Today, you can find entrepreneurs dipping into any and every field. The catering industry is a prime example of an industry that has experienced a boom in the past decade or so.
A catering business is one almost anyone can start. While some investment is necessary, you don’t need a whole lot because you can start it from the comforts of your home. Given you know how to cook and enjoy it.
If you’ve been thinking about starting a catering business, there is no better time than now to start. Our, how to start a catering business guide has the complete rundown on the process. So, you start out on the right foot.
Like any business, you will need to invest some money to start a catering business. Depending on the location, scale, and type of catering business you start, you can expect the startup cost to range between $10,000 and $50,000.
We also recommend having at least a year’s worth of money in operating costs on hand. You don’t want to rely solely on revenue for operating costs because it takes some time to generate traction and build a reputation. So, make sure you have some funds available or have a plan to attract investors before you embark on this journey.
1. Hone your skills
While most of you are probably thinking, why do I need to perfect my cooking skills when I’ve had so many people compliment me on it. You do. Cooking for 50+ people is a whole different ball game when compared to cooking for 5-6. Unless you throw massive parties and do all the cooking, you will need to work on your craft.
Also, caterers need to be versatile. You can’t have one or two items on your menu. Learn new dishes and practice them until you perfect them.
Your catering business will only be successful if you can offer a variety of food that tastes great. Practice the dishes until all the dishes that you offer are a specialty of yours.
Find cooking courses in your city to learn new dishes and practice, practice, practice. We can’t emphasize practicing enough. Cooking is a lot like science, you experiment until you find the right mix.
2. Decide on the type of catering business
You have the choice to pick if you want to cater to a specific market/type or not. You have the option between the following:
- Cocktail or children parties – finger foods and drinks
- Banquets like weddings and corporate events
- Buffet-style catering
- Boxed lunches
Some may want to do it all. Obviously, catering to all the types would get you more business but also require more resources.
To help you decide, survey the market. See what there is a demand for and decide on the type accordingly. Be sure to check out the services and menu of local caterers to help you decide.
The good thing about choosing a specific type is, you can concentrate on just that and perfect it.
For those that opt to offer all types of catering service, you do so at the risk of compromising on quality. That is unless you have the help that understands your vision and can cook just as well as you.
3. Research about local licensing and permits
Each state has different requirements set out for licenses and permits. Some allow you to prepare meals at home using everyday equipment while others don’t. Look into the requirements of your state to determine how to go about setting up your catering business.
No matter which state you live in, you will need to get the following license and permit for the business:
- General business license: This is issued by the state, city, or municipality.
- Zoning permit: This is required for your cooking facility, you will follow the requirements set forth by the municipality of where the facility is located.
- Health permits: This is required for the cooking facility and for transporting the food.
You can contact the Secretary of State and the local health department to find more details on how to obtain licenses and permits.
Within this step, you also want to think of a business name. The name you think of will need to be registered. Unless, you plan on naming it after yourself, which we wouldn’t recommend.
To register your business name, you need to file a DBA (Doing Business As) form in the state you will operate.
4. Start thinking about your menu
You’ve probably already started thinking about this the moment you decided on starting a catering business. But, it is now time to actually work on a menu for your potential clients.
The market and competition research you’ve conducted in step 2, will help you finalize a menu. Start by listing down all the dishes that you can offer. List down specifics, like ingredients, prep/cook time, and resources needed. This will come in handy when you finalize your menu.
Based on the list you make, look at the human and facility resources you have. Now, narrow down the list to the items you know that your resources can handle.
Make sure that the menu has items that are easy for clients to mix and match. After all, they will want a selection of dishes at their party, no matter what type it is. So, have dishes that complement one another.
We recommend having different menus for different types of parties and seasons. When a client approaches, ask them what type of food they would like and pitch the menu accordingly. Just make sure that you are comfortable making the items mentioned on the menu. Don’t try to impress potential clients by putting dishes you aren’t familiar with.
