5 pitfalls to avoid when starting a food business

1.! Safety Issues

!!You will have added expenses from your clients if you are not careful in handling the food, and you will also face problems with the health authorities

2.! No copycats
!! You have to innovate in order for you to stand out in the competition. Always think: how can you make an existing product a new product?

5 pitfalls to avoid when starting a food business

3.! Inconsistency and unreliability
!! Good manufacturing practices must be put in place at the production area. It! [is bad business practice if the product changes ] everyday, the costumer might get confused

4.! Dangerous and hazardous workplace

!! Especially if the business has delivery services, safety nets must be put in place to ensure the safety of your people

5.! Pilferage and losing money

!! It is very easy to lose in the food industry, aside from pilferage, you have to make sure that you are actually having a profit from what you are selling
Source: http://www.entrepreneur.com.ph/business-ideas/5-pitfalls-to-avoid-when-startinga-food-business/page/2

Pitfalls in Selecting New Ventures

!!Lack of objective evaluation
!!Many entrepreneurs lack objectivity. !!All ideas should be subject to rigorous study and investigation.

!!No real insight into the market

!!Entrepreneurs must project the life cycle of the new product. !!Timing of product is critical.

!!Inadequate understanding of technical requirements

!!Entrepreneurs need to be thorough in studying a new product. !!Unexpected technical difficulties frequently pose timeconsuming and costly problems.

Pitfalls in Selecting New Ventures

!! Poor financial understanding
!! Entrepreneurs are sometimes ignorant of costs. !! Entrepreneurs are sometimes victims of inadequate research and planning. !! Entrepreneurs quite often underestimate development costs by wide margins.

!! Lack of venture uniqueness

!! new venture should be unique. !! Product differentiation is needed to separate product from competitors.

!! Ignorance of legal issues

!! Business is subject to many legal requirements. !! A safe workplace !! Reliable and safe products and services !! Necessity for trademarks, patents, and copyrights
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Critical Factors for New-Venture Development

Phases in New-Venture Start-ups

!!Prestart-up Phase
!!Begins with an idea for the venture and ends when the doors are opened for business.

!!Start-up Phase
!!Commences with the initiation of sales activity and the delivery of products and services and ends when the business is firmly established and beyond short-term threats to survival.

!!Poststart-up Phase
!!Lasts until the venture is terminated or the surviving organizational entity is no longer controlled by an entrepreneur.
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!!Sales growth

Critical Factors for New-Venture Development

!! What is the growth pattern anticipated for new-venture sales and profits? !! Are sales and profits expected to grow slowly or level off shortly after start-up? !! Are large profits expected at some point with only small or moderate sales growth? !! Are both high sales growth and high profit growth likely? !! Will there be limited initial profits with eventual high-profit growth over a multiyear period?

!!Key questions to ask

Critical Factors for New-Venture Development

!!Venture Classification
!! Lifestyle ventures
!! Independence, autonomy, and control are the primary driving forces. !! Sales and profits are deemed to provide a sufficient and comfortable living for the entrepreneur.

!! Small profitable ventures

!! Financial considerations play a major role. !! Autonomy and ownership control are important factors

!! High-growth ventures
!! Significant sales and profit growth are expected. !! May be possible to attract venture capital money !! May be possible to attract funds raised through public or private placements

Critical Factors for New-Venture Development

!!Product availability
!!Goods or services must be available. !! Lack of product availability can affect the companys image and its bottom line.

!!Customer availability
!!Risk continuum (two extremes)
!! Customers willing to pay cash before delivery !! Venture begun not knowing exactly who will buy the product

!!Two critical considerations

!! How long will it take to determine who the customers are? !! What are the customers buying habits?

Why new ventures fail?

Causes for Failure

!!Product/Market Problems
!! Poor timing premature entry, too soon or too late !! Product design problems !! Inappropriate distribution strategy geared towards product or customer !! Unclear business definition !! Overreliance on one customer - diversification

!!Financial Difficulties
!! Initial undercapitalization 90% !! Assuming debt too early too soon or too large,debt servicing problems
!! Undercapitalization, unforeseen operating expenses, excessive investments in fixed assets, and related financial difficulties

!! Venture capital relationship problems differing goals, mission, motivation

Causes for Failure

!!Managerial Problems
!!Concept of a team approach
!! Nepotism !! Founders !! Incompetent support professionals

!!Human resource problems

!! deceit, verbal agreements, lawsuits

First Year Problems

Internal and External Problems Experienced By Entrepreneurs

!!Problem: Difficulty in breaking into the predominant coffee culture and challenging the common perception that chocolate is fattening and indulgent. !!Solution:

!!Problem: Initially drew no more than 100 customers a day and just a few thousand pesos in sales. !!Solution: Grassroots marketing strategies giving free medicine, holding generic awareness talks, and providing monthly medical services to surrounding communities.

!! Problem: Balikbayan Gears first product was hardly original, she says. It was simply a poly-canvas cover for standard cardboard boxes, but I redesigned and repackaged it as a high-end travel accessory, and priced it at P790 which later increased to P1,040. !! Solution: Valdez-Fong then worked on getting her first customer, Rustans Corp., which catered to the upscale market she wanted to penetrate. Armed with only a few illustrations and no product samples, Valdez-Fong was able to convince the Rustans retail buyer to order 36 pieces during their very first meeting. !! Balikbayan Gears unique positioning was an instant hit. Rustans ordered another batch of 90 pieces a week later, and, in just three months time, was already carrying the product in all its department stores. Three other major outlets SM Department Store, Ace Hardware, and True Valuefollowed suit about a year later.

Evaluation Process

The Evaluation Process

!!The Feasibility Criteria Approach
!!Involves the use of a criteria selection list from which entrepreneurs can gain insights into the viability of their venture.

!!Comprehensive Feasibility Approach

!!Incorporates external factors in addition to those included in the criteria questions.

Feasibility Criteria Approach

!!Assessing the viability of a venture:
!! Is it proprietary? patents, !! Are the initial production costs realistic? estimates of cost !! Are the initial marketing costs realistic? marketing strategy !! Does the product have potential for very high margins? - funding is difficult with low margins !! Is the time required to get to market and to reach the break-even point realistic? faster is better

Feasibility Criteria Approach

!!Assessing the viability of a venture:
!! Is the potential market large? 5 years !! Is the product the first of a growing family? returns on 1st product !! Does an initial customer exist?!! Are the development costs and calendar times realistic? !! Is this a growing industry? !! Can the product and the need for it be understood by the financial community?

Comprehensive Feasibility Approache

Technical Feasibility Analysis

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Market Feasibility Analysis

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Financial Feasibility Analysis

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Organizational Capabilities Analysis

Competitive Analysis

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Lecture Done