once told that you shouldn’t exhibit at this show unless you can produce truckload of product. First off, holy crap. Secondly, this is one heck of way to grow your business if you land even one account at this show.
If you don’t want to make truckloads of product, you can start with your local grocery stores, meat shops and mail-order catalogs. All of which are typically smaller volume and more accessible to people like you and me.
Area #2: Food Service & Hospitality
While I don’t have much experience in this industry, the sheer volume is attractive. The downside in food service, however, is many buyers are price-sensitive. This means you need to come up with a cheap, tasty, bulk product to make it in food service. But, you can sell that product to restaurants, colleges, hospitals, golf courses, hotels, government institutions and more. Make sure you partner with a great distributor that has a sales team and will help push your product. Don’t let them carry you, though. You need to be pounding the pavement here, too. This is a great sales channel if you’re looking for social media content, too!
Area #3: Gifting and Small Sizes
While I’m opposed to making smaller jars of anything because you can’t capitalize on economies of scale, people love small, gifty jars of food because you can package up sampler packs. Watch out for the increased packaging costs, though — make sure to pass them on to the customer. You can sell these small jars to gift shops, catalogs, and they’ll be great for weddings or a boost in holiday sales.
Area #4: Catalogs & Other Online Sellers
Selling through your own website is awesome when you want to build brand awareness, tell your story, and show-off your products. It’s even great to make a little cash. But, one of the best avenues to increasing your online sales is to have other companies do it for you. By that, I mean online resellers like Mouth, ScoutMob, Uncommon Goods, Amazon and others. These sites have spent tons of money building an enormous customer base. Getting your products on their site could be a great way to expose your brand to new customers and increase your online sales. Get that bubble wrap ready!
Area #5: Warehouse Clubs
This one may be tricky if you’re a small producer and do not have a kitchen with 3rd party certification (among other regulatory requirements). If you do, explore warehouse clubs. You’ll move a ton of volume, but at a pretty low margin. Make sure to run all of your numbers twice and consult a business advisor before you get too deep. These deals are typically the make-or-break type that get you other retail connections as well so hang on to your hat!
This list isn’t to say you shouldn’t ignore your stellar accounts. Keep those little local retailers humming away. They will support you with the ebb and flow of landing large accounts. But, so will some of these new sales channels. If you can create consistency in your sales forecast, you’ll build a stable, profitable food business.
For example, let’s take food service. We dabbled in food service this summer, as an experiment. Rather than knock on the doors of individual restaurants, we partnered with a local distributor. This distributor was slow to start, but soon, 5 gallons become 10. 10 gallons became 20. If we had kept going with the experiment (we didn’t quite have the production efficiency setup), 20 could have become 50-100 gallons every month. That’s the consistency and repeatability you need in this business. We made about $7.00 a gallon. At 100 gallons, that’s $700 a month in gross profit and $8,400 annually. For a monthly pick-up, that’s not too bad as a consistent source of income.
How do I do this as a one-person or small company?
I know what you’re thinking. You’re probably yelling at me right now. “Michael, how am I supposed to do all this stuff you say when I have to make product, pick the kids up at daycare, and go home to put dinner on the table?”
We’re all in this together. But, I’m sure you’re pretty resilient. If you want to grow in 2021, you’ll find the time. Some strategies that have helped me in the past:
- Carve out an hour each day
- Write down exactly what you’re going to do to move the needle
- Hire an intern for the semester with defined tasks to take off your plate
- Find a sales freelancer to help you build accounts – pay on commission plus travel time
- Get rid of an unprofitable part of your business that’s a huge time suck (like making your product)
What are your sales strategies in 2021? I’d love to hear them!