5. Create a business plan
Planning is key to the success of any business. A well-thought-out business plan sets you on the path to success.
Besides having a great menu, your type of catering business, and market research done, you need to have a plan the covers the following:
- Which problems do you solve for your clients?
- What makes your services different from the competition?
- What are the resources the business depends on?
- Which vendors and suppliers will you use?
- What is the mission and vision of the business?
- What was your inspiration behind starting the business?
This will cover your basic business plan. Which will be very useful when it comes time to seek investment and or expand your business.
6. Determine your pricing
Now, that you have your menu set and know your resource requirements, you can decide on the pricing. You have two routes you can go, either have set pricing or do custom pricing based on your customer’s needs.
We recommend going the custom pricing route. This gives you a bit of flexibility when customers approach you. You also have the option of then sending a proposal that takes the budget of potential customers into account.
When determining the price of dishes, take all your costs into account. You need to consider the costs of resources, ingredients, and transportation. Take competition prices into account also when you do send out custom proposals to customers. We can say with certainty that they will be shopping around and you want your pricing to be competitive.
7. Find an ideal location for your kitchen
You need to check the laws of the state you reside in, to determine the location of your kitchen. Not all states allow you to operate a commercial kitchen from your home. If that is the case then you can either rent a commercial kitchen or prepare food on-site.
Renting your own space is ideal if you have enough funds and want flexibility. You can set up the kitchen with all the equipment you need based on how big an operation you plan to run. You will be able to offer your catering services on a larger scale this way.
You save a lot on operating costs if you prepare food on-site. But it also limits your customer base as you can only cater to events hosted in spaces where a kitchen is available. You may be thinking that every house has a kitchen, but most aren’t big enough to be used for massive parties.
Think about what type of events and parties you want to cater to and decide on which one of the two options is suitable for you. If you have the finances, we recommend renting a commercial kitchen.
8. Develop a marketing strategy
Marketing will likely take a major chunk of your initial startup cost. You want to get the word out about your business fast. The only way to do that is to effectively market it.
However, you need an efficient approach. As a catering business, you don’t need to spend excessively on renting a billboard or running an ad on TV. You want to invest in the following:
- Develop and optimize a business website. People rely on the internet more than ever to look for services, you need to ensure you have an optimized website that ranks well on search engines.
- Establish a presence on social media. Facebook and Instagram are the two platforms you should focus on. Build a presence and maintain it with informative posts, videos, and pictures. Look at ways to use paid marketing to attract customers.
- List your business on online directories. You can look at platforms such as Yelp!, Google My Business, and so on.
- Curate your online reviews. Ask customers to post reviews on social media, Yelp!, Google, and other platforms to get a positive word out about your business. To entice them to do this, you can offer them a small discount on future catering services.
- Word of mouth is still key. Don’t forget to ask customers to tell their family and friends about your services. The best way to ensure they do that is to provide them with exceptional service. Another approach is to offer a referral discount, this tends to work really well in the catering business.
This highlights the basics you should cover in your marketing strategy. Make sure you have a comprehensive plan. If marketing is not your thing, hire a digital marketing agency to take care of it for you.
9. Get funding
If you are one of those lucky few that have enough savings to invest in a business, you can skip this step. Most will require some financial help to start.
There are different types of funding options you have:
- A business line of credit: Banks give you a line of credit, a hybrid of a business loan and business credit card. But the interest is lower than a credit card. The bank gives you a set amount of capital you can use. You just pay interest on the amount that is used. The capital given varies depending on your credit score.
- Equipment financing: If payroll is not an issue and you just need help purchasing equipment, then opt for equipment financing. All you have to do is find a lender and provide them with a quote for the equipment you want to purchase. They usually require collateral for the loan, with most taking the equipment purchased as collateral. So, in case you default, the lender seizes the equipment.
- Family and friends: Not the ideal route, but you can also ask family and friends to loan you the money. This is ideal if you have most of the capital already but just need a few thousand more to cover startup costs.
