Problem solver: How can I get my young son and I to work effectively?
Advice from the former Superquinn supremo on transitioning your business and how much cash is needed to set up a food manufacturing business.
Question: I am a food producer and I am 60 years of age. All of the sales for the business are my responsibility and my 23-year-old son has just come in to join me but has no experience. Can you give me some advice about how to transition the business over the next number of years?
Feargal replies: Many business owners around the country will relate to the question you have raised. The question of succession is often ignored until it is too late. Your situation is a little tricky.
Your son has no experience in the business which means it is going to take many years to get him to understand the basics, and potentially a decade before he is up to the same level of understanding as you are. Also, don't make the assumption that he either wants to take the business over or will be suitable! He may even dislike the business and move on.
With all of the sales responsibility in the business falling to you, this is a vulnerable position in any event, even if I disregard your age and the fact that you have no back-up. If anything happened to you in the morning and you had to take a prolonged period of time out of work, the business could be seriously at risk.
If I were in your shoes I would strengthen the management team in the business. Start by bringing in a sales executive who can assist you in the sales role and who can ultimately fill your shoes if you decide you need them to do so.
You will also find that this will allow you personally to stand back and be more strategic about the running of the business.
Put a structured programme in place to upskill your son, including combining your own teachings with some formal, external education in your field. As the years progress you will have a fair idea whether he is ready to take over the business, or as many companies do, you could consider someone external to step into the senior role.
It will be a busy few years for you and your son working together to forge out a new chapter in the business. Do make sure you enjoy it!
Question: How much cash would I need to set up a food manufacturing business?
Feargal replies: This is always a difficult question to answer but let's see how I can help. Certainly a lot will depend on where you plan to sell your product.
For example, if you plan to sell at a farmers' market, the items you will need to think about are relatively simple, eg your stall, a simple brand, packaging, display utensils, food safety training and some cash set aside to cover insurance, market stall rental etc.
As an estimate I would say you could probably get started for €1,000 or less. On the other hand, if you decide to supply the retail sector and intend to grow the business relatively quickly, there are a different set of considerations for example shelf life testing, nutritional analysis, branding (which could be a significant cost), packaging, website and promotional material.
Many producers forget to allow for cash flow. Remember, in the farmers' market you are selling directly to the customer so the minute you produce the product, you sell it and get paid. When you sell through a third party, like a retailer or a café, the probability is that they won't pay you for approximately 40 days or longer, so you end up with an awful lot of cash owed to you. This is the piece that many new producers forget to take into account. Between your set-up costs and allowing for cash flow, I would estimate that you probably would have to set aside €7,000 to €9,000 at a minimum.
It would be a shame if your products were popular and you were attracting new retailers and foodservice operators at a rapid base, but you were unable to supply the new ones as you didn't have the cash. I hope that has helped to answer your question.
Send your small business questions to email@example.com