Welcome back to the Brixx blog, we’re kicking off 2021 with a new ‘how to start a business’ article.
Thanks to the COVID-19 pandemic, restaurants, pubs and cafes have been shutting their doors across the UK.
With the future of high-street footfall uncertain many people have decided to set up food vans.
They’re mobile and can offer takeaway service only, which makes them a perfect investment in these uncertain times.
Now, despite being perhaps a little easier to open up than a traditional restaurant, pub or cafe, they do still pose some complex challenges.
Well, fear not, as in this article I’ll be walking you through each and every step you must take in order to open up a food van in the UK!
By the end of this article, you’ll have even built your own financial plan, that could look a little something like this:
But let’s first start with the very basics, market research, or how viable is it going to be to open one in your area.
Market Research for a Food Van Business
One of the most important things to do before you set out with your food van business, is to conduct proper market research. But what exactly is market research?, broadly this means research about your customers & your competitors.
It doesn’t really matter which you research first, but for this article we’ll start with you customers.
The main question to constantly ask yourself when you’re carrying out research on your customers is:
“Who is my ideal buyer?”
Get a mental picture of this person in your mind, this is typically known as your “buyer persona”.
Then you can start to ask yourself, what does this person look like? What are their likes, dislikes and personality traits? What do they do in their spare time?
These are just a few of the questions that you need to ask yourself when devising the picture of your target audience.
Not every food van business will have the same target audience, it’ll vary by location, products you’re selling and other factors.
Having said that, I’ll give you a helping hand by creating a business alongside you. Bear in mind that my ideal customers will differ from yours, just use this as guidance!
My food van is going to be a mobile cafe, a coffee van if you will, selling hot & cold drinks, cakes and other sweet treats.
I plan on setting up shop on my driveway on the weekends. This is due to my close proximity to a local country park which is extremely popular with dog walkers – due to the pandemic, the walking route has become popular with non-dog walkers too.
So my target audience is dog walkers and families walking into the country park.
You can do research about your audience online, or by going out into your local community itself.
For my business, it’s as simple as seeing dog walkers and families visiting the cafe inside the country park to know that this is my audience.
Some examples of other food vans audiences could be:
- Selling to kids and their parents at local little league football matches
- Partnering with pubs that don’t sell food
- Setting up in laybys
Keep all these tips in mind as you plan your business!
Researching your competitors
One of the issues with food van businesses in the UK is that it can be difficult to differentiate yourself from competitors, and that prime spots for setting up are often taken!
This is why competitor research is so necessary – you might have a perfect location in mind but find that it’s already in use by someone, or that there’s someone else just down the road that’ll steal all your customers!
But how do you go about doing competitor research?
It’s not always just about who’s in what location – it’s about what times they’re there, what they’re selling and how much they’re selling it for.
Thankfully, for my coffee van, I don’t need to worry about the location as it is my own private residence. But I should be aware of the cafe inside the country park, despite this being a good kilometer walk away, it is incredibly popular with walkers stopping half way round.
Now I know my competitor I need to think about what I’ll do to differentiate myself – and that’s what we’ll talk about in the next sections.
A business model is, described simply, how your company will go about making a profit.
There are many different business models – and probably some that haven’t been discovered yet!
You can find many more by internet searching for your business type + “business models” online.
But your options are limited, you’ll be selling directly to the consumer after buying ingredients and products wholesale from a supplier. Or alternatively you might be buying from a supermarket or CostCo and selling at a much higher price.
Speaking of price, let’s cover that next.
Pricing your products
How you decide to price your products depends on a few factors:
- What you’re selling
- The quality of your products
- Your location and proximity to competitors
Why do these factors matter?
Well, if you’re selling burgers and kebabs, then you should expect to sell these at a lower cost, but if you’re selling these late at night with no other takeaways around, you can sell them at a higher price.
If you’re close to a competitor, you’ll need to either be better in terms of service and quality or be prepared to try and undercut them!
For my coffee van – we know that there is a cafe in the country park not too far away so I’m conscious of this when pricing. They sell their coffees at around £2.50 for an americano and £3 for a latte.
I can compete with this pricing, but to be sure, I will need to look at my financials and how much I need to charge in order to turn a profit (we’ll look at this later in the article). I expect that customers will come across my van before they reach the cafe inside the country park – so this should help entice them.
Of course, I can’t just rely on pricing and footfall to attract customers, my van needs to look enticing too!
Marketing your food van
Marketing is all about how you will tell your target market about your business, how you will draw them in and get them to spend money with you.
For a food van, the key is to keep your advertising targeted – which means local.
So you can forget the £1000 a month adwords campaign, it’ll be wasted cash!
You want to focus on your branding, decoration and local advertisements, such as flyers, joining community groups on social media and newspapers/magazines.
