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How to Start a Food Business

Before you get cooking, here are some tips from folks who built their business from scratch

AARP Kerry Hannon: 5 Things to Know Before Entering the Food Business

Portrait of Jane Lyons, 58, in front of her food truck on E St. SW in Washington, D.C. — Photo by Lexey Swall/GRAIN

En español | There's something appetizing about starting a food business. When friends and family urge you to sell your mouthwatering cupcakes or finger-licking barbecue sauce, it's tempting to try.

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Lots of people do. Sales of specialty foods, many of them initially produced by home-based businesses, are up nearly 20 percent in the last three years, according to the National Association for the Specialty Food Trade.

But no matter how passionate you are about your product, you need a recipe for success. There's nothing simple about running a food business. You need a business plan and a distribution plan. You need to know state and federal food rules, licensing requirements and fees. Ignore these and you may well join the ranks of the many home-based businesses that fail.

In a series of interviews, AARP reached out to people who had created successful food businesses for insights into what an aspiring food entrepreneur should know before debuting the dream. All were women, reflecting a national trend: Between 1997 and 2012, the number of woman-owned firms increased by more than 50 percent, a rate 1.5 times the national average, according to the American Express OPEN Forum, an online meeting place for entrepreneurs. On average, 550 new woman-founded businesses opened up each day.

Who: Jane Lyons, 58, was a senior merchandising executive at Bloomingdale's. Her business partner is Leah Perez, 34, a jewelry maker.

What: Stix food truck sells grilled marinated flank steak, chicken, vegetables, pineapple and pears on 10-inch skewers. The truck is an old U.S. Postal Service vehicle.

Where: Washington, D.C.

Started: 2010

AARP: What's your advice for someone 50-plus who wants to start a food business?

JL: 1. You must have a solid business plan. If the business side of the food industry isn't your strong point, hire a pro.

2. The start-up costs will always be more than you think. Add 10 percent.

3. The entire process will be much more successful if you have a real passion and desire to make it work. Really think about this question: "Is this what I want to do?"

AARP: What's the best piece of advice you ever received?

JL: "Always pay yourself first." You can't go without a salary while you're working these kinds of hours. This advice I took to heart, and it's one rule I've always followed.

AARP: What's one thing you know today that you wish you knew when you started out?

JL: I was shocked by how physically demanding a food truck is. When we finish a session on the street, the truck has to be cleaned, and we have to purchase and prep the food for the next day. There are also daily finances, bookkeeping, scheduling and catering jobs to be booked. Honestly evaluate your energy and the time you are willing to commit to make your business a success.

AARP: What was your best day at work?

JL: My very best day was when a woman wrote us a very heartfelt letter saying how much she loved our food, the fact it was healthy and delicious, and how happy it made her to see two women succeed. She will never know how much that meant to me that she took the time to tell us that.

AARP: The worst?

JL: It was 102 degrees outside. Inside our tin box, as we like to call it, our instant thermometer read 120. We looked out on the deserted streets and said, "What the heck are we doing?"

AARP: What's a pay range someone starting a food truck might expect?

JL: Depending on your loan repayment plan, the salary range for the first few years is $45,000 to $80,000.

Who: Sue Sullivan, 51, was a caterer.

What: Hot Squeeze makes and sells all-natural, fat-free sauces for dipping, grilling and marinating. Its signature sauce: Sweet Heat Chipotle.

Where: Atlanta

Started: 2007

AARP: What are your top tips for someone 50-plus who wants to start a food business?

SS: 1. Everyone has a great family barbecue sauce, pickle recipe, great granola and special cake that everyone raves about. But that's not enough: You need to understand the competition out there and be able to differentiate yourself.

2. Research the business. Talk to folks who are already in it (I have found that everyone is extremely open and willing to share knowledge in this business). You can find these folks selling at farmers markets and offering samples in stores.

3. Don't spend your retirement money.

AARP: What's the best piece of advice you ever received?

SS: That anyone can sell anything. You just have to have a good story and be passionate about your product.

AARP: What's one thing you know today that you wish you'd known when you started out?

