In the landscape of North Carolina’s business ecosystem, scaling a food business comes with its unique set of challenges and opportunities. As the founder and former CEO of Nellino’s, a premium pasta sauce company based in NC, I had my fair share of ups and downs. Here are some timeless lessons that I learned over more than a decade in the food industry, particularly in consumer packaged goods.
Capital Intensity and Efficient Operations
Food businesses are inherently capital-intensive, with significant working capital tied up in raw materials and finished goods. Access to strong startup capital, efficient inventory management systems, and robust accounts payable and accounts receivable (AP/AR) functions are vital for sustained growth.
Takeaway: Efficient financial management and strategic capital planning are cornerstones for success in the food industry. Build a relationship with a banker who believes in your vision and who is aligned with your business’s size, industry, and lending needs. Build backup relationships at the bank in the event that individual departs. Establish protocol for timely receipt of payments from customers and request extensions to your own payment terms from your suppliers.
Patient Scaling and Consumer Demand
Food businesses often operate on low gross profit margins (particularly as shown in dollars/cents), and thereby rely on high unit volumes for success. Scaling a food business takes time as building a brand inherently takes time; brands are built on consumer trust. Effective marketing and sales efforts are essential to activate consumer interest, but the product must meet or surpass expectations if consumers are to purchase your product again and again.
Takeaway: Scaling is a gradual process. Understand the importance of brand building and marketing efforts in creating lasting customer connections. Patience is a virtue in achieving sustainable, authentic growth. Marketing should activate and remind; but products must ultimately deliver the value alluded to in your marketing. If your products don’t deliver, you might as well throw the baby out with the bathwater now.
Visual Appeal and Branding Strategies
In line with my points on scaling, consumers make decisions with their eyes, which make strong branding crucial for business-to-consumer (B2C) success in the food industry. Business-to-business (B2B) transactions should also focus highly on branding, but with an emphasis on how the brand communicates its solution to a problem that the business’s client has.
Takeaway: Invest in compelling branding and corresponding marketing strategies. Addressing customer needs is key for B2B success, while visually appealing products enhance customer engagement across the board. Budget accordingly, research who excels in your industry in creating or improving brands, and never waver from protecting your brand.
Utilizing Available Resources
Entrepreneurs need not navigate the business landscape alone. In North Carolina, numerous resources support businesses, including the SBTDC, the North Carolina Department of Agriculture, the Economic Development Partnership of North Carolina, NCSU’s Entrepreneur Initiative for Food, the North Carolina Food Innovation Lab, the Piedmont Food Processing Center, the Dogwood section of the Institute of Food Technologists, private sector experts and co-manufacturers, and various funding channels (lenders, investors, and grant providers). Collaboration is key to success.
Takeaway: Seek assistance before you think you need it. Leverage the diverse support network available, from government agencies to private sector collaborators. Collective resources amplify growth opportunities. Don’t hesitate to ask for referrals when appropriate and with tact. Typically public support services can be engaged through online forms or phone calls.
Building a Solid Legal and Structural Foundation
Ensuring legal and structural soundness is paramount. Establish strong legal documents, SOPs, HR policies, and robust accounting and tax compliance functions. Be prepared for challenges, having insurance products and advisors in place.
Takeaway: A solid legal and structural foundation is non-negotiable. Preparing for the unexpected contributes to long-term resilience and adaptability. Read about LLCs, corporations, operating agreements, capital raising requirements, and the like. Find solid legal resources online and identify attorneys who can assist you in your growth story.
By understanding the nuances of capital management, consumer engagement, branding, collaboration, and structural resilience, food entrepreneurs and established food business executives can navigate the challenging terrain and build businesses poised for enduring success. As they say, the best time to plant a tree is twenty years ago or today. Don’t wait to start improving how you run your enterprise and don’t hesitate to reach out to the SBTDC.
Neal McTighe, PhD
Interim District Director, SBTDC