March 17, 2025 • 16 mins
Financial Management for Cottage Food Businesses
Financial Management for Cottage Food Businesses – A Must-Listen for Food Entrepreneurs! If you’re running a cottage food business or thinking about starting one, financial management is the key to long-term success. This episode dives deep into the real numbers behind home-based food businesses—covering everything from pricing strategies, budgeting, and managing cash flow to understanding taxes and profit margins. One of the biggest mistakes many cottage food entrepreneurs make is not tracking expenses properly. We break down easy-to-use tools and methods to ensure you're making a real profit—not just breaking even. Plus, we share insights on how to reinvest wisely to grow your business. 🔑 Key Takeaways from This Episode:
📢 Marketing Food Online – Helping food entrepreneurs succeed!
📢 Financial Management for Cottage Food Businesses – Practical tips for making your food business profitable! Hit that subscribe button and turn your food passion into a money-making machine! 🚀
(1) CottageFoodsLaws - YouTube
Become a supporter of this podcast: https://www.spreaker.com/podcast/marketing-food-online-food-entrepreneur--2797701/support.
Financial Management for Cottage Food Businesses – A Must-Listen for Food Entrepreneurs! If you’re running a cottage food business or thinking about starting one, financial management is the key to long-term success. This episode dives deep into the real numbers behind home-based food businesses—covering everything from pricing strategies, budgeting, and managing cash flow to understanding taxes and profit margins. One of the biggest mistakes many cottage food entrepreneurs make is not tracking expenses properly. We break down easy-to-use tools and methods to ensure you're making a real profit—not just breaking even. Plus, we share insights on how to reinvest wisely to grow your business. 🔑 Key Takeaways from This Episode:
- How to price your products for maximum profit
- Hidden costs most home bakers overlook
- When to invest in better equipment vs. when to hold off
- Understanding taxes and financial record-keeping for home-based food businesses
📢 Marketing Food Online – Helping food entrepreneurs succeed!
📢 Financial Management for Cottage Food Businesses – Practical tips for making your food business profitable! Hit that subscribe button and turn your food passion into a money-making machine! 🚀
(1) CottageFoodsLaws - YouTube
Become a supporter of this podcast: https://www.spreaker.com/podcast/marketing-food-online-food-entrepreneur--2797701/support.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back everyone. We're about to take a deep dive
into the world of cottage food businesses.
Speaker 2 (00:05):
Yeah, we're going to be looking at how to manage
the money side of things, you know.
Speaker 1 (00:08):
Like exactly. And to help us out, you are lovely
listeners sent in some excerpts from a guide on financial
management for cottage food entrepreneurs.
Speaker 2 (00:18):
A great guide. We're going to explore it today. So
if you're thinking about starting a business like this, or
even if you're just curious about the topic.
Speaker 1 (00:25):
This deep dive is for you.
Speaker 2 (00:26):
And even if you aren't planning on, you know, starting
a business or anything. A lot of these principles apply
to just smart money management in general.
Speaker 1 (00:34):
Absolutely. Now the guide jumps right into a biggie separating
personal and business finances. Why is that so important?
Speaker 2 (00:42):
Well, you want to think of your business as like
its own little entity. It needs to have its own space,
its own pot, if you will.
Speaker 1 (00:49):
So like not just good bookkeeping, but respecting your business
right exactly.
Speaker 2 (00:53):
And it makes tax season way easier too.
Speaker 1 (00:56):
Okay, that makes sense. The guide even recommends opening a
separate checking account and credit card just for the business.
Speaker 2 (01:02):
Yeah, that way you don't accidentally, you know, claim your
weekly grocery bill is a business expense. Plus, get a
really clear picture of how your business is doing financially.
Speaker 1 (01:13):
Okay, so separate accounts, got it? Next up the guide
talks about budgeting. I know the word makes some people cringe, but.
Speaker 2 (01:23):
Think of it as a roadmap, not a monster. It's
just a way to, you know, see where your money's
going and make good decisions.
Speaker 1 (01:29):
Okay, So how does this roadmap work?
Speaker 2 (01:31):
Well, there are fixed costs and variable costs. Fixed costs
are those expenses that stay pretty much the same every month,
like rent.
Speaker 1 (01:39):
Like the essential ingredients for a cake, no matter how many.
Speaker 2 (01:42):
Are baking exactly. Then you've got variable costs, which are,
like you said, the flour and sugar. Those go up
or down depending on how much you're producing.
Speaker 1 (01:49):
So in a cottage food business, that would be ingredients, packaging,
things like that.
Speaker 2 (01:53):
Yeah, and don't forget about seasonal changes in demand. Your
budget needs to be able to adapt to that.
Speaker 1 (01:58):
So like holiday baking boom versus you know, the summer slowdown.
Speaker 2 (02:02):
Got it?
Speaker 1 (02:02):
Yeah, So we have our separate accounts, We've got our budget.
What's next?
Speaker 2 (02:05):
Time to become a financial detective.
Speaker 1 (02:08):
A detective, what do you mean.
Speaker 2 (02:09):
Record keeping, even those seemingly tiny transactions, got to track
them all.
Speaker 1 (02:14):
Oh you mean, like every little sprinkle and ribbon. Doesn't
that get overwhelming?
