You’ve only got to turn on your TV (or just browse the TV listings) these days to see how popular ‘cooking’ is. Seems we all either want to be, or see ourselves as chefs. Naturally for many of us, when we then consider starting a business, the idea of running a restaurant is near the top of the list of our business ideas.
The trouble is restaurants are expensive to set-up. So those of us without a lot of spare cash can’t and those of us that do have the cash probably shouldn’t, as restaurants are very hard to make profitable and the majority fail. Much as I’d love to start a restaurant I also know I’ll never do so as they start-up costs are too high and I dislike businesses with high fixed overheads. When it comes to capital investment decisions I like a small investment with a large, positive net present value. So what’s an aspiring chef cum wannabe entrepreneur to do?
I’d suggest setting up a catering business. You get to create the culinary delight, but have low start-up costs and low to no fixed overheads. On top of that you’re not tied to one specific location, opening up a bigger potential geographical market in which to find customers.
If you fancy starting your own catering business read on for my thoughts on how to start-up and run a catering business otherwise have a browse around the Business Opportunities And Ideas blog and see if any other business ideas tempt you.
How to start a catering business
How you start-up will depend on how you intend to run the business (full- or part-time), the type (home based, or from premises) of catering you intend to provide and the market (corporate, weddings, parties, etc.) you intend to serve.
Whichever way you chose to go, there are a whole bunch of legal issues you need to deal with regarding starting a catering business: food safety, hygiene etc. Fortunately the Food Standards Agency produce a nice PDF booklet Starting Up: Your first steps to running a catering business that explains what you need to know. Not only does it cover the food related legal requirements for catering start-ups, but it also includes information VAT, bookkeeping, types of business and a useful list of sources of further information.
The next step is to develop a written plan for you business, aka a business plan.
Writing a business plan for your catering business
The great thing about starting a catering business is that you don’t need a lot of capital. With that in mind you’re unlikely to be seeking finance from external investors so there’s no need for a formal business plan, so don’t spend ages worrying about how to create the perfect business plan.
You absolutely MUST however create a business plan. Starting any business without one is folly, as Alan Lakein wisely noted “failing to plan is planning to fail”. For a catering business plan all you need to do is develop a simple plan as outlined in my post How To Write A Simple Business Plan.
Now lets explore some of the business issues you’ll need to consider as part of your planning process.
Estimating earnings for your catering business
When it comes to working out how much a catering business will make you’ll need to take into account several factors:
- What market are you aiming at – you’ll earn more targeting corporate functions and weddings than children’s parties.
- What sort of service will you provide – food only, food and staff, sliver service? People will pay more for additional services and you can charge per hour for staff supplied.
- How many functions are you planning, willing and able to do per day, week or month.
- What are the typical prices that other, competing catering businesses charge – don’t be shy, phone them up and ask.
So for example if you’re going to target weddings, expecting to do two per week, catering for around 80 guests at each wedding and charging £40 per guest you could expect to invoice around £6,400 per week. Depending on how well you’ve managed the overheads of your catering business the business could be generating between 20% and 40% profit on that which is between £1,280 and £2,560 profit per week.
How much does it cost to start a catering business
The cost of starting a catering business will depend on your approach. Ideally I’d suggest you keep expenses down to a minimum, so do the cooking at home, or find another business with an under-utilised kitchen that you can use when they are not.
There are some fixed cost that you can’t avoid however, such as insurance (you’ll need at least public liability and employee liability), food hygiene training and inspection. Which will set you back around £500. You’ll also need to set aside a budget for marketing, the more the better, but ideally at least £500.
I’m going to assume that as a budding chef you’ve got all the equipment you need, if not allow a reasonable budget for that, but don’t get carried away buying everything, remember every penny you spend has to be earned back before you become profitable.
If you’ve decided to go the whole hog and start from your own premises then that will obviously boost the start-up costs by around £1,000 to £2,000 per month. Alternately if you decide you need a vehicle, you can expect to need around £300 per month to cover the costs of that.
Check out the post How Much Does It Cost To Start A Business for a more detailed look at the likely cost of starting up a catering business.
My personal recommendation would be a minimum of £1,000 if run from home on a part-time basis and up to £30,000 if you decide to go the whole hog and start full time with premises – but please don’t, start it from home/a shared kitchen and grow from there. Alternately if you can find a catering business for sale that you like then you could buy an established catering business, which could set you back anything up to £200,000.
Buying an established catering business
If you do choose to buy a catering business then please take care to ensure that you’re paying no more than it is worth. If you’re not sure what that is then please lead the post How To Value A Small Business.
However I wouldn’t recommend buying an established catering business unless you already have commercial experience in the same market. It’s better to make your mistakes whilst small and inexperienced, in other words cheaply, before risking the level of capital required to buy a business.
Running a catering business
The day to day running of a catering business will revolve around either sales and marketing or preparing and delivering the service. Try to balance your time between both – don’t stop marketing just because you’ve got a lot of work on!
Marketing a catering business
When it comes to running a successful business, be that catering or any other business sales and marketing is almost always the key. Without customers the business will fail. So how do you market a catering business? Well that largely depends on exactly what sort of catering you are doing. Generally however you want to be identifying who your customers are, finding out how to reach them and then putting your service in front of them.
You’ll find a lot of useful tips on marketing in the post 171 FREE Marketing Ideas.
Books on starting a catering business
- How to Start a Home-Based Catering Business
- Catering Like a Pro: From Planning to Profit
- How to Start a Catering Business: When You Don’t Know What the Hell You’re Doing
- Starting and Running a Catering Business: How to Start and Manage a Successful Enterprise
- How to Run a Catering Business from Home
If you’ve already set up a catering business, or you’re currently in the process of doing so, please feel free to share your experiences and any tips you’ve picked up along the way below.
Photo by: Neeta Lind.
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