If you enjoy good cuisine and entertaining and are ready to work for yourself, it may be time to start your own catering business.
In 2019, catering companies in the United States earned a total of $11 billion revenue in sales. In addition, if you own a catering business, you can earn between $30,000 – $80,000 annually.
But what are the essential components of a successful catering business? And how can you ensure that yours succeeds? Here are 12 simple steps to starting your own catering business:
1. discover your area of expertise
When your catering company fits into a specialized niche, you will encounter less competition from the big, one-size-fits-all caterers on the market. And word-of-mouth marketing makes it easier to create a solid base of recurring customers.
Consider the following:
- What kind of food will you be serving? Will you be able to serve everyone? Or focus on a particular niche market, such as vegan or gluten-free cooking?
- What kinds of functions will you perform? Smaller occasions, such as cocktail parties, employee lunches, and wedding showers, maybe the most convenient when you’re first starting. You can expand your catering services to encompass more significant events as your business expands.
- What is your capability? If you’re jumping into this full-time, maybe you’re ready to serve many functions per week. But if catering is a side venture, you may need to confine your company activities to the weekends.
- Who will be doing the work? Make a recruiting plan, including who will conduct food preparation, sales, accounting, etc.
Next, it’s time to examine who you’ll be competing against and who you’ll be working for.
related resource: 6 e-commerce kpis you need to keep an eye on
Investigating consumers and competitors
Doing your homework before putting together a menu and purchasing equipment is best. For example, if you reside in a small town with six other caterers who specialize in Sikh weddings, you’ll have a lot of competition in that area. You could focus on something no one else is doing, such as vegan pub food.
Your initial step should be to look for local caterers. Examine the menus and sizes of functions that your competitors provide. If they don’t list ballpark rates on their websites, consider contacting them to get quotes.
Speaking with their clients is the most effective way to learn about local caterers. Not only will you learn what your competitors are doing wrong or adequately, but you will also perform customer research. This will assist you in subsequently planning how to market your company.
Here are a few ideas to get you started
- Consult with friends and family. Baptisms, marriages, and wakes—you almost certainly know someone who has had to organize one. Inquire about who they chose as caterers, why, and how the experience went. It may help you with what services your company should provide.
- Contact the people who use caterers the most frequently. These are your prospective clients, and they’re a gold mine. Wedding planners, event coordinators, and office managers all have preferred caterers.Who is the most well-known caterer in town?
Who has a negative reputation?
What qualities do they want in a caterer? - Go over the customer reviews. This may seem obvious, but in your rush to get your business up and running, you may forget how important it is to find out what clients think.
Local catering company reviews on Google, Yelp, and Facebook will provide you with some insight into what clients enjoy and dislike. - Consider the big picture. Reports and statistics on catering enterprises across the country can provide a complete view of how the industry operates as well as current trends. Begin by reading Catersource’s State of the catering industry report. State of the Catering Industry study.
2. look into local licenses and permits
Catering licenses and permissions differ from state to state. Depending on the state you live in, you may or may not be able to make meals in your own kitchen with the same tools you use to make your own meals. And the standards for liquor licenses will vary by state.
Despite state differences, there are a few licenses and permissions that are common across all states, some of which you will most likely require to start your business:
- A general business license from your state, city, county, or local government.
- A zoning permit, depending on where your culinary facilities will be located.
- Health permits, depending on where the food will be prepared and if it will be transported.
To learn about licenses and permissions that apply to you, contact your local health agency as well as your Secretary of State.
helpful resource: how to apply for a business license
3. plan your menu
If you enjoy cooking and are considering starting your own catering business, you’ve probably sat up late at night fantasizing about the delicious meals you’ll offer.
It’s time to compose a rough copy of your menu now that you’ve researched, answered some crucial questions regarding your business, and looked into local licenses.
While you can subsequently customize, starting with a predetermined list of options is ideal. That way, you can perfect the supply orders and preparation methods for each food you offer well in advance.
Once clients have chosen their purchases, combining the aspects you’ve already planned is simply a matter of combining them.
Your capacity and cooking capabilities will determine your menu. Less obviously, the types of meals you feel comfortable serving, and the market segment you’re targeting will have an impact.
For example, if you exclusively serve cuisine made from local, seasonal products, your winter menu will not include freshly squeezed orange juice.
4. choose a place
Local catering laws and zoning regulations will determine where you should locate your business.
Some states may prohibit you from preparing meals at home. In that case, you have two options: rent a commercial kitchen or cook on-site.
Renting a commercial kitchen raises your operational costs but also gives you flexibility; you can always prepare meals for your customers, no matter where they are. And you’ll be able to accomplish it more efficiently than you could at home.
You will, however, be responsible for delivering food, so you will need cars and equipment that are up to the task.
When you prepare food on-site, you must rely on your clients’ facilities. This restricts you to serving customers who rent or own kitchens, such as churches, community centers, and residences. You’ll save money on operating costs but pay in other ways: you’ll have to adjust to whichever kitchen you use.
You can also not serve at some events, such as art openings, work lunches, and outdoor events.
The ideal strategy is first to decide what you’ll offer and to whom, then find a location and budget that works for you.
5. prepare to purchase equipment
Your equipment requirements could include anything from a new egg whisk to an industrial mixer, as well as a couple of Yeti coolers and a half-dozen chest freezers. The size of your business and the number of customers will determine it.
Make a list of everything you’ll need to get started. Then contact a restaurant supply supplier and request an estimate for your shopping list. You’ll use it to help you create the budget for your business plan.
If you’re considering financing equipment, evaluate your alternatives first.
