Nearly every state in the country now has cottage food laws on the books. These laws allow people to produce and sell certain “nonhazardous” food items made in their own home kitchens. Cottage food laws vary a lot by state — for a streamlined explanation of the cottage food laws in your state, visit Forrager. No matter where you live, answer the following four questions before you jump in.
What’s on the menu? Your state’s legislation will specifically outline the nonhazardous food items a cottage food business is allowed to sell. Generally, this list includes high-acid, canned food products (preserves, pickles and salsas) and low-moisture baked goods that don’t require refrigeration. Sometimes, the legislation will specifically itemize what you can and can’t sell, and it may even include candy or dry mixes. Focus on what you can legally make, and don’t waste time, energy and money spinning your wheels on what you can’t. Of course, you can always dedicate yourself to potentially changing your state’s laws to better meet your aspirations; many more-liberal laws came about because of such active citizenship.
Who are your customers? All cottage food laws allow direct sales to the public, and, in more than a dozen states, you can also sell products through indirect or wholesale channels, such as restaurants, specialty food shops and local cooperatives. You can (and should!) provide free samples of your products at a farmers market or another legal venue unless specifically prohibited at that site.
Where is your “store”? Each state’s cottage food laws dictate where you can sell your products. Farmers markets and special community events are among the most common venues. However, even if your state’s laws permit sales at a farmers market, that doesn’t mean the market must allow you to sell there. Some farmers markets have bylaws or rules that exclude cottage food enterprises. The states with the most venue options also usually allow direct orders, at-home pickups and mail orders.
Is there a sales limit? Most states have an annual gross sales cap on the products a cottage food business can sell. This refers to the maximum gross sales your cottage food operation can reach each year without upgrading to a commercial space — this number can range from $5,000 to $45,000. Some states have no sales cap at all but might have more requirements for regulatory oversight and inspection.
After you’ve answered these questions and you understand your state’s cottage food laws, you’ll need to figure out whether the edible item you have in mind is worth selling. If people are clamoring for your crusty artisan bread or sweet strawberry jam, then you’re off to a great start.
The 7 ‘P’s of Marketing a Cottage Food Business
The most effective marketing efforts are those that combine the following seven P’s into one cohesive and clear plan: Products, Price, Place, Promotion, People, Partnerships and Purpose. Making a great-tasting product is only the first step.
Products. Begin by testing your favorite recipes. Besides taste and flavor, you’ll want consistency. Determine what makes your products stand out from others. If you use homegrown produce, a treasured family recipe, or ingredients that cater to those with allergies or food sensitivities, be sure to highlight those features.
Your state’s cottage food laws will dictate exactly what must be on the label of any canned products. In addition to a list of ingredients (in order of amount used by ingredient weight) and a processing date, most states require a sentence with your name and contact information, plus a statement similar to “Manufactured in a home kitchen.” Always choose packaging that will ensure the product’s safety and a compelling presentation. Remember, we eat with our eyes first.
Price. Setting a price for your products can involve researching your competition, establishing market value, and calculating a cost-input value that captures both your ingredients and time. Pricing is often a combination of these three approaches.
Place. Clearly defined by your state’s cottage food laws, the locations where you can sell your products usually include farmers markets, community events and other venues that will allow you to sell directly to customers. Only select states permit indirect sales or wholesale distribution.
Promotion. Your target market is the potential customer base you want to reach, serve and satisfy with your products. This market is defined by demographics, such as age or geography, as well as psychographics, such as attitudes, beliefs and values. Your products will occupy a niche in the larger market, so you’ll want to “position” your products for the most visibility.
You don’t need to empty the bank to reach your target market. Depending on your skill set, comfort with a computer, time and budget, you can take advantage of many free (or nearly free) promotional opportunities. Most cottage food operations quickly set up an attractive website to share their stories. You can build one free with Wix, Weebly or WordPress. Social media platforms also provide free avenues for you to reach potential customers and build ongoing relationships.
People, Partnerships and Purpose. Customer referrals and word-of-mouth endorsements are the most powerful forms of promotion, which is why many food entrepreneurs follow the “80/20 rule.” Successful businesses recognize that 80 percent of their business comes from 20 percent of their customers, whom they identify and then keep happy and engaged.
You can magnify partnerships, especially if you’re able to connect with like-minded organizations. If you sell fresh bread, connect with a jam-maker at the market — or vice versa. Collaboration can go a long way toward boosting sales and caring for customers.
Finally, let your passion for your products sing through everything you say and do. Your sense of purpose should be part of your inspiring story, and it will help your customers connect a face with the food items they savor.
Everything you need to get started is probably in your kitchen right now, and it’s likely you already have a food product that people are clamoring to buy. Joining the cottage food movement represents more than an enjoyable way to secure a new income source. You’ll also be boosting the local food movement in your community. Best of all, thanks to cottage food laws, “Fresh from the Farm” and “Homemade” on the label can mean exactly that.
A Successful Home-Based Food Business: The Happy Tomato
It’s a simple claim found on the Happy Tomato label — “It’s the sauce that makes a difference.” In 2012, owner Liz James set out to launch a home-based food business that could help families connect around their dinner tables over simple, quick and healthful meals.
Liz lucked out by living in Virginia, a state that has flexible cottage food laws for small-scale startups and also offers a “home food processor” license, which allows home cooks to function like a commercial operation. While this license involves many steps, inspections and fees, it enabled Liz to reach her goal of selling wholesale relatively quickly and efficiently.
Liz’s story exemplifies how deep a role local resources and support can play in championing a startup’s success. “Hands down, I wouldn’t be here today without the support of my local community,” Liz says. Various nonprofit groups provided business-plan workshops and marketing advice, and a $2,500 Kiva Zip loan provided partial funding, which Liz used to purchase canning jars, cooking supplies, and a suitable gas range for heating stockpots. Kiva Zip is a project of Kiva (www.Kiva.org), in which the general public serves as lenders and collectively makes micro-finance loans directly to borrowers via the Web.
While Liz sold directly to customers at a farmers market, she simultaneously built a wholesale business selling to area retailers, including her local Whole Foods Market. By 2014, she had transitioned exclusively to wholesale and was focusing her marketing efforts on in-store demonstrations and sampling. “I find the biggest bang for my time is when I do in-store sampling. Shoppers are much more likely to walk away with jars of my product,” Liz says.
Thanks to loyal wholesale accounts, the Happy Tomato is gaining ground on Liz’s goal of producing 135 to 150 cases (with 12 units per case) weekly, which would enable her to scale up to a commercial facility and hire more help. Liz held several part-time jobs as she launched and grew the Happy Tomato, and is slowly cutting down her hours at those positions as her profits grow. “For the first time in my life, I’m earning income while simultaneously doing something I truly believe in: providing a reason and a means for getting families around the dinner table again,” Liz says. “You can’t beat that feeling of satisfaction at the end of the day.”
For more information about cottage food enterprises, including valuable advice about bookkeeping basics, kitchen organization, legal structure for beginning businesses and more, purchase a copy of the authors’ book Homemade for Sale.
Lisa Kivirist and John Ivanko are co-authors of Homemade for Sale, Farmstead Chef, Rural Renaissance and ECOpreneuring. They operate a cottage food enterprise from their home kitchen and are the owners of the solar- and wind-powered, award-winning Inn Serendipity Bed & Breakfast in Browntown, Wisconsin.