Speaker 2 (02:18):
Well, there's where technology comes in. Handy spreadsheets, accounting software,
all sorts of things to help you stay organized.
Speaker 1 (02:24):
Makes sense, so you can see exactly where every penny's going. Okay,
now let's talk about production costs. It's more than just
the ingredients.
Speaker 2 (02:32):
Right right, You got a factor in the whole experience.
You know, the packaging, the labels, those little touches that
make your products special.
Speaker 1 (02:40):
Don't forget those cute little ribbons we talked about earlier.
Speaker 2 (02:43):
Exactly, and don't forget those less obvious costs, like you know,
a portion of your utility since you're using your home kitchen.
Speaker 1 (02:49):
Oh yeah, good point. So it's about those hidden costs,
got it. But then how do we actually decide on
a price for our amazing creations.
Speaker 2 (02:57):
Well, the guide talks about something called the break even point.
Speaker 1 (03:02):
Sounds kind of scary, but it's basically how much you
need to sell to cover all those costs before you
even start making any profit.
Speaker 2 (03:09):
Exactly. See factor on all those hidden costs we just
talked about, plus things like you know, website feeds if
you're selling online.
Speaker 1 (03:14):
So once we figure out the break even point, how
do we actually decide on the price itself.
Speaker 2 (03:20):
Well, the guide recommends doing little market research. See what
others are charging for similar products, you know, at farmers' markets, online,
places like that.
Speaker 1 (03:29):
Okay, so check out the competition. But how do we
justify charging more? Say, if we're using really high quality ingredients.
Speaker 2 (03:36):
Be transparent. Let people know why your product is special.
You know, maybe it's organic ingredients, you neque packaging, something
like that. People will pay for value.
Speaker 1 (03:45):
Okay, transparency. Now let's move on to something I think
a lot of us struggle with cash flow management. What's
the key takeaway there?
Speaker 2 (03:52):
Well, the guide has a great analogy. It's like squirrels
saving nuts for winter. Right. You might have busy periods
and slower perod so you got to plan ahead.
Speaker 1 (04:02):
So like saving during those busy times so you're covered
during the slower months.
Speaker 2 (04:06):
Right, And part of that is managing your inventory, especially
if you're working with perishable ingredients.
Speaker 1 (04:11):
Yeah, you don't want to end up with a fridge
full of you know, wilted herbs or anything. Speaking of
unexpected expenses, what about an emergency fund.
Speaker 2 (04:19):
Oh, that's crucial. You know, what if your oven breaks
down right before a big order, or what if there's
a recall on one of your main ingredients.
Speaker 1 (04:28):
Oh, I've been there. My oven died right before the holidays.
Once it's a total disaster exactly.
Speaker 2 (04:33):
That's what that emergency fund is for. It's your safety net.
Speaker 1 (04:36):
Okay, so emergency fund check. Now, let's talk about the
thing nobody loves but everybody has to deal with taxes.
Speaker 2 (04:42):
Even though it's called cottage food, you still got to
pay taxes on that income, and.
Speaker 1 (04:46):
The rules can be different depending on where you live exactly.
Speaker 2 (04:50):
So the guide recommends getting advice from a tax professional,
you know, just to make sure you're doing everything right
makes sense.
Speaker 1 (04:56):
They can help you figure out all those complicated rules
and maybe even find some deductions you didn't know about.
And this is where all that meticulous record keeping comes
in handy, right.
Speaker 2 (05:06):
Absolutely, those receipts and invoices are your proof when it's
time to file those taxes.
Speaker 1 (05:12):
So organization is key, You got it, Okay.
Speaker 2 (05:15):
So let's say you've got your finances in order, you're
managing your cash flow, you've even got that emergency fund
tucked away, what's next.
Speaker 1 (05:23):
Time for the fun part, reinvesting those profits back into
your business.
Speaker 2 (05:27):
The guide talks about this too. It's not just about
pocketing the extra cash.
Speaker 1 (05:31):
It's about helping your business grow exactly.
Speaker 2 (05:35):
Think about upgrading your equipment, maybe expanding your product line,
or even investing in better ingredients.
Speaker 1 (05:41):
And what about marketing.
Speaker 2 (05:42):
Absolutely, spend a little on professional labels, a website, maybe
a booth at a local farmers market.
Speaker 1 (05:48):
And don't forget about your own professional development workshops, webinars,
you know, keeping up with the latest trends.
Speaker 2 (05:54):
It's all an investment.
Speaker 1 (05:55):
Okay, we've covered a lot here, but there's one last
thing I want to highlight from this guide.
Speaker 2 (06:00):
The need to review and adjust your financial plan regularly.
Speaker 1 (06:03):
Yes, it's not just set it and forget.
Speaker 2 (06:06):
It right exactly, take a look at your budget every
few months.
Speaker 1 (06:10):
Like tasting the batter as you bake. Yeah, you adjust
as you go to make sure the final product is perfect.
Speaker 2 (06:16):
Exactly. See what's working, what needs tweaking, Maybe even spot
some new opportunities.
Speaker 1 (06:20):
And don't forget about setting those measurable goals, whether it's
increasing profits or reducing costs.
