Pros & Cons

Start A Catering Business

Pros & Cons

Trying to understand the pros and cons of starting a catering business?

Here are all of the pros and cons of selling catering online:

Pros Description
Flexibility You can put as much time into the business as you'd like. If you like the work and have some initial experience, you can start small and manage all aspects of the business on your own.
Ability to start your business from home It's not necessary to have a physical storefront or office space to get your business started. You can do everything from the comfort of your own home, at least in the beginning!
Little startup costs required The cost to start a catering business costs significantly less money than most businesses, ranging anywhere from 5,572 to 100,877.
Meaningful business connections You never know who you will meet as a catering business. This could be the start of an incredible business opportunity!
High customer retention rates Once a customer invests in your product, they've invested their time and energy to utilize your product/service which is highly valuable to them. Typically, your product or service becomes indispensable to your customer.
Pick & choose the clients you work with Catering Businesses have the ability to choose the clients they work with. You have the freedom to work with only a few loyal clients or with hundreds of clients!
Control of workload With starting a catering business, you have the unique ability to choose how little or how much you want to work. You also have the freedom to decide which projects you want to work on, and can turn down the ones that do not interest you.
Gain exposure and experience This career allows you to gain experience working for multiple different businesses - which will benefit your resume and also keep things interesting for you!
Unlimited income potential With starting a catering business there is no cap as to how much income you can make. The stronger your business skills and the more energy/time you put into your career, the more you'll make.
You are your own boss! With starting a catering business, you are the one to make decisions for almost all of the operations. Calling the shots can be empowering and liberating!
Predictable income stream Your businesses income stream tends to be predictable based on the number of customers you have signed up. This makes financial planning and outlooks much more seamless!
Higher likelihood of getting referrals This business is all about referrals, which can be a a very impactful way to attract and retain customers. It's critical that you have a great referral program in place that incentivizes your customers to tell their friends about your product.
Location is everything! When operating a physical storefront, the location often speaks for itself and serves as it's very own marketing tool! It's important to choose a location in a high traffic area so you can spark curiosity and get people through your door!
Face to face interaction If you are the type of individual that thrives on human interaction, then this is the business for you! With a catering business, you will be hands-on with customers and or employees every day.
Simple business model A catering business has the advantage of a simple business model, which makes launching and building the business more seamless.
Control your own destiny Starting A Catering Business allows you to control every aspect of your life and make your own dreams come true every day.
Greater Income Potential With this business, the sky is the limit in regards to your income potential.
You get to do something you truly love With starting a catering business, you get to put your energy into something you are truly passionate about! You'll find yourself devoting as much time and energy as possible into the business to make it successful.
You can decide who you work with Gone are the days of working in a toxic work environment with employees that you may not vibe with. As a small business owner, you get to decide who you work and surround yourself with.
Can build solid foundation of clients It's unlikely you will have one-off customers as a catering business. Typically, you have a solid foundation of clients that use your product and services regularly.
Results and revenue happen quickly! Unlike other businesses, it can be relatively quick to start seeing results and revenue. As long as you follow [all the steps](https://www.starterstory.com/validate-business-idea) to validate your idea before launch, you are likely to see quick results and ROI.
Cons Description
Low margins The gross margins for your catering business are typically around 11%, which can make it more challenging to incur new expenses and maintain profitability.
High employee turnover In the catering business, employee turnover is often high, which can be quite costly and time consuming for your business. It's important to try and avoid this as much as possible by offering competitive pay, benefits, and a positive work environment.
Taxes As a catering business, you typically pay self-employment taxes which can be quite high. It's important to understand what you will be paying in taxes each year so you can determine if the work you're taking on is worth it.
Niche Market A niche business is not necessarily a bad thing, in fact, it can be the key to your success. However, it can be more challenging and time consuming to find the perfect niche market and target audience.
High overhead expenses With starting a catering business, there are overhead expenses that come with selling a physical product. You will want to make sure you strategically budget for these overhead costs. We discuss this more in the startup costs section below.
You may need to charge sales tax If you are selling your products in various states, you may be required to charge sales tax. Although this may not impact your financials specifically, it can be a headache to create a process and procedure for this. To learn more about sales tax, check out [this article](https://www.thebalancesmb.com/do-i-need-to-collect-sales-taxes-in-my-state-398913)
Work can be repetitive You may find creating the same product over and over repetitive and tiresome. One way of avoiding this is to diversify product lines and revenue streams - this will keep things interesting!
Churn In this business, customers can cancel their membership or subscription for your services - which can make revenue forecasting challenging and unpredictable. It's important to focus on your churn rates and trends so that you can prevent this as much as possible.
Time commitment With starting a catering business, all responsibilities and decisions are in your hands. Although this is not necessarily a negative thing, work life can take over at times. This can place a strain on friends and family and add to the pressure of launching a new business.
Difficult to build trust with your customer With starting a catering business, there can be minimal face-to-face interaction, which means it can be a lot more difficult to establish trust with your customers. You'll need to go the extra mile with your customer to grab their attention and business.
Impatient customers You may offer an engaging user experience for your customer, but customers expect a lot and may be impatient if they aren't pleased with your product or service.
Difficult to scale With a catering business, it can be challenging to find ways to scale. Check out [this article](https://www.inc.com/jeff-bussgang/scaling-a-business-is-hard.html) that discusses scaling your business and the challenges that come with it.
Learning Curve When you start your own business, you no longer have upper management to provide you with a playbook for your roles and responsibilities. You should know the ins and outs of every aspect of your business, as every decision will come down to you.
Equipment Breakdowns Over the years, your equipment can get damaged, break down, and may need repairs which can be expensive. It's important you prepare for these expenses and try to avoid damages/wear & tear as much as possible.
Recession-Impacted Industry When the economy is down, catering business's are one of the first things to be cut.
More challenging to earn passive income It can be more of a challenge to make passive income in this business. Often times, the amount of revenue you bring in is limited by the amount of time you have in the day.