How to Start Home-Based Cottage Food Business

1
Here's Your Quick Start Guide to Starting Home Based Food Business

hot cross buns and jam
Biscuits and jam - both can be made in a home-based business. Susie Wyshak

Particularly for passionate canners and preserve makers, start with this article with the steps to get started with your home-based food business: Ever Think About Selling Your Preserves? Here's What You Need to Know.

And here are 6 popular cottage food questions with answers to get you started even quicker!

2
Do Home-based Cottage Food Businesses Also Need a Business License?

home-based business making cheese crackers
My attempt at a home-based food business. Susie Wyshak

Someone asked me the following question, after seeing my article about the California Homemade Food Act:

"I'm a beginner in this small business world.  I'm baker whose focusing on cookies.  I'm selling to family and friends.  If this business grows, would i need both the county permission and a small business license or does one cancel out the other?"

Answer: You probably need both a home-based business certificate AND a business license.

A home-based business certificate or license assures public and the local health department that you know what you're doing and that you're making foods that are allowed (usually as "non-potentially hazardous") under the cottage food, or homemade food, law.

A business license is the city and / or county's way of collecting tax on revenue-generating local businesses and also a way to make sure you are following whatever the local laws are around small businesses.

For example, for home-based businesses more urban areas usually have laws related to whether you will be allowed to:

  • have people coming to your house for your products or services
  • have signage in front of your home (Imagine you're living in a suburban subdivision and everyone has a sign outside. Not something you see everyday.)

Takeaway: Learn the ins and outs of running a small business. Even though you are casually making food at home for sale, it's important to know about licensing, taxes and best practices for running a small business before announcing you're in business.

3
Can I Sell My Foods To Local Stores Without Nutrition Labels and Barcodes?

Crackers in a simple holiday cellophane bag
Crackers in a simple cellophane bag. Susie Wyshak

Another home baker wrote to me:

"This past holiday, I had an offer to put my cookie boxes in a local grocery store. However, since I'm not licensed or have a nutrition label/UPC barcode its not something I could do."

Answer: You probably can sell your cookies to the local market without having a nutrition label, thanks to the Small Business Nutrition Labeling Exemption. Small, independent markets often will not require a barcode.

Directly from the collective mouth of the FDA:

"The Federal Food, Drug, and Cosmetic Act requires packaged foods and dietary supplements to bear nutrition labeling unless they qualify for an exemption (A complete description of the requirements). One exemption, for low-volume products, applies if the person claiming the exemption employs fewer than an average of 100 full-time equivalent employees and fewer than 100,000 units of that product are sold in the United States in a 12-month period."

Takeaway: Most anyone making food products at home or at a small scale very likely will apply for the Small Business Nutrition Labeling Exemption at least in your first year of doing business. That's enough time for you to know if you want to invest more and grow the business—in which case you then should invest in the nutrition labels and bar codes.

4
Can California Cottage Food Operators Take Orders Online and Ship the Food?

All our systems are now online
PeopleImages.com / Getty Images

A home-based candy maker sent in the following questions about taking online orders and shipping:

"[Someone] told me he thinks the laws forbidding shipping may have relaxed since the law first came into effect.  Do you know if this is true?  How can I find out?  I make a candy that is perfectly safe to ship, but I'm unable to sell online or ship it.  If the law has changed I would love to know."

Answer:  California Homemade Food Act does permit food businesses to sell online as long as the buyer picks up the products from you.

Everyone selling under cottage food laws follows the same rules. (Small consolation but worth remembering you're all in the same boat—and all enjoy the same benefits of testing and generating revenue with a home-based food business.)

As far the "how can I find out?" question, all states provide contact information for the local public health departments that oversee cottage food operations.

I picked up the phone and got a call back to get the answer: In California, are not allowed to ship food in state or out of state. According to the spokesperson, the cottage food law was intended to support local home-based food businesses serving local eaters, not be a platform for selling food beyond your local area.

However it is possible some counties will tell you are allowed to ship. It's up to you to ask them if they are able to override the state law...or not. I'm relaying what the state told me.

How to contact your public health department: Most states with cottage food laws make it easy to find the department that oversees the cottage / homemade food laws as a whole. In the case of California, that's here.

Takeaway: When you want answers, it usually takes a little searching.

5
How Much Is Insurance For Home-based Cottage Food Businesses?

Home Insurance Concept Man Protecting House By Hands From Fire, Drawn on Blackboard
Copyrights @ Arijit Mondal / Getty Images

Someone wrote and said: "I've been told that insurance runs about $250 per year for home-based food businesses."

That amount sounds like it might cover some aspects of the business.

Insurance brokers have quoted amounts ranging from $250 to $1,000 or more. As with all insurance, the more expensive it is, the better your coverage. Take a look at a company called FLIP which specializes in liability insurance for small food companies.

Takeaway: If you're serious about maximizing sales through a home-based business you should talk to an insurance broker experienced in the food industry for the hard facts. As you might guess, they will be more than willing to write up a quote for you.

6
How Can I Start a Food Business When I Don't Have All the Answers?

Soft chocolate chip cookies at anniethebaker.com
Annie the Baker's small batch cookies. Susie Wyshak

Someone sent me the following challenge with getting her food business off the ground:

"Until I can figure out the best plan for producing the cookies, I can't do anything. My biggest concern is having it become something I hate doing because I don't have the right plan to make it happen."

Answer: So you can't do anything? Anything?

Previous to the above statement was the following: " I have been selling cookies for years to friends, friend's friends and neighbors and my coworkers."

That's something. That's a big something.

Takeaway: You need to just start testing the waters, say wise food entrepreneurs I've interviewed to write Good Food, Great Business and in panels.

Even if you start at home then can't meet demand, as long as you don't invest too much (e.g., haven't spent thousands on equipment or build demand through an expensive food tradeshow), you will have proven your concept. Or not.

If people love your foods, you'll have built a bigger fan base. This could lead to custom orders during which time you will have had time to think about what you really want to go with the business.

Thousands of people have started food businesses on a small scale over the centuries.

When you say you can't do anything, there's another reason you don't want to start. Can I help you break through?

7
Can I Start a Bone Broth, Yogurt or Beef Jerky Business At Home?

Biltong
Sasha Radosavljevic / Getty Images

Each state lists the foods you're allowed to make under their cottage food laws. The fastest way to get your answer is to:

  1. see if your state has a cottage food law then
  2. look up the allowed foods

Many states do not allow making foods at home that require refrigeration, to minimize the chance of possible contamination or customer illness.

Then again there are visionary states like Ohio. For a $10 fee, Ohio residents can get a home bakery license which allows production and sale of potentially hazardous foods like cheesecakes and dairy-based foods.

Takeaway: Foods subject to spoilage, bacteria, illness and death are pretty well controlled by state health departments and / or the USDA and for that reason rarely, if ever, are included on cottage food law "allowed foods" lists. However you should check what your state allows — you may be delighted to find they have a separate home-based food business law.

Read about various ice cream recalls due to listeria for some good evidence as to why such foods are usually produced under very controlled conditions.