Speaker 2 (06:26):
Those goals will keep you motivated and on track.
Speaker 1 (06:29):
All right, So we've got separate accounts, a budget, meticulous
record keeping, and we're always reviewing and adjusting. It sounds
like a lot.
Speaker 2 (06:37):
It can be, but remember you don't have to do
it all alone.
Speaker 1 (06:41):
And that's where we'll pick up in the next part
of a deep dive. We'll be exploring the resources available
to help cottage food entrepreneurs succeed. So stay tuned, and
it's all about setting those measurable goals. Right. Maybe you
want to bump up your profits by you know, ten
percent this quarter, or maybe you're trying to figure out
how to cut down on those pesky overhead.
Speaker 2 (07:00):
Right. Those goals they keep you focused and it could
feel like a lot to juggle, you know, the whole
financial side of things while you're busy baking up a storm.
It can be overwhelming, it really can.
Speaker 1 (07:10):
That's why the guide emphasizes this next point, don't be
afraid to ask for help.
Speaker 2 (07:15):
That's right. A good accountant or bookkeeper can be a
total lifesaver.
Speaker 1 (07:19):
I bet. I mean they can help you organize everything,
make sure you're following all the tax rules, and honestly,
just free up your time so you can focus on
what you love.
Speaker 2 (07:27):
The baking, right. No one wants to be drowning in
spreadsheets when they could be perfecting a recipe exactly.
Speaker 1 (07:33):
You know, something that really struck me about this guide
is that it's not just about like cold hard numbers.
It actually talks about the mindset of financial management, oh totally.
Speaker 2 (07:44):
It emphasizes that success, especially with a cottage food business,
takes more than just being a whiz in the kitchen.
You got to have a healthy relationship with money too.
Speaker 1 (07:54):
It's like that saying, your beliefs become your thoughts, your
thoughts become your words, and so on. Eventually it all
shapes your reality.
Speaker 2 (08:02):
Powerful stuff. Our mindset really does affect everything.
Speaker 1 (08:05):
We do, right, And even that first point we talked
about separating personal and business finances, that's a mindset shift too.
Speaker 2 (08:11):
It is. It's about respecting your business as its own thing,
giving it the space and resources it needs to thrive, like.
Speaker 1 (08:17):
Giving it its own little garden plot to grow in
separate from your own personal finance exactly.
Speaker 2 (08:23):
And this applies even if you're not running a business.
It's just being mindful of your spending, making conscious choices
about where your money goes.
Speaker 1 (08:32):
Do I really need those fancy imported sprinkles from my
personal baking or are those a business expense?
Speaker 2 (08:38):
Right? Setting boundaries can make a big difference, and the
guide emphasizes that a budget isn't about restriction, it's about empowerment.
Speaker 1 (08:48):
It's about knowing what's going on with your money so
you can make smart decisions, whether you're building a cookie
empire or just trying to manage your own personal finances better.
Speaker 2 (08:58):
And that's where tracking every transaction comes in. Right, Yeah,
it's about awareness.
Speaker 1 (09:01):
It's like shining a light on those little expenses that
can sneak up on you. You know, wait, how much
do I spend on takeout coffee each month? Oh?
Speaker 2 (09:08):
Yeah, we've all been there, but seeing those numbers can
be a real wake up call. You know. It can
help you make changes if you need.
Speaker 1 (09:14):
To, exactly, Like, maybe you decide to cut back on
those lattes and put that money towards a new stand
mixer instead.
Speaker 2 (09:19):
Or that emergency fund. And speaking of which, that breakdown
of production costs in the guy, that's gold.
Speaker 1 (09:28):
Especially for people just starting out right, it's easy to
forget that all those little costs add up.
Speaker 2 (09:33):
Oh yeah, those little things like packaging, labels, even just
the electricity to run your oven. They all contribute to
the final price tag.
Speaker 1 (09:41):
Right It's like, oh, yeah, my website costs money to run.
Too easy to forget those things when you're caught up
in the excitement of making yummy.
Speaker 2 (09:48):
Treats, exactly, so you have to factor all that in
when you're setting your prices.
Speaker 1 (09:51):
It's about making sure you're not only covering your expenses,
but actually turning a profit so you can keep doing
what you love.
Speaker 2 (09:59):
And that's where that break even point is so important.
You need to know how much you've got to sell
to actually start making money.
Speaker 1 (10:06):
Makes sense, and the guide also recommends doing some research,
you know, seeing what other businesses are charging for similar products.
Speaker 2 (10:13):
That's right, check out the local markets, online shops. Get
a feel for what the going rate is.
Speaker 1 (10:18):
Right so you can stay competitive. But what if you
want to charge a little more, like if you're using organic,
locally sourced ingredients or something.
Speaker 2 (10:25):
And be transparent. Explain why your product is worth that
extra cost. Maybe it's the ingredients, the packaging, or even
your commitment to sustainability. People are willing to pay for
quality and values.
Speaker 1 (10:36):
Okay, so be upfront and honest about what makes your
products special. And now let's dive into the topic that
can make or break any business, cash flow management.
Speaker 2 (10:46):
This is where that squirrel analogy really comes into play.
You got to think ahead, especially when it comes to
those seasonal ups and downs.
