Over the last 14 years I have had hundreds of budding Entrepreneurs contact me to find out all the costs and funding needed to make their food or drink idea a reality. On closer scrutiny, they explain that they are putting together a business plan to raise money to develop their idea, but sadly not one of them has ever come back with the funds and started their project!
I have successfully raised money over the years and built up and sold businesses, so I have a very good idea what investors are looking for. Unless you are getting money from close family you need to have something tangible to show a potential investor. More importantly, you need to show that you have ‘skin in the game’ because they are not going to take 100% of the risk and pay you a salary, based on a basic idea that may or may not work.
All of this said, since Covid I have seen some very basic brands raise far more money than they were looking for or needed. This is because Food & Drink seemed like a recession free commodity, but the secret is ‘they have a tangible brand and invested their own money’ to get to where they are. Investors can see the brand and taste it to make their own decision as a consumer, as well as an investor.
If you want to get into this industry you need to have your own funds to develop a proof of concept, not a few samples made up in the kitchen with some designs on your laptop. This industry is VERY competitive and even the best brands fail, so you need to have something that is innovative and commercially producible. This means involving a professional recipe developer that can take your idea and adapt it to be mass produced. Next you need to identify a target audience and know where and when they will buy your product. Once this is understood, you need a professional company to adapt your branding and messaging to that audience. Finally, you must look for a co-packer that will make small volumes and upscale as you do. This is the only way you will know what the cost is, as it is impossible to develop a business plan without know what your product cost will be both initially and long term. Volume speaks very loudly in this industry and it’s important to remember that the early costs will be very high but that these will reduce dramatically
I can’t emphasize enough just how important research is when getting into this industry. Learning who your competition is, where they are selling, and why consumers will switch to your brand instead of theirs, is all key information to know. If you are unique without any competition, you must decide how you will convey this fact to your consumers and make it a stand out aspect of your brand. As education is the most expensive part of this industry, usually buyers need to remove brands to put yours in so you must research which ones you think they will be. These are all questions that you may come across when building a brand in food & drink.
The final words that I would like to share is to not waste time trying to develop a business plan to raise money when you don’t have anything to raise money for. You need to have your own money to invest and show proof of concept and something that is tangible to an investor. If you do this, then you have a strong chance of getting backing as it seems investors like food and drink.