HOW TO START A FOOD PROCESSING COMPANY
It has been believed over the years that the three basic needs of man include food (including water), shelter (a place for one to lay his head), and clothing (what to wear on the body). Every human being irrespective of tribe, race, ethnicity, colour, or gender needs these three things to survive. It, therefore, is not out of place for one to go into the business of food processing which is a highly profitable venture for a person to engage in. The food processing industry has been around for quite a long time, it will not be out of place to assert that this industry could be as old as a man however must have kept on evolving as technological advancements have been coming to light in different generations and dispensations of the existence of man. As technology improves, the industry continues to evolve. The food processing industry is an industry that involves billions of dollars on yearly basis. Here, ingredients for food that are still in raw form are processed into food substances or substances that are edible and fit for consumption. This usually involves the transformation of harvested farm produce that is clean into food products that can be marketed. The food processing industry is viable and vibrant especially in Nigeria hence revenues are generated from it. Processed food has become a major component in our meals almost making it impossible to do without it as it is used in food preparation. Previously, anybody wanting to prepare jollof rice will need to buy fresh tomatoes and grind them before the meal can be prepared. However, we now have access to already processed tomato pasta which makes it easier, quicker, and faster to prepare the meal than go through the hassle of grinding the fresh tomatoes. It is for a reason such as the above given and many more that people subscribe to processed food, hence going into the industry will not be a waste of time or resources. With the right business tools and analysis, you could venture into the business and carve a niche for yourself while aiming at turning your business into a conglomerate that could even go international. So, in a nutshell, this business involves the preparing and packaging of food in a way that they could hardly get spoilt, quicker and faster to use in the preparation of meals hence saving time, money and energy. With a population of more than 200 million people in Nigeria, where a percentage of the population are working-class people who leave home early in the morning and come back at night, they must have access to food that they can prepare quickly without much ado owing to the exigencies of time which is not their ally. Hence, venturing into this business is a step in the right direction.
Food processing usually involves;
- Primary Processing b) Secondary Processing
In Primary Processing, agricultural products are processed into edible substances. In ancient times, there were produced through practices of winnowing, threshing, milling, shelling, butchering, drying, etc. it includes the processes of deboning and cutting meat, freezing and smoking fish and meat, extracting and filtering oils, canning food, preserving food through food irradiation, and candling eggs, as well as homogenizing and pasteurizing milk. (Wikipedia).
In Secondary Processing, food is created from ingredients that are ready to use. The following are secondary processed foods; baked bread, sausages, wine, fermented fish, beer, etc.
Other categories of Food processing business include;
- Small Scale Businesses: These do not require much capital or ado and they can be done from the comfort of one’s home. Where there is a corporation, sole-proprietorship or partnership, the employees are usually very few, production low, and revenue also low. These could include the making of cakes, meat-pies, snacks, chips, etc.
- Medium Scale Businesses: These are small-scale businesses that are gradually transiting to higher levels of operations. As small-scale increases, other machineries are procured as well as equipment thus expanding the market operations of the business. This business level is such that cannot be easily done from the comfort of the home.
- Large Scale Businesses: These are businesses that produce at a large scale which can be distributed nationally and even exported outside the country. They are usually mega corporations and multinationals. They involve large capital and complicated food production and processing procedures.
In running a food processing company, you should have a farm supplier that supplies you with farm products that you need or other raw materials needed for processing. When the products are ready for consumption, it must go through the process of quality assurance, to be sure it is fit for consumption, then it is test run by giving a selected few for a taste before distribution to the public. It could be distributed locally to shops, supermarkets, schools, etc.
Different groups of people patronize processed food companies. These include schools, hotels, restaurants, homes, supermarkets, etc. it is therefore expected that the company is poised to deliver excellently to these various target markets who expect nothing less than excellence from them. The following should be considered: –
The customer service of the company should be always inviting to members of the public. The facial expression of the customer care agents, as well as the level of intonation, will go a long way in determining the patronage level of potential customers. Job roles on a higher level are also rated on their ability to demonstrate acceptable client service practices.
Evaluating food processing companies’ employees on standards of acceptable service is a way of looking at the workers’ performance experience to make decisions or appraisals. The company must be careful to follow the standards of acceptable service set in the industry and not flout it because of the negative effect on its goodwill. Service standards conjointly embody the techniques for food processing, labeling of processed food products, distribution, and sale to relevant customers.
