A member of a prominent family who has bought and sold many companies over the years once told me that there are only two times that you should sell a business. The first is when you are not really trying, and someone comes to you with an offer to good to refuse. The second Continue reading
What drives valuation in an early stage, branded food company?
What does an early stage investor look for in a growing food company when they attempt to put a value on a potential investment? Many food entrepreneurs think it is the rate of growth in sales that drives valuation. That is partially true but does not tell the whole story. I have found the following to be the key factors in valuing early stage high growth food companies.
Managing your supply chain as your food company grows from early stage to mid-size is both complicated and a great opportunity. As your volume increases you can reduce your product costs as much as 30%. Purchasing raw materials at higher volumes along with production economies of scale drive this reduction. However, if not managed well your supply can kill your business quickly. Running short on raw materials, quality issues in finished products, and uncontrolled costs from out of code product are some of the many issues that can cripple a growing early stage food company. These issues can come up whether you use a co-packer or make the product in-house When planning your growing supply chain, you should consider the following:
As a food company begins scaling the organization required to run it changes dramatically. The external factors driving this are many. The most important ones are:
- Selling to larger more complicated customers
- Distribution going from local to regional and national
- Greater regulatory scrutiny
- More partners and increased financial reporting requirements
- Multiple production locations
- Aggressive growth projections
So, you have built your new food or beverage company from a start-up to over $1,000,000 in annual sales, with good margins and strong same-store sales. You have investors looking to finance your growth to the next level. You feel you are over the hump and on your way to long-term success.
However, you have just entered the most complicated stage of building a food company. That is scaling from the start-up phase to a fully staffed and well organized small business. This phase in the build out of your organization has led to the stagnation or death of many companies. The following are the most critical areas of concern as you build a food company from very small to mid-size and a few of the major tasks in each area:
Running a frozen specialty co-packing operation for nearly 30 years has given me unique insight into what makes up a healthy partnership between Co-Packer and customer. At Little Lady Foods we introduced over 100 new product lines for customers such as Nestle, Kellogg’s, Newman’s Own, Walmart, and numerous early-stage companies. Continue reading
For many growing food companies that process their own products, deciding when and how to expand processing capacity are among the most critical decisions they will ever make. Wait too long and risk missing growth opportunities or causing service issues with current customers. Move too quickly and without adequate planning and put the entire company at risk. Continue reading
Venture Capital money can be very enticing – a tool to help founders quickly scale and achieve their wildest dreams – but it can also limit founder’s choices and increase risk.
Read more on article from Crunch Network: Venture Capital is a hell of a drug
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What does the future hold for our food? Will consumer demand for “real food” continue to grow and will suppliers be able to fill the demand? Will synthetic foods continue to fill gaps amid current criticism? The quick answer: Yes! There are tremendous growth opportunities in both areas. Continue reading