Business mis-opportunity


My girlfriend learned from her aunt how to make & preserve blackberry jam a couple of months ago. It’s very tasty, but that wasn’t the part that had her excited. She first thought about making jams & jellies to give away on Christmas. It’s fairly inexpensive – $10 for 3-5 half pint jars of concentrated berry goodness, people love it, can be decorated to look snazzier than just a glass jar & metal lid, so what better to give friends & family?

Come to think of it, people pay good money for this stuff. There’s a big push against mass produced foods. Farmers markets are busy places these days as people fight for the organic, local, cage free, home grown, and home made alternatives to the big evil grocery store brands. People would pay $6 or more for a jar of concentrated berries, especially if you make it look nice with a ribbon or other farmhouse bling. So why not sell it? $3 of ingredients, sell for $6, and pocket the extra!
And why stop at berries! Apple butter is very tasty & apples are pretty inexpensive per pound. Off-brand peanuts cost $2.50 per pound, taste just as good, and a couple passes through a meat grinder reduces them to a slightly crunchy, wholly delicious peanut butter. Use honey roasted peanuts and the next time you have to buy peanut butter will be to load mousetraps.

The girlfriend’s other idea, which I admit I wasn’t too keen on at first, was candles. Large amounts of wax melted on the stove sounds like a good way to burn down the house, especially when you remember overheated wax vapors are explosive. But, with a double boiler, it’s safe enough. Some parafin or soy wax, a dash of scent oil, a couple blocks of coloring, and some Goodwill store wine glasses add up to quirky, unique candles perfect for, well, someone quirky & unique.
So, all these things can be produced for less than $4 each, sold for $6-8, have fun making them, and have enough money to go to the movies every once in a while. Good plan, right? I talked to an accountant friend. Time to break out the calculator.

The missing ingredient of all of these is time. Two pints of blueberries, a lemon, two cups of sugar & 3 jars may cost $10, but it takes an hour to do so. If we pay ourselves $10/hr, that jam went from $3.33 a jar to $6.66. Assume you spend a bit on labels & decorations, and you’re at $7 to produce half a pint of blueberry goodness. If a stranger walked into our kitchen & offered us $6 for half a pint of blueberry jam, we would be right to turn them down. And call the cops.

Of course, I’m not including the energy bill for running the stove, and assuming one hour is enough time to cook & clean up after ourselves, and shop for the ingredients, and a handful more tasks. But, here’s where it gets really bad: sales. Our local farmers market has pretty reasonable dues, maybe $10/day when you buy for the whole season. And, for the sake of argument, let’s say we’ve got some folding tables & a canopy, and all the table decor to make our little booth look nice. And maybe we use 2 jars of samples & some crackers, at a cost of $15. We’re at $25 for the day. At $7 to produce & $8 sales price, we need to sell 25 jars to break even, right? The market runs 8am-1pm, 5 hours, so one sale every 12 minutes. That’s a reasonable day. Oh, but we forgot to pay ourselves again! 5 hours, plus an additional hour to setup, tear down, and drive, means another $60. Now we have to sell 85 jars to break even. That’s a pretty lively business. Raise the price to $9, and we’re down to only selling 43, but how many people would spend $9 for half a pint of jam?

Could we even produce 45 jars of jam per week (43 to sell, two samples)? At an hour per three jars, that’s 15 hours. In addition to a full time job, 3 hours per day, 5 days a week, plus 6 hours to run the market on Saturday. 21 hours per week. I know, we could probably make larger quantities & speed things up, reducing production times & increasing revenue per jar, but we’re talking about making 5 products or more, so we can’t streamline things too much or we wouldn’t have the variety.
Wow, this is really turning into a business now. Maybe too much, in fact. 43 jars at $9 means we would gross $387 per week, $1548 per month, and $12,384 per 8-month season. That’s just the minimum to break even! Plus more if the equipment needs to be upgraded or replaced. So, if we’re talking ~$15,000 a year in sales, what laws do we need to worry about? According to Forrager.com, Iowa doesn’t require a license for non-potentially hazardous foods. Potentially hazardous would be jams & jellies not following CFR title 21 section 150, which basically states what acidity level is needed to preserve fruits with water bath canning. Peanut butter is questionable here – the nearest I can find is http://www.fda.gov/food/foodscienceresearch/safepracticesforfoodprocesses/ucm094143.htm – potentially hazardous food does not include a food with a water activity under 0.85. The nuts have about no water in them, so they should be good. Candles aren’t edible, so they should be good. And then there’s tax to consider. And tax returns, and deductions based on use of a home kitchen, and calculating opportunity costs, and and, and…

Phew. let me step back a bit. OK, I’m feeling better now. If I went on, I’d have to talk about insurance and marketing and capital expenses, but I won’t. I’ll pull out a jar of blueberry jam & some hot biscuits, admire the chunks of fruit as the juice melts into the pastry, and take a big bite. The tart flavor will remind me that I bought the berries at a farmer’s market, and I’ll be appreciative of all the work someone else is doing so that I can have fresh, local foods. And probably get a blueberry stain on my shirt.

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