Prominent among the labour laws is strict adherence to the Health and Safety of the workers as well as the workplace. Hazards and risks that are likely to occur to workers must have a means of being taken adequately care of. The items to be used in food processing, preparation and packaging must be such that must be handled carefully to avoid contact with sensitive parts of the body that is likely to lead to disease or death eventually. The company should ensure compliance with already existing laws on Occupational Health and Safety.
A food processing company should be able to appraise the ability of the team to work together since more is achieved when there is team-like cooperation among the workers. The teamwork, peaceful cohesion, and coexistence among workers will be appraised and measured by customers as they frequently approach the company for sales. It is a very important appraisal factor for food processing companies hence its need cannot be over-emphasized. Collaboration must be the driving force behind the work done and this will happen irrespective of religion, ethnicity, social status, position, or rank.
Pros & Cons of starting the business: advantages and disadvantages of starting the food processing company business.
- It can be easily afforded and because of this, there would be a high turnover rate.
- Excellent delivery from you will earn you more customers since you will be highly recommended by customers you delivered excellently to.
- Increased vision and insight into the food processing industry.
- The goods can be preserved easily which makes them less prone to easy spoilage.
- You will continue to improve on the nutritional composition and quality of your processed food items.
- You’d have the ability to market your brand and make it popular in the market.
- Mega profit can be gotten by you as you sell and market your product.
- You can mass produce as well as distribute widely your processed food products.
- You could have disappointments from your farm produce suppliers thus reducing your sales at a particular time.
- Customers can be disappointed and this can affect the goodwill of the business should there be any delay in distribution.
- Where your processed food products are not sold out or consumed within a period, it could lead to losses.
- Losses can also occur owing to the domination of the market by top competitors and brands in the industry.
- Many times, processed foods are not natural foods, they undergo processes that lead to genetic modification of the food item
- There could be damage to the kidney as a result of processed food products
- There could be a loss of nutrients, vitamins, and fibre in processed food products.
- Lack of experience could affect the business
- Storage constraints could hamper the storage of processed food items
- Low investment in Agriculture in Nigeria could affect business yield outcome
- There could be low rainfall resulting in low farm outputs.
Skills required to succeed in the Business e.g., Self-motivation skills, customer service skills, business savvy skills.
Owing to our multiple business engagements within and around industries of this kind, a list of top skills needed is given below;
food Processing Skills
Owing to the sensitive and delicate nature of food and food items, it becomes imperative that part of the skills a person would require here is the ability to put different ingredients together to achieve the needed result. The company may need to hire if it lacks one with this great skill. It should be among the requirements or getting employees.
- Organizational Skills
For the general work populace and especially for those at the managerial level, the ability to organize is highly needed in an industry like this. Owing to the delicate nature of the industry, it is good that a person who knows how to organize the various arms and departments of the company is employed to get more returns as a result of the good and skillful organization of man and material resources.
Customer Service Skills
A company without good customer service is bound to liquidate in no time because as it is always known that the customer is king. Where the customer is not satisfied with the service, it can spell doom for that company. Hence, the company must ensure good customer service representation from its employees that are employed to deal directly with the public e.g., truck drivers, sales representatives, marketers, etc.
There are technicalities in every line of business. As already stated earlier, the technical know-how of the food processing company is one that attention must be paid to critically. Hence, in the employment of staff members, competent technical specialists must be employed who know the rules in and out. They must be innovative, competent, and know what to do at every point in time. They must know standards by regulatory bodies.
- Employee Relations
Every business establishment requires good employee relations within it to foster unity. Just as you need to have good customer relations, the same is equally needed for the employees. A bad worker who is aggressive and violent can do something that will dampen the processing of food ingredients, thus hurting the company. So good employee relation skill is also needed.
Marketing, promoting and Sales
This is unarguably a highly needed skill. There are different brands of food processors in the market. You need to have the skill it takes to market, distribute and sell your product to get to the market. Using the right marketing strategy will give you the right sale you need. You must be able to promote your brand above your competitors, you should be able to differentiate your product from other products in the same industry so that your customers will know the difference. You will need highly qualified and competent personnel to form your marketing and sales department.