Perhaps the most important of all these is your branding – if you have chosen your location right then this’ll be the one of the biggest factors for drawing in passers by.
If your van looks clean and is branded with nice colours, people will be more likely to stop. If it looks dirty, it’ll immediately put people off!
So for my coffee van, I plan on converting an old VW campervan, painting it light blue and putting some branding on it. Similar to this:
This will match the aesthetic I am aiming for by looking unique, clean, fresh and will hopefully bring in more customers.
In addition to this, I plan on setting up a Facebook page and joining some local community groups, will put up flyers around my village and spend some money on some print adverts for local magazines/newspapers.
Now you know how you’ll be marketing, it’s time to move on and start making your dream a reality.
Setting up – Licenses, Permits, Insurance, Training and Qualifications
Unfortunately, making your dream a reality involves looking at licenses, permits, insurance and ensuring you’re qualified to make your dream.
This is where your dream can be crushed, what if that prime spot you’ve got your eye on can’t be used? What if you can’t get insurance?
These are all things to be aware of, ensure you’ve covered all your bases and do further research than what I list here. The last thing you want is a fine!
So, let’s break each of these down, starting with licenses & permits.
Licenses & permits needed for starting a food van business in the UK
You will need a Street Trading License, which essentially allows you to sell food on the street.
Fines can be up to £1000 if you don’t have one, see your local council for details on pricing.
If you are going to be trading in the town/city centre then you’ll want to keep an eye out for permits – are you going to be allowed to park your van where you want to? Again, check with your local council for details on this.
Insurance needed for a food van business in the UK
You’ll want to ensure you get some kind of public liability insurance to cover you against any compensation claims that arise from customers – but even with this, try not to poison your customers!
Public liability insurance can be relatively cheap – you can use comparison sites to see quotes.
Oh, you’ll need to pay your car insurance and road tax too!
Training & qualifications needed for a food van business in the UK
Whilst it’s not strictly necessary to have any prior training or qualifications to start up your food van, it’s a good idea to get some.
Any business involved in preparing and serving food should ensure staff are trained to understand the risks.
A good idea is to undertake a Food Safety Qualification to at least level 2. These courses are online and only cost around £20 to do.
Registering your business
In the UK, you’ll need to register with HMRC. As you’ll likely be self-employed, you need to complete a self-assessment tax return each year – where you’ll pay income tax and national insurance.
It’s really important to keep records of all the transactions you take, how much you spend on items for the business, i.e. bowls, leads, vehicles (if applicable). This is so you don’t overpay on your tax.
Other countries will differ, so make sure you check, a visit from the tax man is the last thing you want!
Funding your food van business
The cost of starting your food van will largely depend on the type of van you intend on starting.
If it’s a burger van, are you buying a van that is already ready for that purpose? Or will you have to convert it?
Same goes for my coffee van, I need to buy and convert a VW campervan, fit branding and fill it with all the necessary equipment.
The largest cost comes from buying the vehicle in question and your equipment – so consider this when you’re planning your startup costs.
I’ll break down the costs needed to start my cafe van to give you an idea of what to expect:
Custom conversion: £5000
Coffee machines: £2000
Initial stock purchase: £1200
Blackboard sandwich board: £50
There are, of course other costs to consider, and there are more recurring costs that you need to be aware of, but rest assured we’ll cover these in the next section.
I’m looking like I need around £30,000 to get my business idea off the ground – I can’t finance this myself.
So my next steps should be to either find an investor or approach a bank for a business loan.
We’ve got a couple of great articles that go into more detail about funding:
If you’re going for funding – your investor or bank will want to see a financial plan – let’s discuss that.
How to create a financial plan for a food van business
The final hurdle you must overcome in making your dream a reality is creating a financial plan and projections.
This is no easy feat, and isn’t something you can throw together in an hour. It takes hours of careful research, planning and estimating. Then you actually have to build your plan.
There are a couple of ways you can build your financial plan:
- In a dedicated financial modelling or forecasting tool, such as Brixx.
- In a spreadsheet
Now, you’ll probably guess which method I’d recommend, but plenty of people do just fine with creating a financial plan in Excel, we even created some templates to help you do just that.
But if you do opt to use Excel, just be aware of the risks and frustrations that can come with it.
I’ll now walk through building your financial projections, step by step. I’ll be doing this in Brixx, you can follow along with a free trial (no credit card required) or try using any of our templates.
Section 1: Setting up your plan
When I first create a plan in Brixx, I’m presented with this screen:
I input my plan name and when I want my forecast to start from, I also leave tax off for the moment as I don’t plan on earning enough initially to fall into that.
I now hit create plan, which presents me with this screen:
The Brixx interface is designed to be easy to use:
- On the left you have your components, which represent business activities, so this could be income from sales, staff costs, loans, assets etc.
