So you’ve been putting together these incredibly tasty and beautiful edibles in your kitchen and sharing them with friends, family, co-workers or others for fun–and maybe someone gives you a monetary token of appreciation for your effort. But you’d like to legitimately make some “dough” from your kitchen creations. Could you–should you–turn it into a business?
AB1616, California’s Homemade Food Act, was developed to feed that entrepreneurial spirit and give people a way to start and grow a business from their home, thus avoiding many of the overhead expenses of starting up! With a little forethought and planning, you CAN do it!
First and most importantly, you need to know a) Are my products on the list of approved foods, and b) Will local zoning laws allow a cottage food business at my residence? Then you are ready to ask yourself some real questions about whether you want a hobby or a business.
1. Do you have the money to start?
Starting a business is going to entail certain upfront costs. With the Homemade Food Act come some fundamental regulations and requirements which were established to protect the public from contaminated food. A food processor’s course (lasting not more than four hours) will be required and the permits themselves (A or B) also will have fees which San Diego County is still deciding. And, if you are going to have a business, most areas will require a business license (sometimes called a tax certificate). The advantage though, is that businesses are allowed to deduct expenses from their gross revenue so if done properly, your business should benefit you in several ways.
Some costs to plan for:
- Filing fee for San Diego Fictitious business name $42 (+$5 for each additional business name of person)
- Local business license (and possibly a Home Occupancy permit, which is often included in the license fee.) Costs range from $25-$50 annually
- Permit A or Permit B ($142/year or $284/year, respectively)
- Cost of course (see our post “Best Value, Least Risk CFO Training”)
- Cost of ingredients
- Cost of labels and packaging
- Cost of selling
*If you plan to sell at San Diego Farmer’s Markets or community events, you will need a Temporary Food Facility permit from the San Diego Department of Environmental Health. For multiple locations or dates, the current fee is $250 per year.
If you will be delivering your items, determine if you have the funds to get your product to the markets.
Will you be doing online sales? You may need to set up some sort of website so people can find you to place orders. One easy, free way to do this is through Etsy, an online marketplace for homemade items. Remember though, under CA CFO laws, you cannot SHIP your product. It must be delivered or picked up.
Liability Insurance. While not an absolute necessity, this is always a good idea for your own protection when producing an edible product. Product liability insurance protects you financially from lawsuits arising from any harm caused by your product. It is not very expensive (especially in comparison to its value) and highly recommended by Cottage Foods Sandie. Some farmer’s markets will require you to show evidence of liability coverage before you can sell at their event. Get several quotes to find the coverage that suits you best.
2. Do you have the time and space needed?
AB1616 includes some specific instructions and restrictions re. food preparation, packaging and handling. For instance, when you are preparing or packaging your product, no children are permitted. Also, no pets are allowed in the kitchen or preparation area. Will you have the time you need to prepare, package, store and clean up your food without children or pets needing to get in the room? Can you separate your cottage food product preparation from family meal prep, clothes washing, or other household chores and activities? Are you or other members of the household who smoke willing to give that up during food handling and packaging? Is there an insect and rodent-free place in your residence–not outside, or in a garage, or in a separate building–where you can store your ingredients and final product without worry? Cottage Food Sandie knows it’s disheartening to spend hours making hundreds of dollars worth of food product and have Chewy the Dog eat it all while you are out at the post office!
3. Do you have the commitment?
The most important factor is having the right mindset to move from hobby to business. Making the product may be great fun for you, but there is much more to making a profit from it! Do you have a goal for your undertaking? Can you establish a schedule for yourself and stick to it? Are you willing to set aside part of your life, your home, your resources, etc. to promote your product and business? Undoubtedly you will have to learn and grow in areas outside of your “comfort zone.” Those areas might be budgeting, planning, money management, marketing, sales, time management, or others. But, if you are willing to learn and committed to developing a profitable business, there are many resources available. You CAN build a personally rewarding and profitable enterprise “from scratch.” Cottage Food Sandie and others are here to help you succeed!