Technologies and technical know-how for companies within the industry will include the following;
This technology has always been applied by pharmacies and pharmaceutical establishments but it could also be used by food processing companies especially as it concerns the discovery of ingredients. To further understand the relationship between ingredients to be used and their effect on human health, companies can use bioinformatics. This technology will involve the use of artificial intelligence to do an analysis on bioactive compounds and check the ways they could be potentially applied. If proper research is done, new ingredients can be discovered more quickly.
- Ingredient Informatics
This technology involves the fact that one can view food ingredients like materials where a person can use artificial intelligence, data, and also analysis to have a reduction of cost, have improved outcomes as well as fasten the development of processed food products. It is very similar to bioinformatics. This would be achieved by knowing the ingredients and their properties. When this is achieved, it becomes easier to get the desired or required outcome. Where a company needs an ingredient that can be trusted with less flavour in it, an ingredient that can digest easily and has protein in it, it could use this technology to locate all those features it desires in an ingredient. Better and quicker decisions could be made about the ingredients and could also be used in the future. The use of ingredients informatics could help a processing company know what might be the response of its customers to any nutritional change in its product occasioned by the use of a particular ingredient.
- Non-Thermal Processing
This is a food processing technique that avoids a rise in temperature during the processing activity. It ensures that there is a prevention of heat in the taste and nutrition of processed food. It is also a way of reducing the negative environmental impact of food processing. The two major ways these are achieved include;
- High-Pressure Processing (HPP) and b) Pulsed Electric Field (PEF)
High-Pressure Processing is a means of using pressure to preserve the food and is more of a preservative means. It is useful in pasteurizing solid food items after packaging and prevention from contamination has been achieved.
Pulsed Electric Field on the other hand is preserving the food through the use of electrical pulses. It is used to pasteurize liquid food items.
These two-processing means are used widely in the food processing industry.
- Human Capital Management
Like the company, like the manpower, and vice-versa. A contemporary food processing company will largely have a dependence on its unique and value-driven manpower to boost its sales. This human capital will range from technical specialists to those involved in procuring plants and machinery. It is going to be an onerous task in selecting and recruiting competent employees with a plenitude of required skills.
- Warehouse Management
Managing the warehouse is something that you cannot do without. The increasing growth of the business will pose a challenge as to the management of the inventory that is already packaged and stored in processed food products. A good warehouse management system will help to ensure that there is a good arrangement and walkways are not blocked by stacks of food products which can cause harm, also the need to handle new products as they make their way to the warehouse.
- 6. Good Supply Chain Management
Highly developed food processing companies need to have a system in place to ensure that they do not run out of stock. Proper chain management and inventory management will help to prevent that. While ensuring they deliver properly, they need a supplier or they need suppliers that have a very good management system that prohibits them from disappointing their clients which in this case your company. A sophisticated Chain Management System that permits you to form period changes will be a game-changer.
What you should do:
- Have an approach to your product that shows it as part of a cohesive line, strung by core complete traits and values of your business., you would want a brand that wholistically defines who you are and what you do.
- Develop a unique brand that embodies the totality of your business.
- Methodically outline a systematic way of gaining visual representation in the market.
Make Investment in a branding system that is highly visual and unique to give you the best reach
What you should do:
- Have a consideration of trying to gain an increase in complete identity by developing extra graphics that is tightly grounded in your core complete identity.
- Ensure consistency in the use of the developed branded graphics to further your visual language for your audience.
- Use your visual branding system to access clients through all contact means available. (Website, product packaging, email, ads, etc.) to extend recognition.
Share your authentic story as it appealing and arresting to the attention of the customers’
What you should do:
- Share your authentic story to the audience which should be captivating.
- Ensure to feature your authentic and captivating story visibly on your business website and as you sell.
- Tell your story in its most profound form. Make sure it is very real to avoid being framed counterfeit.