Speaker 1 (10:52):
Right, like saving some of those profits from the busy
season so you're covered during those slower months.
Speaker 2 (10:58):
It's all about planning and having that financial cushion right exactly.
Speaker 1 (11:02):
And speaking of cushions, let's not forget about that emergency
fund we talked about earlier.
Speaker 2 (11:06):
Oh yeah, that safety knit for those unexpected kitchen disasters,
you know, the oven break down, a sudden spike in
ingredient prices, those kinds of things.
Speaker 1 (11:16):
No one wants to think about those things, but they
can happen. Better to be prepared, right absolutely.
Speaker 2 (11:22):
You know, it's interesting the guide actually talks a lot
about seeking help from professionals. I think that's such good advice,
and not just for finances.
Speaker 1 (11:29):
I agree, it's easy to get caught up in that
DIY mentality, but sometimes you just need an expert.
Speaker 2 (11:34):
Right, whether it's an accountant for taxes, a marketing consultant
to help with online presence, or even just a therapist
to talk through the challenges of running a business. Having
that support system can be huge.
Speaker 1 (11:47):
It's a sign of strength, not weakness, to ask for
help when you need it exactly.
Speaker 2 (11:52):
And the guide's emphasis on reinvesting profits that really resonated
with me. It's about having that long term vision.
Speaker 1 (11:59):
Right, not just spending all those profits right away, but
thinking about how you can nurture your business and help
it grow.
Speaker 2 (12:04):
Like upgrading your equipment, expanding your product line, investing in
marketing and your own education. All of that fuel's future success.
Speaker 1 (12:12):
It's about turning your passion into something that can thrive
in the long run, not just a quick burst of excitement.
Speaker 2 (12:18):
Building a legacy, and that's something to be proud of.
Speaker 1 (12:21):
We've talked a lot about the practical side of managing money,
but the guide also dives into something deeper. The mindset
you need to succeed in business.
Speaker 2 (12:29):
Oh yeah, it's about shifting away from scarcity thinking and
embracing abundance.
Speaker 1 (12:34):
Believing in yourself, your products, your ability to create something
amazing and share it with the world.
Speaker 2 (12:40):
And recognizing that money is just a tool. It's not
something to be afraid of or hoard. It's a resource.
That can help you achieve your goals.
Speaker 1 (12:47):
It's about using your money wisely to create a business
that reflects your values and brings your vision to life.
Speaker 2 (12:54):
And the guide reminds us that managing your finances is
an ongoing process, right. It's about regularly reviewing your plan,
seeing what's working, and making adjustments.
Speaker 1 (13:04):
It's like that dance, you know, constantly moving, adapting, finding
your rhythm.
Speaker 2 (13:09):
As you gain experience and confidence, that dance becomes more graceful.
Speaker 1 (13:13):
It's about mastering those steps, you know. Speaking of mastering something.
Speaker 2 (13:17):
Those cookies we were talking about earlier.
Speaker 1 (13:19):
I'm thinking it's time for a cookie break.
Speaker 2 (13:21):
I agree, and hey, maybe we can even use it
as a chance to practice some of what we've learned today,
you know, calculate the cost per cookie, figure out our
profit margin.
Speaker 1 (13:30):
Sounds like a delicious plan. But before we dive in,
let's leave our listeners with one final thought.
Speaker 2 (13:36):
Building a successful business, or even just managing your money, well,
it's a journey. There will be ups and downs.
Speaker 1 (13:43):
But with the right attitude, the right tools, and a
whole lot of determination, you can achieve anything you set
your mind to.
Speaker 2 (13:50):
So keep learning, keep experimenting, and keep baking those delicious treats.
Speaker 1 (13:55):
And we'll be here to cheer you on every step
of the way. Now, excuse us, those cookies are calling
our names.
Speaker 2 (14:00):
You know. Thinking back on all this great info from
the guide about cottage food finances, it really hits home
that you don't have to do it all alone.
Speaker 1 (14:08):
It's so true, and you don't necessarily need to hire
like a full blown accountant right away either.
Speaker 2 (14:13):
Yeah, exactly. Remember how the guide mentioned some really great resources,
especially for cottage food folks just getting started.
Speaker 1 (14:21):
Yeah, like those SBDCs. I think we touched on those
briefly before, right.
Speaker 2 (14:25):
Small Business Development centers. Those are awesome. They offer tons
of workshops on all sorts of things like finances, marketing,
even legal stuff.
Speaker 1 (14:32):
Yeah, it's like a one stop shop for anyone who's
running a small business or even thinking about starting one,
and a lot of.
Speaker 2 (14:38):
Their services are free or super low cost, which is
amazing so helpful.
Speaker 1 (14:43):
Plus, I think they can connect you with mentors other
people in your area who've been there, done that.
Speaker 2 (14:48):
Yeah, like having a whole team cheering you.
Speaker 1 (14:49):
On, exactly. You know. I think one of the biggest
takeaways from this guide is that it's not just about
the numbers. It's really about your mindset.
Speaker 2 (14:56):
One hundred percent. It's about believing in yourself and your business.
