Typical “self-made” challenges made by many food start-ups that can be easily avoided

I saw these unnecessary challenges repeatedly happening at many small and little experienced food start-ups and share them here together with some ways how you can avoid them.

Starting with too little margin and not protecting it sufficiently in B2B and retail negotiations without a clear expansion strategy and sufficient funding that allow to run on losses
• Start with a proper financial plan considering all costs and sufficient margins for your scenario
• Use a fixed conditions model to only allow discounts for a value in return
• Correct addition of the margin on the product costs so that it is e.g. 35% of the sales price and not of the product costs: Sales price = Product costs / (1-Margin)

Letting the daily operations run out-of-control
• “Stay on-top of the wave” by keeping up the regular maintenance tasks (in the same way you’re not going to cut trees efficiently with a blunt saw)
• Prioritize the important tasks and not only the urgent ones
• Get your operations ready for your sales targets

Changing main systems and structures too often
• Think ahead and establish a system that lasts for the next years (once you’re building a professional setup, because it’s time to scale up)
• Stay within the standard system instead of creating individual solutions
• Finalize one system change before starting the next one

Not keeping track of profitability – also for individual projects
• Keep track of unit economics
• Make project budget / profitability calculations
• Create and track gross margin objectives instead of just revenue in order to work on profitability

Hiring too many employees to work on inefficient processes and thus creating more chaos instead of creating automized solutions and reducing complexity
• Sketch a profitable and efficient target organization for your growth stage
• Constantly research, understand and leverage automatization possibilities
• Consider the extra work and complexity for additional employees (onboarding, HR, communications, leadership, etc.)

Not forecasting demand (based on past data and future plans considering market data)
• Use an appropriate system for the current situation of the company
• Communicate and check additional demands as soon as possible
• Consider fluctuations, especially in starting retail sales and promotional activities

Spreading important product and sales data across different locations
• Use a single-source-of-truth-system for all sales-related data (an ERP system once you’re ready for it)
• Keep all product data in one place so all employees can find it quickly

I gathered many learnings and recommendations in an “operations playbook for food start-ups”, which you can download on my consulting website.

❓What are typical, but easily avoidable mistakes in food start-ups that you have seen? And how would you do it better?