In Nigeria, the National Agency for Food, Drug Administration and Control (NAFDAC) is saddled with the responsibility of setting out the regulations to be followed as it concerns food and drug administration in Nigeria. The Governing Council of the board was given that power by sections five and thirty of the Management Act that brought NAFDAC into existence in 2004. The Director-General of NAFDAC works with the endorsement of the Honourable Minister for Health in the country. In The National Food Safety Policy, there is a provision for the establishment and instituting of a committee that shall be termed ‘National Committee on Food Safety. The membership of this committee shall be gotten from both public and private sectors that are essential to everything that concerns food consumption. The following make the list of all the Ministries, Departments, and Agencies involved in the regulation of food processing companies;
- Federal Ministry of Health
- National Agency for Food, Drug Administration and Control (NAFDAC)
- Standard Organization of Nigeria (SON)
- Consumer Protection Council
- Federal Ministry of Agriculture and Rural Development
- Federal Ministry of Environment
- Federal Ministry of Science and Technology
- Nigerian Institute of Food Science and Technology (NIFST)
- Nigeria Export Promotion Council (NEPC)
- Federal Competition and Consumer Protection Commission (FCCPC)
The Legislations that apply to food processing companies include the following;
- Federal Competition and Consumer Protection Act 2018
- The Standards Organization of Nigeria Decree No. 56 of 1971;
- The Food and Drug Act No 35 of 1974 (now Food and Drug Act Cap F32 Laws of the Federal Republic of Nigeria, 2004)
- National Environmental Health Practice Regulation 2016
- National Environmental (Food, Beverages and Tobacco Sector) Regulations 2009
- The National Agency for Food and Drugs Administration and Control Decree No 15 of 1993 (now NAFDAC Act CAP N1 Laws of the Federal Republic of Nigeria, 2004);
- The Food, Drug, and Related Products (Registration, etc.) Decree No 19 of 1993 [now Food, Drugs & Related Products (Registration, etc.) Act Cap F33 Laws of the Federal Republic of Nigeria (LFN), 2004];
- The Counterfeit and Fake Drugs and Unwholesome Processed Food Act No 25 of 1999 (now Counterfeit & Fake Drugs and Unwholesome Processed Foods (Miscellaneous Provisions) Act Cap C34 LFN 2004;
- Various bye-laws enacted by various LGAs in the country.
NAFDAC is the body saddled with the responsibility of granting licenses to companies that wish to engage in food processing. NAFDAC requires that the food item must have an expiry date or a date that is called best before which is a date after which the item may not be suitable for consumption. NAFDAC places great detail on the hygienic condition of the place where food products are processed, it also places great emphasis on the condition of the item used in producing the processed food.
Before Seeking Licensing, the following documents should be downloaded and read by a prospective food processing company. They include;
- Current Good Manufacturing Practice Guidelines for Food and Food Products (Revised)
- Guidelines And Requirement for Inspection in Food Storage Warehouse
- NAFDAC Guidelines For Food Hygienic Practices (NGFHP)
- Guidelines for Production Inspection of Small-Scale Food Enterprises (New Applicants)
- Guidelines for Production Inspection of Micro Scale Food Manufacturing Facilities in Nigeria (New Applicants)
- Guidelines for Inspection of Facilities for Manufacture of Food Products
- Guidelines for Inspection and Requirements for Bread Manufacturing Facility (For those involved in Bread Making)
The following are also needed to run a successful food processing company in Nigeria;
- An application letter to the Permanent Secretary of the Ministry of Interior.
- Certificate of incorporation obtained from CAC.
- A copy of CAC forms showing statements of share capital structure and particulars of shareholders and directors.
- Memorandum and articles of association of the company which will be filed with FIRS
- Tax Clearance Certificate of the registered company from Federal Inland Revenue Services.
- Evidence of acquisition of business premises (Lease Agreement or C of O).
- Feasibility report and Project Implementation Programme (Business Plan) (should be certified or registered with CAC as written by a professional management consultant)
- Registrations with the state inland revenue service for necessary tax payments like PAYE
- Corporate Affairs Commission – CAC Certificate
- Federal Inland Revenue Services – Tax Certificate and VAT Certificate
- Good Hygiene observe (GHP) License – NAFDAC
- Environmental Permit – LASEPA (for Lagos state only)
Develop a comprehensive Business Plan: State the full items that must be contained and the topics it will cover.