Speaker 1 (15:00):
This moving away from that fear like can I really
do this, and stepping into yes I can. It's about
abundance not scarcity, and understanding that money is a tool
to help us reach our goals, not something to be
afraid of.
Speaker 2 (15:13):
Right. It's about using your money in a way that
aligns with your values, like what do you want your
business to stand for?
Speaker 1 (15:19):
That's so important And when you bring those delicious treats
into the picture, you know the heart you pour into
creating those.
Speaker 2 (15:26):
It's about sharing something you love with the.
Speaker 1 (15:28):
World exactly, and by mastering these financial skills, you're making
sure that passion can not only thrive creatively, but also
as a sustainable business.
Speaker 2 (15:38):
So to everyone out there who's dreaming of launching a
cottage food business, or even just curious about the whole thing,
we say, go for it, Embrace the adventure, learn.
Speaker 1 (15:48):
Grow, and keep creating those incredible treats.
Speaker 2 (15:51):
We've loved diving into this topic with you all.
Speaker 1 (15:54):
And be sure to check out the episode notes for
all those helpful links we mentioned, plus some extra resources
we think you'll love.
Speaker 2 (16:00):
Until next time. Keep learning, keep exploring, and keep on baking.
Welcome back everyone. We're about to take a deep dive
into the world of cottage food businesses.
Speaker 2 (00:05):
Yeah, we're going to be looking at how to manage
the money side of things, you know.
Speaker 1 (00:08):
Like exactly. And to help us out, you are lovely
listeners sent in some excerpts from a guide on financial
management for cottage food entrepreneurs.
Speaker 2 (00:18):
A great guide. We're going to explore it today. So
if you're thinking about starting a business like this, or
even if you're just curious about the topic.
Speaker 1 (00:25):
This deep dive is for you.
Speaker 2 (00:26):
And even if you aren't planning on, you know, starting
a business or anything. A lot of these principles apply
to just smart money management in general.
Speaker 1 (00:34):
Absolutely. Now the guide jumps right into a biggie separating
personal and business finances. Why is that so important?
Speaker 2 (00:42):
Well, you want to think of your business as like
its own little entity. It needs to have its own space,
its own pot, if you will.
Speaker 1 (00:49):
So like not just good bookkeeping, but respecting your business
right exactly.
Speaker 2 (00:53):
And it makes tax season way easier too.
Speaker 1 (00:56):
Okay, that makes sense. The guide even recommends opening a
separate checking account and credit card just for the business.
Speaker 2 (01:02):
Yeah, that way you don't accidentally, you know, claim your
weekly grocery bill is a business expense. Plus, get a
really clear picture of how your business is doing financially.
Speaker 1 (01:13):
Okay, so separate accounts, got it? Next up the guide
talks about budgeting. I know the word makes some people cringe, but.
Speaker 2 (01:23):
Think of it as a roadmap, not a monster. It's
just a way to, you know, see where your money's
going and make good decisions.
Speaker 1 (01:29):
Okay, So how does this roadmap work?
Speaker 2 (01:31):
Well, there are fixed costs and variable costs. Fixed costs
are those expenses that stay pretty much the same every month,
like rent.
Speaker 1 (01:39):
Like the essential ingredients for a cake, no matter how many.
Speaker 2 (01:42):
Are baking exactly. Then you've got variable costs, which are,
like you said, the flour and sugar. Those go up
or down depending on how much you're producing.
Speaker 1 (01:49):
So in a cottage food business, that would be ingredients, packaging,
things like that.
Speaker 2 (01:53):
Yeah, and don't forget about seasonal changes in demand. Your
budget needs to be able to adapt to that.
Speaker 1 (01:58):
So like holiday baking boom versus you know, the summer slowdown.
Speaker 2 (02:02):
Got it?
Speaker 1 (02:02):
Yeah, So we have our separate accounts, We've got our budget.
What's next?
Speaker 2 (02:05):
Time to become a financial detective.
Speaker 1 (02:08):
A detective, what do you mean.
Speaker 2 (02:09):
Record keeping, even those seemingly tiny transactions, got to track
them all.
Speaker 1 (02:14):
Oh you mean, like every little sprinkle and ribbon. Doesn't
that get overwhelming?
Speaker 2 (02:18):
Well, there's where technology comes in. Handy spreadsheets, accounting software,
all sorts of things to help you stay organized.
Speaker 1 (02:24):
Makes sense, so you can see exactly where every penny's going. Okay,
now let's talk about production costs. It's more than just
the ingredients.
Speaker 2 (02:32):
Right right, You got a factor in the whole experience.
You know, the packaging, the labels, those little touches that
make your products special.
Speaker 1 (02:40):
Don't forget those cute little ribbons we talked about earlier.
Speaker 2 (02:43):
Exactly, and don't forget those less obvious costs, like you know,
a portion of your utility since you're using your home kitchen.
Speaker 1 (02:49):
Oh yeah, good point. So it's about those hidden costs,
got it. But then how do we actually decide on
a price for our amazing creations.
Speaker 2 (02:57):
Well, the guide talks about something called the break even point.
Speaker 1 (03:02):
Sounds kind of scary, but it's basically how much you
need to sell to cover all those costs before you
even start making any profit.