SS: I wish I really understood the profit margins and cost structure. It is important to know just how much everything costs and what your expenses will be.

AARP: What was your best day at work?

SS: When I received a phone call from the Whole Foods buyer for the mid-Atlantic telling me she wanted my product in all of her stores. Up until that point I had produced all of these bottles of sauce and I didn't know if I'd have to give them all away!

AARP: The worst?

SS: Realizing that by expanding so quickly and without a strategic plan, I was really losing money.

AARP: What is a pay range someone might expect?

SS: Honestly, don't expect to really turn a profit for at least three to five years. I am saying this about a food business, not a hobby. If the route you want to take is to sell your cakes at a farmers market every weekend, you will have cash in your pocket immediately. If you want to build a food company, it takes time and money.

Who: Wendy Volhard, 72, a dog trainer and author, is a former reporter for the Wall Street Journal.

What: Volhard Dog Nutrition makes and sells Wendy Volhard Natural Diet Foundation 2, a natural dehydrated dog food.

Where: Culpeper, Va.

Started: 2010

AARP: What's your advice for someone 50-plus who wants to start a food business?

WV: 1. Find something you really believe in and follow your instincts and ethics.

2. You need a good business plan; discuss it with an accountant and a lawyer. In my case, it was an intellectual rights lawyer, since I am dealing in recipes. Find out the exact costs of making the product. Also work out the overhead and profit margin before you start.

3. Rarely can you do this alone. Look at your own strengths and weaknesses and know your limitations. Hire people you can trust, and employ them in the areas in which you're weak. Pay your employees well, so they have a vested interest in growth of the business.

AARP: What's the best piece of advice you ever received?

WV: Always be in charge of the finances.

AARP: What's one thing you know today that you wish you knew when you started out?

WV: I wish I had been better at working out production cycles. That has been the biggest challenge. Leaving enough time to make sure that you have enough bags of food on hand right where and when you need it. You can't have any down time, which would mean product being put on back order — something that, when feeding dogs, you cannot do.

AARP: What was your best day at work?

WV: Going over the first year's figures to see if our adventure was a viable proposition and finding it was.

AARP: The worst?

WV: When I realized that I underestimated the demand for the product. Our products take a month to make from beginning to end — and learning when to order the ingredients, so there is a constant supply, was a learning curve.

AARP: What is a pay range someone might expect?

WV: $50,000 to $100,000 annually to start, depending how quickly you grow.

Who: Eleanor Harren, 80

What: Aunt Aggie De's Pralines makes and sells all-natural candies.

Where: Sinton, Texas

Start: 1987

AARP: What's your advice for someone 50-plus who wants to start a food business?

EH: 1. Be sure you have a great product before you begin. I had catered for several years. No matter what kind of event I was catering — be it a fiesta or board meeting or wedding - the customers always insisted I serve my pralines. That's how I knew I had a winner.

2. Don't compromise on quality. There will always be people who try to talk you into increasing your profit margin by compromising on quality — adding preservatives, in my case. They aren't good for our bodies, and they aren't good for your product.

3. Don't go into debt. I began my company with $50 in ingredients and at first took pralines to only three stores. After age 50, we don't have the luxury of losing our savings because there may not be time to rebuild them. If you try to grow too quickly — borrowing for expansion — you may get caught without anything in the end.

AARP: What's one thing you know today that you wish you knew when you started out?

EH: I wish I had known more about technology and how important it would be. When I began, I didn't know how to use a computer. Even today, I wish I were more capable of using technology.

AARP: What was your best day at work?

EH: The most exciting day was when we got our first large order from Monterrey House, a wonderful chain of 30 Mexican restaurants. It needed to be filled the following Monday. That was the only Sunday we ever worked.

AARP: The worst?

EH: The worst days are when you have to let employees go because they just aren't doing their job as they should. This is the most painful part of running a business.

AARP: What is a pay range someone might expect?

EH: As owner, you should always pay yourself a reasonable salary so it's worth the long hours and hard work. With that said, the rest of the profit needs to go back into the business so it can grow.

Kerry Hannon is the author of What’s Next? Follow Your Passion and Find Your Dream Job.

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