- Executive Summary
- Company Summary
- Market Analysis Summary
- Strategy and Implementation Summary
- Management Summary
- Financial Plan
The choice of a location for a food processing company is highly critical to the establishment and smooth operations of the business. That is why much consideration has to be given to a person’s choice of location. Choosing a site location is not as easy as it sounds, this could be one of the hardest things to do in siting at a particular location for the company. An appropriate, suitable and convenient place to run the business is a very important decision to make as this could make or mar the business in the nearest future. Since processed food is the focus here then one has to be very careful since it directly affects human life. When siting the location for the company, consider the following conditions;
- The hygienic condition of the area: Check the neatness and safety of the area to be sure it is free from soak-away, oil spillage, contamination from wood or wooden materials, dirt, chemicals, and other things that could cause harm to the neatness and safe eating condition of the food item. Since food directly affects human health and life, then proper caution and care must be given to the environment where the food items are produced. You would not want to produce what will damage the health of people due to unhygienic elements that are present in the surrounding where the foods are processed or even inside the food itself. You need to check the impacts of your activities also on the citizenry domiciled in such areas.
- Nearness of the Location to Town or Urban Areas. Most of the target market for processed food items are people living in urban areas or township locations. This however does not mean that the rural areas are typically excluded, but the processing company has to be sited in an area where it can easily access its target market. Consequent on that, it is needful that the company is not sited too far from the town for ease of delivery of the food items to shops, restaurants, supermarkets, schools, offices, homes, etc. This is also necessary because of the bringing of raw materials needed for production. If the place is not motorable, it will affect the bringing of materials as well as prevent you from effective distribution.
- Large or sizeable expanse of land: The food processing company should have enough space where it can house its factory, warehouse as well as office or offices. The warehouse should not be too far from the place of production for easy storage of the food items.
- Requirements of NAFDAC (for companies in Nigeria) or regulatory agencies of country where business is located.
- Government incentives: It is most likely that certain businesses that operate in certain areas are likely to receive incentives from the government. These incentives include things like tax deductions or tax breaks, lower fees or regular payments to the community where the company is located, etc
- Government rules: You need to of necessity know the rules that apply to the area you want to choose for your business. Are there rules or that encourage or discourage business in that area? are they subject to higher or lower tax? This should be done before choosing a location because you cannot escape government policies that positively or negatively affect a place.
- Facility kind: Here, you need to make a consideration of the kind of structure you want to erect in that location. Will the place be able to accommodate such a structure? Is the place susceptible to flood or other natural disasters?
- Utilities: The facility would need utilities like adequate electricity, gas, water, and sewer access. Also, check whether these things are in place and your regularity in access to these utilities.
- To ensure that profit margins are maintained at 20-25% profit margins and this would be achieved through attention to expenses and cost of raw materials.
- To provide good and well-processed food items to the general public to ensure proper functionality of the body.
- Income generation for the manufacturing company. This is so because the sole aim of any business is profit maximization and revenue generation. It is also aimed at job creation.
- To ensure that high-quality food is provided at reasonable prices and without contamination.
- To drive awareness and boost sales through referrals and social media means
- To attract customers and consumers e.g., supermarkets, hospitality services, offices, schools, homes, etc.
- To ensure that raw food materials are thoroughly processed and converted into attractive food products that will catch the attention of the public.
- To provide the nutrients required for health (termed nutritional quality of food). This is so because food enables the systems of the body to function properly especially when it is a good food prepared hygienically.
- To increase the amount throughout that food remains wholesome (the shelf life) by preservation techniques that inhibit microbiological or organic chemistry changes and therefore enable time for distribution, sales, and residential storage.
The insurance consists of food processing corporations and companies and this could vary by geographic location, kind of product, and other factors. In several developed nations of the world, companies are required to hold workers’ compensation insurance (sometimes referred to as “workers’ comp”) or its equivalent, in the eventuality of the death of a worker. This is owing to the inherent risks of operating within the food production industry, particularly for personnel assigned to production lines that have serious instrumentation, workers should be given this kind of compensation.
Other kinds of insurance include:
- General and product insurance: this insurance provides indemnity for any legal actions taken against a food processing company for third-party injuries or harm to property ensuing from products made from the factory and is provided sometimes as alternative activities.
- Directors’ & Officers’ insurance: this protects the non-public assets of the company administrators and officers within the event that they in person are sued by workers, vendors, competitors, investors, customers, or alternative parties, for actual or alleged wrongful acts in managing a corporation (Side A). The insurance will give indemnity to the corporation or company for the indemnity they supply to the director and officers (Side B) and conjointly indemnity to the corporate for security category actions (Side C).