Speaker 2 (03:09):
Exactly. See factor on all those hidden costs we just
talked about, plus things like you know, website feeds if
you're selling online.
Speaker 1 (03:14):
So once we figure out the break even point, how
do we actually decide on the price itself.
Speaker 2 (03:20):
Well, the guide recommends doing little market research. See what
others are charging for similar products, you know, at farmers' markets, online,
places like that.
Speaker 1 (03:29):
Okay, so check out the competition. But how do we
justify charging more? Say, if we're using really high quality ingredients.
Speaker 2 (03:36):
Be transparent. Let people know why your product is special.
You know, maybe it's organic ingredients, you neque packaging, something
like that. People will pay for value.
Speaker 1 (03:45):
Okay, transparency. Now let's move on to something I think
a lot of us struggle with cash flow management. What's
the key takeaway there?
Speaker 2 (03:52):
Well, the guide has a great analogy. It's like squirrels
saving nuts for winter. Right. You might have busy periods
and slower perod so you got to plan ahead.
Speaker 1 (04:02):
So like saving during those busy times so you're covered
during the slower months.
Speaker 2 (04:06):
Right, And part of that is managing your inventory, especially
if you're working with perishable ingredients.
Speaker 1 (04:11):
Yeah, you don't want to end up with a fridge
full of you know, wilted herbs or anything. Speaking of
unexpected expenses, what about an emergency fund.
Speaker 2 (04:19):
Oh, that's crucial. You know, what if your oven breaks
down right before a big order, or what if there's
a recall on one of your main ingredients.
Speaker 1 (04:28):
Oh, I've been there. My oven died right before the holidays.
Once it's a total disaster exactly.
Speaker 2 (04:33):
That's what that emergency fund is for. It's your safety net.
Speaker 1 (04:36):
Okay, so emergency fund check. Now, let's talk about the
thing nobody loves but everybody has to deal with taxes.
Speaker 2 (04:42):
Even though it's called cottage food, you still got to
pay taxes on that income, and.
Speaker 1 (04:46):
The rules can be different depending on where you live exactly.
Speaker 2 (04:50):
So the guide recommends getting advice from a tax professional,
you know, just to make sure you're doing everything right
makes sense.
Speaker 1 (04:56):
They can help you figure out all those complicated rules
and maybe even find some deductions you didn't know about.
And this is where all that meticulous record keeping comes
in handy, right.
Speaker 2 (05:06):
Absolutely, those receipts and invoices are your proof when it's
time to file those taxes.
Speaker 1 (05:12):
So organization is key, You got it, Okay.
Speaker 2 (05:15):
So let's say you've got your finances in order, you're
managing your cash flow, you've even got that emergency fund
tucked away, what's next.
Speaker 1 (05:23):
Time for the fun part, reinvesting those profits back into
your business.
Speaker 2 (05:27):
The guide talks about this too. It's not just about
pocketing the extra cash.
Speaker 1 (05:31):
It's about helping your business grow exactly.
Speaker 2 (05:35):
Think about upgrading your equipment, maybe expanding your product line,
or even investing in better ingredients.
Speaker 1 (05:41):
And what about marketing.
Speaker 2 (05:42):
Absolutely, spend a little on professional labels, a website, maybe
a booth at a local farmers market.
Speaker 1 (05:48):
And don't forget about your own professional development workshops, webinars,
you know, keeping up with the latest trends.
Speaker 2 (05:54):
It's all an investment.
Speaker 1 (05:55):
Okay, we've covered a lot here, but there's one last
thing I want to highlight from this guide.
Speaker 2 (06:00):
The need to review and adjust your financial plan regularly.
Speaker 1 (06:03):
Yes, it's not just set it and forget.
Speaker 2 (06:06):
It right exactly, take a look at your budget every
few months.
Speaker 1 (06:10):
Like tasting the batter as you bake. Yeah, you adjust
as you go to make sure the final product is perfect.
Speaker 2 (06:16):
Exactly. See what's working, what needs tweaking, Maybe even spot
some new opportunities.
Speaker 1 (06:20):
And don't forget about setting those measurable goals, whether it's
increasing profits or reducing costs.
Speaker 2 (06:26):
Those goals will keep you motivated and on track.
Speaker 1 (06:29):
All right, So we've got separate accounts, a budget, meticulous
record keeping, and we're always reviewing and adjusting. It sounds
like a lot.
Speaker 2 (06:37):
It can be, but remember you don't have to do
it all alone.
Speaker 1 (06:41):
And that's where we'll pick up in the next part
of a deep dive. We'll be exploring the resources available
to help cottage food entrepreneurs succeed. So stay tuned, and
it's all about setting those measurable goals. Right. Maybe you
want to bump up your profits by you know, ten
percent this quarter, or maybe you're trying to figure out
how to cut down on those pesky overhead.
Speaker 2 (07:00):
Right. Those goals they keep you focused and it could
feel like a lot to juggle, you know, the whole
financial side of things while you're busy baking up a storm.
It can be overwhelming, it really can.
Speaker 1 (07:10):
That's why the guide emphasizes this next point, don't be
afraid to ask for help.
Speaker 2 (07:15):
That's right. A good accountant or bookkeeper can be a
total lifesaver.