In terms of interest payments, a small business loan or line of credit may be less expensive than a finance plan.
Furthermore, paying cash upfront may allow you to purchase old equipment, which may cost you less in the long run.
6. make a business plan
“Cook it, and they’ll finally come” is a recipe for a failing catering business. You’ll need detailed blueprints for every aspect of your organization to succeed.
In addition to the competitor and customer research, a startup budget, and Financial projections, your unique business plan should completely cover the following topics.
- The main problems you solve for clients and customers
- What makes sets you apart from the competition
- The resources your business relies on
- Your mission statement and future vision.
This is only a high-level overview. To put everything all together one step at a time, consult our advice on how to write a business plan. Also, don’t forget to include an attention-grabbing cover page.
A note on the startup costs of a catering business
According to the pros, you could expect to spend $10,000 to $50,000 on startup expenses for your catering business. Naturally, launch costs differ from one business to the next. You must consider your equipment, transportation, and marketing requirements. Whatever your beginning expenditures, your initial budget should be adequate to pay your business’s operational costs for 12 months without taking income into account.
7. develop a low-cost marketing strategy for your catering business
Fortunately, you don’t have to spend money on a Super Bowl commercial to promote your catering company. A few low-cost techniques will suffice.
Keep menus and prices up to date.
Customers that look up your company are considering having an event catered. They want to know what kind of menu you provide, what types of events you cater, and how much it will cost. Having up-to-date menus and price lists on your website lets your consumers start planning before contacting you. A couple planning their wedding would prefer to know if your services are within their budget before contacting you; providing price ranges upfront may lead them to choose you over a competitor whose website is currently “under construction.”
Curate your Social Media Reviews
A social media profile with current reviews demonstrates that the lights are on; you’re an active, well-known firm. Encourage customers to leave reviews and make sure to respond to any negative ones. It’s frequently preferable to offer a refund to a customer who has high expectations rather than risk having a one-star review harm your reputation.
Post Eye-Catching Food Photos
Pictures of the foods you’re most proud of can whet your social media followers’ appetites while also demonstrating that you know what you’re doing when it comes to presentation. Food images are a terrific, low-cost way to keep your social media up-to-date.
But be warned: A picture of your food that doesn’t look appealing is worse than no picture. If every shot you take looks like a public warning billboard about food poisoning, you should consider hiring a professional photographer.
Your Best Friend is Word-Of-Mouth Marketing
Good, horrible, or forgettable – whatever type of experience a consumer has with catering, they’re eager to spread the news. The finest thing you can do is ensure that your consumers have nothing but positive things to say about you.
One way to accomplish this is to provide excellent service. Another option is to give referral discounts. Perhaps if a customer refers to someone, they will receive 15% off their next order—or fresh-baked, tempting breakfast muffins and cappuccino coffee for their office as a thank you.
Building and sustaining positive relationships, as well as rewarding recommendations, will help you build your clientele faster than any print campaign or leaflet.
8. decide on a business structure
How your catering business is set up affects how it is taxed and how much you have to pay for debts and legal proceedings.
When you start your own firm, the IRS immediately classifies you as a sole proprietorship. That’s fantastic in terms of convenience—no forms to fill out, no corporate structure to choose from. However, it is not ideal if you cannot pay your bills or if someone decides to sue you.
A single-member limited liability company (LLC) is the next step up from a sole proprietorship. An LLC is similar to a sole proprietorship in that it establishes your firm as a separate legal entity from you. In other words, you obtain more liability protection than you would with a single property.
9. give your company a name
Registering a business name is unnecessary if you are a sole proprietor and operate under your own name – say, Monica Geller. However, if you want to operate under a different name, such as Monica’s Catering with a Smile, you must register it.
If your company chooses a form other than a sole proprietorship, you must register your business name, even if it is the same as your personal given name.
In each of these cases, you must register your business name with your state and county by submitting a business as (DBA) form.
10. obtain insurance
Business insurance protects your catering company in the event that something unexpected occurs. Even if your state does not mandate insurance, you should obtain as many types of insurance as you need to safeguard your assets and avoid being sued. General liability insurance is the most essential sort of insurance for a catering business. Your client’s valuable Persian rug was permanently damaged when the chocolate fountain overflowed. Have some of your wedding guests been ill as a result of a bad batch of oysters from your supplier? An overzealous flambé removed someone’s brows? You are covered by general insurance.
Following that, you might want to think about the following:
- Commercial automotive insurance for your food truck.
- Commercial property insurance, which protects you in the event that your equipment or kitchen is damaged.
- Unemployment insurance is frequently required by law if you have employees. It also prevents you from being sued for monetary damages if an employee is fired.
- Wrongful termination insurance shields you from legal action if an employee claims you mistreated them.
- If your star chef gets sick and can’t work, it could cost you money if you don’t have key person insurance.
11. begin bookkeeping as soon as possible
Working on your books may appear to be a vast distance from the kitchen’s sights, scents, and tastes. However, it is an essential component when starting your own firm. When your bookkeeping is more organized, everything else could be better.
Good bookkeeping allows you to ensure that consumers are paying you, that you have paid your suppliers, and that you are aware of how much cash you have on hand.
If you’re having difficulties paying your bills, it can help you plan how to develop your business or make it more profitable. And, if you keep a detailed account of your costs, you can take advantage of every potential tax deduction at the end of the year.
Make sure you have bookkeeping in place before catering your first event. There are a few options, but we strongly recommend Countick (that’s us). For a fixed monthly price, you’ll get an entire team of bookkeepers to perform your bookkeeping and an easy-to-use app to track your accounts.
Is Countick the best fit for you? Sign up for a trial now!