- Crime insurance: this covers the theft of cash and food items or other products.
- Marine Transit insurance: this insurance provides protection or seeks to indemnify the transportation of the factory-made product, raw materials plant, equipment, and alternative assets. This insurance covers products that are transported at intervals in the country of domicile and conjointly imports and exports.
- Motor Vehicle Insurance: this provides cover for any vehicle owned or chartered by the corporation.
- Corporate Travel insurance: covering workers traveling interstate or overseas on company business or assignment.
- Cyber insurance: This is vital coverage that food processing companies need to contemplate as they leverage more and more on technology in their business models and regular operations. A cyber-attack will considerably impact your organization negatively.
Other alternative insurance that will be needed for the products include the following;
- Insurance against product contamination or mislabelling
- Drought, flood, frost, etc. which can cause reduced yield/quality
- Combustible panel building fires
You are now ready to hire your employees at this point, you make sure competent personnel are employed to work in the food company. You may either hire people who have worked at other food processing companies before or you hire fresh people and ensure they are trained before they commence work. Hire people who either are used to the use of the machines and equipment or train people on the production process and the use of the machines. Food processing workers in a food processing company are people whose responsibilities include working in the food production line and they also help in the loading of ingredients in the equipment used for industrial baking. They ensure that the company meets its product quality standards, they make sure that during the processes of cooking and mixing, the machinery is well observed. Employees required in a food processing company will include the following;
- Food Cooking Machine Operators
- Meat and Fish Cutters/Trimmers
- Food Batch makers
- Roasting and Drying Machine Operators
- Food Processing Technician
- Food Canning and Freezing Workers
- Food Packagers
- General Food Processors
- Product Grader
- Production Manager
- Quality Assurance Supervisor
- Delivery drivers and distributors
- Sales and Marketing Personnel
- Warehouse Manager
Please kindly note that the kind of workers you will need will directly be influenced by the sub-sector in the industry or food processing niche that you focus on.
The following sub-sectors exist in the food processing industry. They include; Soybean Processing, Other Oilseed Processing, Breakfast Cereal Manufacturing, Chocolate and Confectionery Manufacturing, Confectionery Manufacturing from Purchased Chocolate, Nonchocolate Confectionery Manufacturing, Frozen Fruit, Juice, and Vegetable Manufacturing, Frozen Specialty Food Manufacturing, Fruit and Vegetable Canning, Dried and Dehydrated Food Manufacturing, Creamery Butter Manufacturing, Cheese Manufacturing, Dry, Condensed, and Evaporated Dairy Product Manufacturing, Ice Cream and Frozen Dessert Manufacturing, Animal (except Poultry) Slaughtering, Processed Meats, Rendering and Meat Byproduct Processing, Poultry Processing, Seafood Canning, Fresh and Frozen Seafood Processing, Frozen Cakes, Pies, and Other Pastries Manufacturing, Cookie and Cracker Manufacturing, Flour Mixes and Dough Manufacturing from Purchased Flour, Dry Pasta Manufacturing, Roasted Nuts and Peanut Butter Manufacturing, Other Snack Food Manufacturing, Mayonnaise, Dressing, and Other Prepared Sauce Manufacturing, Spice and Extract Manufacturing, Perishable Prepared Food Manufacturing, Tomato Processing, Cashew-nut processing, Honey Processing, Wine Manufacturing
The above listed are various categories or sectors of processed of which market niche may or may not be drawn from as some of them already in themselves automatically constitute market niche. However, other niches can be gotten below;
- Processing of Food and Vegetables
- Meat Processing
- Processing of Dairy Products e.g., Ice-Cream, Yoghurts, Milk, etc.
- Processing of Farinaceous food products e.g., Noodles, Macaroni, Pasta, Bread, etc.
- Healthy Snacks like Biscuits, Chin-chin, etc.
- Ingredients for Home Cooking and Baking.
- Flour Production
- Fruit Juices
- Fried Foods e.g., Potato Chips, Plantain Chips, etc.
The revenue model could differ from region to region just like the business plan or model for operation. Before diving into the revenue model, it is important to take a look at the business environment and make decisions from there.