Speaker 1 (07:19):
I bet. I mean they can help you organize everything,
make sure you're following all the tax rules, and honestly,
just free up your time so you can focus on
what you love.
Speaker 2 (07:27):
The baking, right. No one wants to be drowning in
spreadsheets when they could be perfecting a recipe exactly.
Speaker 1 (07:33):
You know, something that really struck me about this guide
is that it's not just about like cold hard numbers.
It actually talks about the mindset of financial management, oh totally.
Speaker 2 (07:44):
It emphasizes that success, especially with a cottage food business,
takes more than just being a whiz in the kitchen.
You got to have a healthy relationship with money too.
Speaker 1 (07:54):
It's like that saying, your beliefs become your thoughts, your
thoughts become your words, and so on. Eventually it all
shapes your reality.
Speaker 2 (08:02):
Powerful stuff. Our mindset really does affect everything.
Speaker 1 (08:05):
We do, right, And even that first point we talked
about separating personal and business finances, that's a mindset shift too.
Speaker 2 (08:11):
It is. It's about respecting your business as its own thing,
giving it the space and resources it needs to thrive, like.
Speaker 1 (08:17):
Giving it its own little garden plot to grow in
separate from your own personal finance exactly.
Speaker 2 (08:23):
And this applies even if you're not running a business.
It's just being mindful of your spending, making conscious choices
about where your money goes.
Speaker 1 (08:32):
Do I really need those fancy imported sprinkles from my
personal baking or are those a business expense?
Speaker 2 (08:38):
Right? Setting boundaries can make a big difference, and the
guide emphasizes that a budget isn't about restriction, it's about empowerment.
Speaker 1 (08:48):
It's about knowing what's going on with your money so
you can make smart decisions, whether you're building a cookie
empire or just trying to manage your own personal finances better.
Speaker 2 (08:58):
And that's where tracking every transaction comes in. Right, Yeah,
it's about awareness.
Speaker 1 (09:01):
It's like shining a light on those little expenses that
can sneak up on you. You know, wait, how much
do I spend on takeout coffee each month? Oh?
Speaker 2 (09:08):
Yeah, we've all been there, but seeing those numbers can
be a real wake up call. You know. It can
help you make changes if you need.
Speaker 1 (09:14):
To, exactly, Like, maybe you decide to cut back on
those lattes and put that money towards a new stand
mixer instead.
Speaker 2 (09:19):
Or that emergency fund. And speaking of which, that breakdown
of production costs in the guy, that's gold.
Speaker 1 (09:28):
Especially for people just starting out right, it's easy to
forget that all those little costs add up.
Speaker 2 (09:33):
Oh yeah, those little things like packaging, labels, even just
the electricity to run your oven. They all contribute to
the final price tag.
Speaker 1 (09:41):
Right It's like, oh, yeah, my website costs money to run.
Too easy to forget those things when you're caught up
in the excitement of making yummy.
Speaker 2 (09:48):
Treats, exactly, so you have to factor all that in
when you're setting your prices.
Speaker 1 (09:51):
It's about making sure you're not only covering your expenses,
but actually turning a profit so you can keep doing
what you love.
Speaker 2 (09:59):
And that's where that break even point is so important.
You need to know how much you've got to sell
to actually start making money.
Speaker 1 (10:06):
Makes sense, and the guide also recommends doing some research,
you know, seeing what other businesses are charging for similar products.
Speaker 2 (10:13):
That's right, check out the local markets, online shops. Get
a feel for what the going rate is.
Speaker 1 (10:18):
Right so you can stay competitive. But what if you
want to charge a little more, like if you're using organic,
locally sourced ingredients or something.
Speaker 2 (10:25):
And be transparent. Explain why your product is worth that
extra cost. Maybe it's the ingredients, the packaging, or even
your commitment to sustainability. People are willing to pay for
quality and values.
Speaker 1 (10:36):
Okay, so be upfront and honest about what makes your
products special. And now let's dive into the topic that
can make or break any business, cash flow management.
Speaker 2 (10:46):
This is where that squirrel analogy really comes into play.
You got to think ahead, especially when it comes to
those seasonal ups and downs.
Speaker 1 (10:52):
Right, like saving some of those profits from the busy
season so you're covered during those slower months.
Speaker 2 (10:58):
It's all about planning and having that financial cushion right exactly.
Speaker 1 (11:02):
And speaking of cushions, let's not forget about that emergency
fund we talked about earlier.
Speaker 2 (11:06):
Oh yeah, that safety knit for those unexpected kitchen disasters,
you know, the oven break down, a sudden spike in
ingredient prices, those kinds of things.
Speaker 1 (11:16):
No one wants to think about those things, but they
can happen. Better to be prepared, right absolutely.
Speaker 2 (11:22):
You know, it's interesting the guide actually talks a lot
about seeking help from professionals. I think that's such good advice,
and not just for finances.
Speaker 1 (11:29):
I agree, it's easy to get caught up in that
DIY mentality, but sometimes you just need an expert.
Speaker 2 (11:34):
Right, whether it's an accountant for taxes, a marketing consultant
to help with online presence, or even just a therapist
to talk through the challenges of running a business. Having
that support system can be huge.