- The middle shows the dashboard which builds automatically based on your inputs
- You can switch between the dashboard and your cash flow, profit and loss and balance sheet reports in the top bar.
If you’re still not sure how it works, you can watch this video to help you get started!
Now we’ve got our plan base, we can start to input our sales forecast.
Section 2: Income forecast
Perhaps the most important part of your financial plan.
This is where you estimate how many sales you will make across your plan. It’s not just a guess though, it’s an estimate based on the outcome of your marketing efforts, market research, competitor research and your business model.
If you want to read more about creating an accurate sales forecast, check out this in-depth article we wrote.
Initially for my cafe, I only intend on opening on weekends for the first 6 months whilst I work my day job.
I’ll open between 9am – 4pm.
I know that an average of 2000 people will walk past my van on a weekend day.
Now I know how many will walk past, I need to estimate how many of these will stop and make a purchase.
It’s important not to overestimate sales, but what you can do is create multiple scenarios, a best, worst and base case.
For my base case I expect 5% of passers by to stop and buy something.
So that gives me an average of 100 sales per day.
I need to estimate how much each person might spend with me.
If each person buys 1 coffee and every other person buys a coffee and a cake, then we should see 100 coffee sales and 50 cake sales.
I price coffee at:
Victoria Slice £2.75
You should break this down further, so those 100 coffee sales might be 75 americanos and 25 lattes, and the cake sales might be 34 brownies and 16 victoria slices.
Try to go into as much detail as you can.
So if this is my average sales for a given weekend day, I now need to work out what this is per month.
At 4 weekends per month, I should see 1200 sales a month:
- Americanos x 600
- Lattes x 200
- Brownies x 272
- Victoria Slice x 128
I’ll enter this into my Brixx plan as so:
I’ve done this for each item I sell.
Now we can move on to the next step, adding in cost of sales.
Section 3: Cost of Sales
Each item you sell will have a cost attached to it – for example for an americano, I need to factor in the cost of the beans, water supply and the coffee machine.
As with everything in your financial plan, try to be as accurate as possible when working out your cost of sales.
In Brixx, I can link a cost of sale component to any income component:
This allows me to set a cost per unit sold or as a percentage of income. You can see in my example above, I’ve set my americano cost per unit sold as 20p, this will automatically calculate in Brixx for each sale that I forecast.
For goods that I buy packaged, like brownies, working out the cost of sales is significantly easier, it’s just the cost per cake that I buy from the supplier.
Section 4: Other startup costs & ongoing costs
Assets are any items the business owns, tangible or intangible.
This could be land, vehicles, machinery etc.
In the case of your food van, it could be:
- Your van
- Any cooking equipment
- Your brand
For my coffee van, I have:
- My VW Camper = £20,000
- 2x coffee machines = £2,000 (1k each)
- 2x small fridges = £500 (250 each)
We need to account for these items so that they appear on the balance sheet.
It’s important that they’re on the balance sheet to show what the company owns and owes, crucial if the business is ever sold or needs to be liquidated.
Each asset you own, especially vehicles, will need to be depreciated over the course of their life – you can read more about depreciation here.
I’ll add these to my financial plan:
Remember we need to finance these assets.
I am hoping that by presenting this financial plan to a bank, they will allow me a business loan of £22,500 to get me off the ground, at 5% over 5 years.
I know that this is a viable rate and length of time as my Brixx plan will show if I can make the sales to cover this or not.
Section 5: Assets
You need to remember all the other little costs that come with starting and running your business, marketing and branding costs, utilities, insurance, you name it, it goes in your plan.
Let’s add up my remaining costs:
Insurance & licenses- Paid Annually
Public Liability Insurance: £324.30
Car insurance: £950
Road tax: £150
Street food license: £200
Marketing – Paid Monthly
Social media ads: £50
Print adverts: £25
Ongoing costs – Monthly
One off costs
Custom conversion: £5000
Sandwich blackboard: £50
I’ll pop these into my financial plan and then we are nearly done!
This is what my cash flow report look like for the first 3 months:
Growing and expanding your business, the next steps.
Where you go next with your business is up to you.
In my example, I enter the same number of sales each period. This gives me a good impression of my potential, but in reality there might be a ramp up period or there might be some seasonality involved.
If all goes well, I might initially start by opening up on Fridays and then expanding to other days of the week.
A good idea for growth is in 2021, as people hope to get back to offices, I might choose to move into a city centre to catch some footfall from office workers during the week.
I might choose to hire more staff, or to expand my product offerings – I might even choose to buy another van!
There are lots of possibilities, but you should map out each change your bring to your business with a modelling tool like Brixx.
This allows you to see the impact of any change on your existing business and allows you to make an informed decision about whether you can actually do it!