For this business, the revenue model can vary as there are other products and ways that can fetch the business money like distributing to supermarkets, distributing directly to offices and homes, etc.
Business Structure: Partnership, sole proprietorship, Limited Liability Company, PLC (state advantages and disadvantages of each chosen structure.
Having the right business structure is vital to business success. It will also affect the business when it comes to filing of tax, borrowing of funds, the attraction of investors.
Types of Business Ownerships to choose from
Sole Proprietorship is a business structure that is a foremost style within the food processing business and it is such that is controlled by a single individual. This business structure features an easy structure.
Pros of Sole proprietary
- Sole proprietorship is the cheapest business structure to run.
- The sole owner has complete management over the business, he or she dictates what happens in the business.
- The business is taxed as a part of the owner’s taxes, thus there is no possibility of having double taxation.
Cons of Sole proprietary
- There is no legal separation between the owner and their business, meaning that the person will be blamed for all the debts and financial obligations incurred by the business.
- It’s difficult to attract investors to invest in a sole proprietorship business.
- The business tends to be mismanaged by the owner since he is the only one involved in the management of it.
A partnership is a business structure that involves two or more people involved in the management of a business. Contribution is made by all the partners either by bringing capital together or by their experiences and connections. They also share profits and losses. It is similar to sole proprietorships in the sense that it is not a separate entity from its owners. The partnership is not taxed but the income of the partners is taxed.
Pros of Partnerships
- Partnership is cheap and easy to operate especially when the partners are few.
- Partners share finances, and every individual invests within the success of the business, relieving the burdens that a single person faces in a sole proprietorship.
- Usually, partners bring different skills and areas of experience to the business.
Cons of Partnerships
- Similar to sole proprietorships, there’s no legal separation between the business and therefore the partners suffer private liability for the business in the eventuality of business failure or debt.
- Disagreements among or between partners can have a bad effect on the smooth operations of the business.
- It may take a longer time before certain decisions are taken and implemented because of the bureaucracies involved especially where the partners are many.
Limited Liability Companies (LLC)
A Limited Liability Company is a business structure where the owners of the company are different from the business. Here the company is a legal entity that can sue and it can be sued. The owners of the company are personally protected from debts and liabilities of the business.
Pros of Limited Liability Companies
- Members are protected against personal liability for any business financial obligations or debts that are incurred.
- The owners control the business directly. Hence, can make decisions easier and faster.
- There are fewer restrictions on profit-sharing in an LLC, and members will distribute profits from the business as they think is appropriate.
Cons of Limited Liability Companies
- Oftentimes, once a member leaves an LLC, the business dissolves, and therefore the remaining members are left with the burden of fulfilling all remaining obligations either to continue to run the business or shut it down.
- Members are thought of as freelance and should pay the self-employment tax contributions.
- The entire profits of the LLC are subject to self-employment tax.
This is a business structure that is often called a corporation. It is a freelance entity that’s taxed singly from its homeowners. This kind of business structure is formed by people who constitute shareholders and are given stock when they invest in a corporation. By law, PLC companies should have assets of ₦10 million or more which may be the case or may not be for a food processing company that is new.
Pros of PLC companies
- The corporation acts as a separate entity; therefore, shareholders’ assets are protected against any of the business’s debts or legal actions.
- Corporations will simply raise funds through the sale of stocks.
- Taxes will be filed singly from the private taxes of the corporation’s homeowners.
Cons of PLC companies
- Corporations are difficult to operate as there are bureaucracies involved.
- Sometimes, companies are likely to be taxed twice. Once the corporation makes a profit and when dividends are paid to shareholders.
- There is extra work to fill out as a result of companies being extremely regulated by federal, state, and native agencies.
Steps in Registration of the Business at Corporate Affairs Commission
- Step One – Public Search: Search for business entities already existing
- Step Two – Reserve a Name: Submit a Business Name you prefer
- Step Three – Pre-Incorporation: Register a Company with Your Name Availability Code
- Step Four – Post-Incorporation: File Changes to Your Existing Business
- Check for the availability of the proposed company name you have chosen
- Complete pre-registration form and upload relevant documents (Online using Company Registration Portal)
- Pay filing and Stamp duty fees.
