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How To Make Money In The Kitchen Products Business
Continued...

In this business, like any other, you must keep records to tell how you are doing, learn from your experience and keep out of trouble with the IRS. As long as you are a one person (or family) business there need not be complex records keeping. Keep a notebook by the phone and systematically write down all incoming orders -- and "suspense" them with a circle or box that you check off as the orders are filled. This lets you tell at a glance which orders are still pending. Use the same notebook to write down any information that could help your daily or long-term activities.

DO NOT TRUST THEM TO MEMORY. Those "I won't forgets" soon get lost in the confusion of a new business. This is a LESSON that many beginners PAY DEARLY to learn. If you have a tax person, all you need is an accurate (and complete) record of what you spend for the business and what you take in form it.

Many single proprietorship use a simple single-entry ledger. Put down all business transactions that involve money in Chronological (by date) order: date, name or company, action, amount. If the money is paid out, put the amount in a column marked OUT or EXPENSES; if it came in, put in the other (IN or INCOME) column. At the end of each month, total them both to see how you are doing. This record, along with ALL RECEIPTS and checks will be the meat of what your tax person will need to make out your taxes.

Kitchen products can, but need not remain a small operation. While it is easy to stay small (raise prices when business gets "too good," cut back on advertising, etc.) it is also quite possible to "graduate" to supplying gourmet dishes to restaurants or delicatessens or package your products for supermarket sales. Always keep your eyes open and your imagination alive. Be on the
lookout for that special need that YOU can fill!

A couple of possible problem areas are licenses and insurance. When you process and sell any type of food, you may come under any number of state or local regulations. Some of these will prevent you from making doughnuts in your kitchen and selling them to the local market. Admittedly, sometimes these rules are more to prevent competition than protect the public, but they must be obeyed just the same. Most rules are quite logical -- if you make sandwiches, your kitchen should be open to health inspections from time to time, and your area and procedures should meet minimum standards. If you run up against "one of those" rules, consider alternatives. For example, if it is illegal to make doughnuts in your kitchen, perhaps it is legal to open a snack shop or rent a corner of local cafe for your operation.

The second area to watch is insurance. Ironically, passing a health inspection is not an absolute guarantee that someone won't sue you. If you wholesale AND retail, it is very important to maintain your prices. If you cut prices to retail customers your wholesale accounts will feel betrayed. The best way to handle this situation is to give your wholesale accounts "suggested retail" prices -- which are actually your own retail prices. Of course, you can't control what they charge, but they can't  accuse you of underselling them if you sell at your own "advertised" prices.

To price your products, you should scientifically compute the exact cost of all the ingredients, containers, wrappers, shipping or delivery, plus an estimate of the utilities (gas, electricity). Then, add your labor (what it would cost to hire someone to do the job). Add these and double the result for your wholesale price. This formula will give you a quick and easy way to price your foods, and allow for some spoilage and waste. Now, add another 66.7 percent to get the "suggested retail" price (this equates to a 40% profit margin for your retailers).

For example, if a loaf of your homemade rye bread costs fifty cents to make (counting all costs), your wholesale price would be $1.00 (double). To add 66.7 percent, punch in 1.00 on your pocket adding machine then "+," then 66.7, then "percentage." This will give you $1.6667, which rounded off to $1.67. Note that 40% off that (1.67 - 40% is 1.002(rounded off to a dollar).

If you wanted to give your retailers a 40 percent markup (which is not the same as a 40% profit margin), you add 40% to the wholesale price (1.00 plus 40%) you would get a suggested retail price of$1.40 per loaf. The more markup you give your retailers, the more incentive they will have to push your products, and if most of your business is wholesale, consider the bigger markup. Your retailers can always lower the price. For clarification, MARKUP is the amount the dealer adds to his wholesale cost.

An item that costs him one dollar and he sells for 41.25 is marked up 25 percent. PROFIT MARGIN is the percentage of the sale price that is gross
profit. If the item costs him a dollar and he sells for $1.25, the 25 cents is only 20 per cent (5 quarters in $1.25, each = 1/5 of 20% of the total) of the total sales price (profit divided by sales price, or .25 divided by 1.25) -- or, a 20% profit margin.

To set up an area wholesale business, call on prospective retailers, let them know of your plans and ask for their suggestions. If possible leave a few samples with them, and ask for an order. Do this early, so if any needed production adjustments can be implemented before your procedures are finalized. tell the prospective retailers what you have too offer, what it costs, how much profit then makes, and when you deliver. It is extremely important that you do exactly what you say you will. If you say you deliver on Monday's make it a point to drop by those who have not yet ordered -- just to show them they can rely on you.

 If your products could be blamed for something that would involve a lawsuit, consider some general liability insurance. Check with (more than one) commercial insurance agents to find out how you can be protected against such an eventually. This is an area where conferring with others in similar businesses is a particularly good idea.

BUSINESS SOURCES

FROSTY, Box 8014, Blaine,WA 92830. Offers a booklet showing how to set up an ice cream making business - $12.
OZARK COOPERATIVE WAREHOUSE, Box 30, Fayettville, AR 72702.
Consumer owned warehouse that sells mostly to privately owned food buying clubs; over 1,000 items; Catalog $4.78.
FOOD SERVICE MARKETING, 2132 Forden Ave.,Madison, WI 53784.
Monthly trade journal for the food service industry.
SO-GOOD, INC.,Union, IL 60180. 815/923-2144. Supplies local distributors with specialty foods (bar-B-Sauces, etc.) for restaurants, church groups, etc. Free info.
OLSON PUBLICATIONS, INC., Box 1208, Woodstock, GA 30188, 404/928-8994. Publishes monthly FOOD PEOPLE for retail food industry (not restaurants).
HBJ PUBLICATIONS, INC., 131 W. 1st St.,Duluth, MN 55802,
218/723-9343. Publishes SNACK FOOD, monthly trade magazine for
manufacturers and distributors.
WHOLE FOODS COMMUNICATIONS, INC., 195 Main St.,Metuchen, NJ
08840. Publishes WHOLE FOODS, "Largest circulation in the natural food industry," monthly for health food dealers.
EDWARD HAMILTON BOOKSELLER, Falls Village, CT 06031-0358. Discount reference books, including cookbooks.
DISCOUNT BOOKS, INC.,427 Ferry St.,Newark, NJ 07105. Discount and close-out books, including cookbooks.
BARNS & NOBLE, 126 Fifth Ave.,New York, NY 11011. Discount books, clip art, stencils, etc.
QUILL CORPORATION, 100 Schelter Rd.,Lincolnshire, IL 60917-4700, 312/634-4800. Office supplies.
NEBS, 500 Main St.,Groton, MA 04171, 800/225-6380. Office supplies.
SWEDCO, Box 29, Mooresville, NC 28115. 3 line rubber stamps - $3; business cards - $13 per thousand.
ZPS, Box 581, Libertyville, IL 60048-2556. Business cards (raised print - $11.50 per K) and letterhead stationery. Will print your copy ready logo or design, even whole card.
WALTER DRAKE, 4119 Drake Bldg.,Colorado Springs, CO 80940. Short
run business cards ($250 - $3), stationery, etc.

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