Speaker 1 (11:47):
It's a sign of strength, not weakness, to ask for
help when you need it exactly.
Speaker 2 (11:52):
And the guide's emphasis on reinvesting profits that really resonated
with me. It's about having that long term vision.
Speaker 1 (11:59):
Right, not just spending all those profits right away, but
thinking about how you can nurture your business and help
it grow.
Speaker 2 (12:04):
Like upgrading your equipment, expanding your product line, investing in
marketing and your own education. All of that fuel's future success.
Speaker 1 (12:12):
It's about turning your passion into something that can thrive
in the long run, not just a quick burst of excitement.
Speaker 2 (12:18):
Building a legacy, and that's something to be proud of.
Speaker 1 (12:21):
We've talked a lot about the practical side of managing money,
but the guide also dives into something deeper. The mindset
you need to succeed in business.
Speaker 2 (12:29):
Oh yeah, it's about shifting away from scarcity thinking and
embracing abundance.
Speaker 1 (12:34):
Believing in yourself, your products, your ability to create something
amazing and share it with the world.
Speaker 2 (12:40):
And recognizing that money is just a tool. It's not
something to be afraid of or hoard. It's a resource.
That can help you achieve your goals.
Speaker 1 (12:47):
It's about using your money wisely to create a business
that reflects your values and brings your vision to life.
Speaker 2 (12:54):
And the guide reminds us that managing your finances is
an ongoing process, right. It's about regularly reviewing your plan,
seeing what's working, and making adjustments.
Speaker 1 (13:04):
It's like that dance, you know, constantly moving, adapting, finding
your rhythm.
Speaker 2 (13:09):
As you gain experience and confidence, that dance becomes more graceful.
Speaker 1 (13:13):
It's about mastering those steps, you know. Speaking of mastering something.
Speaker 2 (13:17):
Those cookies we were talking about earlier.
Speaker 1 (13:19):
I'm thinking it's time for a cookie break.
Speaker 2 (13:21):
I agree, and hey, maybe we can even use it
as a chance to practice some of what we've learned today,
you know, calculate the cost per cookie, figure out our
profit margin.
Speaker 1 (13:30):
Sounds like a delicious plan. But before we dive in,
let's leave our listeners with one final thought.
Speaker 2 (13:36):
Building a successful business, or even just managing your money, well,
it's a journey. There will be ups and downs.
Speaker 1 (13:43):
But with the right attitude, the right tools, and a
whole lot of determination, you can achieve anything you set
your mind to.
Speaker 2 (13:50):
So keep learning, keep experimenting, and keep baking those delicious treats.
Speaker 1 (13:55):
And we'll be here to cheer you on every step
of the way. Now, excuse us, those cookies are calling
our names.
Speaker 2 (14:00):
You know. Thinking back on all this great info from
the guide about cottage food finances, it really hits home
that you don't have to do it all alone.
Speaker 1 (14:08):
It's so true, and you don't necessarily need to hire
like a full blown accountant right away either.
Speaker 2 (14:13):
Yeah, exactly. Remember how the guide mentioned some really great resources,
especially for cottage food folks just getting started.
Speaker 1 (14:21):
Yeah, like those SBDCs. I think we touched on those
briefly before, right.
Speaker 2 (14:25):
Small Business Development centers. Those are awesome. They offer tons
of workshops on all sorts of things like finances, marketing,
even legal stuff.
Speaker 1 (14:32):
Yeah, it's like a one stop shop for anyone who's
running a small business or even thinking about starting one,
and a lot of.
Speaker 2 (14:38):
Their services are free or super low cost, which is
amazing so helpful.
Speaker 1 (14:43):
Plus, I think they can connect you with mentors other
people in your area who've been there, done that.
Speaker 2 (14:48):
Yeah, like having a whole team cheering you.
Speaker 1 (14:49):
On, exactly. You know. I think one of the biggest
takeaways from this guide is that it's not just about
the numbers. It's really about your mindset.
Speaker 2 (14:56):
One hundred percent. It's about believing in yourself and your business.
Speaker 1 (15:00):
This moving away from that fear like can I really
do this, and stepping into yes I can. It's about
abundance not scarcity, and understanding that money is a tool
to help us reach our goals, not something to be
afraid of.
Speaker 2 (15:13):
Right. It's about using your money in a way that
aligns with your values, like what do you want your
business to stand for?
Speaker 1 (15:19):
That's so important And when you bring those delicious treats
into the picture, you know the heart you pour into
creating those.
Speaker 2 (15:26):
It's about sharing something you love with the.
Speaker 1 (15:28):
World exactly, and by mastering these financial skills, you're making
sure that passion can not only thrive creatively, but also
as a sustainable business.
Speaker 2 (15:38):
So to everyone out there who's dreaming of launching a
cottage food business, or even just curious about the whole thing,
we say, go for it, Embrace the adventure, learn.
Speaker 1 (15:48):
Grow, and keep creating those incredible treats.
Speaker 2 (15:51):
We've loved diving into this topic with you all.
Speaker 1 (15:54):
And be sure to check out the episode notes for
all those helpful links we mentioned, plus some extra resources
we think you'll love.
Speaker 2 (16:00):
Until next time. Keep learning, keep exploring, and keep on baking.
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