Anjali Oberoi: Your food business financials. What you need to know.
In our experience, it’s a rare individual who loves financial data as much as she loves food. Possibly even rarer to find one who has studied both and spent much of her career at the intersection between food, science and finance. And yet, here she is. Anjali Oberoi is one of Food Craft Institute’s principal instructors and founder of Bernoulli Finance where she works with fast-growing ecologically-minded companies, helping them record, monitor, and use their financial data for better decision-making and long-term planning.
In addition to leading our upcoming Financial Management course, Anjali splits her time supporting clients across three continents. So we’re delighted she found time to share her financial planning advice for food entrepreneurs.
Q. How did you get into food business finance?
In some ways, I feel that all the paths I could have taken would have eventually led to Bernoulli Finance, the company I head today, because it lies at that most natural intersection of my skillset – I am a numbers geek through and through – and my interest is in ecological ventures, particularly those related to food.
The latter is older than my oldest memory – it all started with a love for consuming chocolate at the ripe age of 2 that developed into a strong interest in understanding its history, economics, and production. I took this pursuit to university, where I focused on food science & technology followed by financial management.
I’ve had a number of detours along the way, including a career break a few years ago when I found myself taking up one, then two, then more engagements with food companies through relationships I had been cultivating for years. At some point, it became evident to me that all these gigs added up to something larger than their individual selves, and Bernoulli Finance was born. My path in getting here has seemed a little tortuous at times, but in hindsight I realize that every experience was somehow relevant and has made me better at what I do today.
Q. What are some top financial or accounting considerations for food entreprenuers as they’re starting to create their business?
First, cash is king. Securing adequate cash resources that not only cover the start-up costs but last until you start breaking even is essential to the company’s success. This may be a multiple step process and many times, absolutely is. So don’t sweat it all the way in the beginning, but in reasonable chunks of time that allow you to secure the next round of cash.
Second, a lot of food ventures are the result of considerable passion (which is great) and insufficient planning (which is bad). We always encourage our clients to think through their plan thoroughly, keep questioning their revenue projections, and to stay nimble, ready to switch tracks if needed.
Third, know your supply chain: from suppliers and distributors to competitors and customers. Determine how much inputs should cost at different times of the year, what markups you should expect throughout the supply chain, and which you can avoid. Have a very clear understanding of your goods’ production costs at various quantity levels. Finally, figure out how you should price your products to remain competitive without compromising the brand image.
Q. You work with a lot of good-food companies. What are some of the minimum financial management standards that food businesses should maintain during start up and then during growth?
From day one, record every single transaction, to the penny. From week one, check that your cash at hand matches what your records say it should. From month one, take a step back to look at your data and recognize what it says about your business and its trends – How are you doing on sales? Are some of your cost categories surprisingly high or low? Are there certain locations or times where you do better than others? Etc.
There are plenty of software solutions that can help you with those tasks. In the very beginning, which solution you choose is not as important as just being organized. Use Excel if you have to. As your business matures, if you find that either the tool you are using or the time you are putting in is a constraint, recognize that it might be time to shift to a different software solution, hire the right resources, or do both.
Q. Many food makers just want to be managing the food-related elements of their business. What advice do you have for them to get over any aversion to ‘the numbers’?
The numbers are just tools to convey a story. If recording and reviewing numbers won’t work for you, then find a format you can digest – it can be tables, charts, graphs, or simply text summaries – and setup the systems and resources that will bring the story to you in that format. You can be number-averse, but, as a business owner you cannot allow yourself to ignore how your company is doing.
Also, taking a class like Financial Management with FCI might help you find the Goldilocks spot between number-geek and number-averse. As I can attest, the goal of that class is not to turn you into an accountant or a math nerd, but to help you translate your numbers into real life decisions that are closely tied to the food-related (fun!) elements of your business.
Q. What are some common mistakes or missteps you see food startups make around financial management?
Not tracking or projecting cash movements leading to a failure to manage cash flow well – I cannot emphasize how important this is. All the incredible ideas and growing demand will not help if your cash is tied up and not available for use.
Not understanding the importance of managing inventory well. In the food business, where shelf life is an added complication, knowing inventory turnover is key to managing both demand and supply, and cash (yes, again!) well.
Being haphazard about reviewing finances, at times ignoring them altogether and at others micromanaging to the last cent. Establishing a routine and sticking to it is as important as managing staff, dealing with equipment breakdowns, or mopping up product spills.
Q. We’re excited for you to lead our Financial Management course. Who would you encourage to attend the course?
This course is definitely for you if you fit any of the following profiles:
You are a one-person show.
You are the designated finance person in a food startup and have no background in finance.
You have your finances in order but are looking to draw strategic insights from your numbers.
You are about to make big capital investments but not sure if it’s the right time or use of your money.
You want to set yourself up in the best way possible to raise external capital.
You can join Anjali and meet other food startups at our upcoming Financial Management course. She will be covering essential food business financial skills and decisions including: understanding and using accounting basics, financial statements and cash flow analysis; applying the building blocks of finance to your business (cost, margin, sales channels, pricing, volume, product selection); establishing your break-even and inventory management processes. Plus you’ll get a chance to workshop your own business numbers.
More details and enrollment information here.