- Now registration is end-to-end on the COMPANY REGISTRATION PORTAL (CRP)
- with electronic Certificate of Registration and Certified Extract of Registration information
HOW DO YOU APPLY?
To apply for VAT, you will need to go to the Federal Inland Revenue Service (FIRS) office that is closest to your registered address. The following documents should be provided: –
1 Memorandum & Articles of Association
2 Certificate of Incorporation: CAC2, CAC7
3. Duly filled and officially stamped VAT form 001
4 Utility bill
5. Application letter on company letter headed paper
If your business is a registered business name, and not a limited liability company then you will need to provide the following documents;
1 Business Name Registration Certificate
2 Duly filled and officially stamped VAT form 001
3. Utility bill
4 Application letter on business letter headed paper
You should take the original copy and 2 photocopies of each document. The originals are required for sighting only. 1 copy will be left with the FIRS, and 1 copy will be stamped and signed by an official of FIRS as evidence that you have made an application.
- Disregarding customer’s feedback
- Unprofessional customer services
- Wrong Marketing strategies/ moves
- High/Low seasons of event
- Poorly serviced room
- Staff/employee welfare
- Wrong product pricing
- False/misleading advertisement of food products
- Inconsistency in production both in quality and quantity
- Unreliable farm produce suppliers
- Incompetent Employees
The equipment and machinery required here will depend on your market niche however various equipment and machinery used in different niches are listed below;
Grinders, boilers, deep fryers, mixers, cutters, processing plant, food items to be processed, slicing machines, confectionery moulders, bread moulders, pie and biscuit formers, lettuce shredders, peanut butter mill, juice extractors, vegetable extractors, industrial-sized can openers, can ejectors, tray wrapping machines, can seaming machines, peelers, biscuit-cutters, food choppers,
Other items needed will include the following; labeling machine, power generators, conveyor belts, delivery trucks, fire extinguishers and fire blankets (for safety purposes), labels, hand gloves, rubber boots, face masks, hand sanitizers, laboratory clothes, batch coding machines, printer for printing batch numbers, other office equipment, etc.
- Nestle Nigeria
- Dangote Group
- UAC Foods
- Dufil Prima
- Unilever Nigeria
- Chi Limited
- Golden Pasta
- Bigi Foods
Name the Business: Offer tips on the name of the business including domain, name of the offer system.
- Choose Your Market Niche
- Conduct adequate and proper Market Research
- Prepare a good and well detailed Business Plan
- Ensure registration of your Business
- Buy a Delivery Truck for your Processed food products
- Get a trusted bottle Supplier
- Set up Your Price
- Set up Your Payment Structure
- Hire Staff
- Implement Your Marketing Strategy
Cost of Starting a Food Processing Company in Nigeria
NOTE: Starting a Food processing company in Nigeria might cost between ₦5,000,000 to ₦7,000,000 on a minimum startup cost.
To get your gross profit calculation, you will need a service of an outsourced accountant or let your in-house accountant conduct proper financial statement preparation.
To raise funds or to do an analysis of the capital structure of this business in Nigeria, it is mainly done through commercial bank funding for a majorly long-term duration. Sometimes, some angel investors can buy the idea of the business owners and invest in the business.
If the business has taken off and is now a listed company on the stock exchange floor, members of the public can subscribe for shares in the company.
Bootstrapping (self-funding) is another major source of capital for this kind of business as it will give it much leap. Funding (capital firm investing for exchange of equity) some investment companies give out money for business too as discussed above. Other means are: –
- Private Equity
Since humans cannot do without food, especially foods that they have to eat very quickly. There will always exist a need for this kind of service in the country. When people travel, they prefer to eat foods like snacks, cakes, chips, etc. A very good reason why one should venture into this business. Travelers will be a very good target market. It is therefore our recommendation that one venture into this business.
For swift and timely action to be taken, you need to contact us on 08023200801 or email us on our website email link. We are always available and visible at 5 Ishola Bello Close, Off Iyalla Street, Alausa Ikeja. You should contact us for in-depth analysis, market knowledge, and business plan breakdown for your business.
The basics of commencing a food processing company have been discussed adequately in this article. The prospects, the policies, branding, means of financing, applicable legislation governing the business, competitors, etc.
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