Author Note: This is the fifth in a series of essays about starting a small food business in Virginia. This article was written in May, 2016. Future essays how the regulatory process turned out and other topics that I have not yet written about are forthcoming. I hope you enjoy the articles and feel free to express opposing and supporting opinions.
The articles that have been written so far are:
1. Starting a Small Business in Virginia
2. Starting a Small Business in Virginia – The Krauts
3. Starting a Small Business in Virginia – The Regulations – Part 1
4. Starting a Small Business in Virginia – The Regulations – Part 2
5. Starting a Small Business in Virginia – The Investment
How naïve I have been! With my head hidden under my hand I am embarrassed to show my readers my initial cost estimate. In January and February, I put together a spreadsheet of my estimated one-time outlays and now in May I shudder at my innocence. Here it is:
In my early career I completed half of an MBA, as well as a Masters in Systems Engineering. I was pretty confident I could get close to the costs with a little effort but I was aware that many new businesses underestimate their initial costs. My estimate of $2050 was woefully inadequate as it turns out.
I divided my expenses up into the following categories: Regulation, Equipment, Groceries, Marketing, and Administrative. The big surprise was the cost of all of my equipment. By the end of April, it had exceeded $2200. The biggest cost was the ceramic fermenting crocks. I used Mason jars to develop my recipes, but needed to be able to make large batches of sauerkraut. The single 5-liter and two 15-liter crocks cost over $500. I really underestimated my costs there. An unexpected cost was the refrigerator we needed to store cabbage and finished sauerkraut. That was also around $500. I had expanded my product line to include ginger cookies and date and nut bars, and so purchased full sized baking sheets and silicone liners. The glass jars in which I will place the kraut cost $1.70 each causing me to rethink how I will package the sauerkraut. I decided to use the glass jars for retail sales and to bring the sauerkraut in bulk containers to the farmers markets so that I can use less expensive plastic containers. However, this decision will lead to more costs as I will need to develop labels for the new containers.
Regulation costs included the cost of the Better Process Control School course ($400), the food safety course I took at the Eastern Shore Community College ($231.50), and the establishment of the company under which I operate ($252.36). Not included is the cost I am incurring ($260) by the requirement to have Virginia Tech test 42 sauerkraut samples. So far, I’ve spent $983.86 on Commonwealth regulatory items. An interesting item here is my original intent to use LegalZoom to set up the LLC. I went through the LegalZoom steps to create a LLC, but the cost was way too high. Instead, I set up the company through a local attorney.
Groceries to get my first cookie, bar, and sauerkraut production batches cost $569.16. This included a 40-pound container of organic virgin coconut oil, a case of Hatch Fire-Roasted Mild Chilies, spices, and the famous 80-pounds of organic cabbage. Although the cabbage costs are not expensive for the sauerkraut, the organic spices and chilies are very expensive.
In February I held a focus-group tasting of the krauts and bars to determine if I should proceed with the company. The tasting was held at the Cape Charles Coffee House and was a lot of fun. Another marketing costs were the cost of a banner for the Cape Charles Farmers Market.
I underestimated my costs by more than 100%! I am embarrassed to report this to my readers, even though there only seem to be a few. For the next few weeks you will find me skulking around town hoping that those I run into have not read this article.