Once your business hits the ground running, you will also have access to SBA loans. These are loans provided by small banks that offer the most competitive rates. They are given to small businesses that have a good credit score and have been in operation for a few years.
10. Get business insurance
No matter how much you prepare and plan, accidents happen. Business insurance will protect you if anything unexpected happens, to protect your assets and shield you incase of a lawsuit.
For a catering business, we recommend you get the following insurance:
- General liability insurance: An accident can happen at any time. You never know when a chocolate fountain may overflow or a bad batch of fish results in the guests getting sick. General insurance will cover you if such incidents happen, protecting you and your business.
- Commercial automotive insurance: This would protect your catering van in case of an accident.
- Commercial property insurance: Protects your kitchen and equipment in case there is any damage.
- Unemployment insurance: You will need this once you hire employees. It protects you from damages if and when your employees lose their job.
- Wrongful termination insurance: Protects you if you are accused of mistreatment by an employee.
These may seem like a lot, but they are all to protect you. So, think of them as an investment rather than an expense.
11. Hire and train your staff
No matter how ambitious or hardworking you are, you cannot cater an event just by yourself. You need a team to help you out. Hiring staff might be the most difficult of tasks to do.
The first step is to get the word out. Use your network and post the vacancy online in job portals and forums. Look for local platforms that cater specifically to foodservice job seekers. They will get you the type of individuals you need.
The second step is shortlisting candidates for interviews. Give preference to individuals that have some experience in the catering or restaurant industry. But for servers, you can be open to candidates with no prior experience.
Think of the payroll budget you have when deciding who to shortlist. Experienced individuals will ask for more money but may require less training.
Interviewing candidates is the next step. During the interview to judge if the candidate is a good fit, determine whether they share similar values and beliefs as you. Ask them questions that will help you determine that because you want people that share the same vision, all to help your business succeed.
Once you’ve selected candidates, you will need to train them. The training process won’t be too difficult if you’ve hired experienced individuals. For inexperienced candidates, you will need to take time out.
The training depends on the job requirement of the individuals. So, go about the process thinking about what the job requirements are, and proceed with the training.
12. Outfit your staff
Your service staff should all be uniformed. This way people at parties can easily identify them.
Get uniforms that have your business logo on them. This serves as a great marketing tool, getting the word out about your business at the event.
Our step-by-step guide should have answered most of the questions regarding how to start a catering business. It really isn’t that difficult. You will have to do a lot of research and go through a few procedures, but it will pay off in the end. After all, starting your own business requires effort.
To help you a little further, we have some tips for you to run a successful catering business:
- Be realistic: Know your strengths and limits. Do not accept a job if you and your team cannot handle it. Yes, the money may be good, but what good is that if you can’t handle the customer’s requirements. If you fail to deliver, not only will you lose a client but also damage your business’ name.
- Be flexible with your menu: Catering business requires versatility and flexibility. You won’t survive too long if you have a set menu and aren’t flexible. Every customer will have specific food requirements, so be flexible with the menu. It will get you a lot more business.
- Success takes time: You’ve heard the phrase, “Rome wasn’t built in a day.” Your business may not be as big as Rome but it takes time to find success. Take your time and be patient. You will find success as long as you stay determined and work hard.
- Start bookkeeping from day one: You need to have your finances in order from day one. Make sure you have all your expenses and finances ready to go. If you aren’t great with bookkeeping, hire someone that is. Financial mismanagement is one of the most common reasons why many startups fail.
- Keep an eye on your competition: Continue to monitor your competition to see what they are doing. You need to analyze how they market their brand, pricing, services, and client relationship. This will help you determine their weaknesses and devise a plan on how you can attract customers by ensuring their weaknesses are your strengths.
If you have a knack for cooking and looking to start your own business, there is no better option than a catering business. It doesn’t require heavy investment upfront and allows you to base your career on something you are passionate about.