A Blue Apron Box (Photo Courtesy of BlueApron.com)

My Biggest Missed Opportunity: How Listening To A Client May Have Changed The Course Of My Business

In the summer of 2011, I was nominated for Florida Entrepreneur of the Year by Ernst & Young for the second time in three years. I had been at the gala in Orlando the first time I was nominated in 2009 and decided this was a great opportunity to bring together The Fresh Diet management team for our second company conference. We had held our first management conference in early 2010, and viewed it as a great success and something we wanted to do each year. I felt very strongly that bringing together our key employees from around the country was imperative to building a strong company culture. The event was being held again in Orlando, so I had all my managers from around the country fly in to discuss the past, present and future of our company. This time, besides having the 20 plus employees, I wanted to add another perspective, so I invited a few of our customers to join us as well. I figured what better way to understand the current and future needs of our clients then by having them discuss our product directly with us, in person. To decide which customers would join us, we had anyone who was interested write in why they should be chosen. We received many inspiring stories from around the country and ultimately chose six customers to come in and speak at our conference.

One of the customers we selected was Fred Cuellar, the Founder & CEO of Diamond Cutters International. Not only was Fred a loyal Fresh Diet customer, but an author, executive coach and motivational speaker as well. I asked Fred if he would open our conference by speaking to our entire team. Fred agreed, and I let him know that he could speak about whatever he desired. Fred stood in front of all of us and began his speech: “The Fresh Diet is a great company, and you are all doing a great job, but my number one recommendation for your company is to launch an ingredients in a box concept.” Fred went on to explain how he and his wife enjoyed having freshly prepared meals delivered to them, but sometimes he would love to do the cooking himself. “If you could deliver me the ingredients instead of a prepared meal,” Fred said. “I would use your services for the rest of my life.” This concept was something my partners and I had discussed in the past, but Fred laid it out perfectly, explaining, from the perspective of a customer, the importance of adding other services to our current offering. Fred understood that there was a void in the market when it came to consumers wanting the convenience of healthy meals but also wanting to cook for themselves. His revolutionary idea of delivering ingredients as well as prepared meals would allow Fresh Diet to meet all consumers’ needs and continue to innovate as a company.

By the time our conference ended we felt good as a company. I had just taken our second investment from our angel investor and no longer was dealing with the cash flow crunch of the summer. We were on pace to have another 100% year over year growth, and we were ready to innovate and expand our offerings. But instead of using Fred’s idea, we chose to focus on another major project. The ability to ship our meals nationally. At the time we were only delivering meals with our own fleet and covering only 33% of the population. This new project, called MAP (modified atmosphere packaging), allowed us to ship meals twice weekly to customers in 98% of the continental US. Although we needed to purchase very expensive machines in each of our five kitchen facilities, I felt that the ability to ship meals all over the country would help continue our explosive growth.

I wish I could tell you that the projects we chose to spend our money on surged the company to greater growth. Unfortunately, the next two years were some of the most difficult years of my life. We were on pace to have our first flat year, with no growth. This was mostly due to the inability to raise the capital needed to keep up our hyper growth. We were operating on cash flow and high interest cash advances. Our MAP project was not performing as expected. Although we were able to launch our national product and believed we had a great offering, our cash flow crunch did not allow us to market it properly, resulting in limited signups to justify the large expenditures.

Looking back, I wish I had listened to Fred. As a client who knew our product really well, Fred saw where we needed to go as a company. Of course, history has shown how right Fred really was. Over the last year Blue Apron, Plated and Hello Fresh, all companies who deliver ingredients in a box, have raised over $200 million dollars and have revenues over $300 million combined. Although I am not convinced of the sustainability of these companies as a stand-alone business, as an add-on service this could have brought in the extra cash flow our company really needed. As an entrepreneur you need to look everywhere for advice, and in this case the advice came from a devoted customer. Customer feedback is always precious, but when it comes from a brand ambassador like Fred and it comes in person, it’s probably worth listening to.

The stronger lesson, though, was the importance of thinking deeper on how to innovate as a company. For us, focusing on expanding our offering nationally proved to be the wrong decision. Today The Fresh Diet no longer ships our MAP product. If I would have focused on expanding our offering to our current delivery zone instead, I may have launched the ingredients in a box concept and changed the course of our company. The key, I realized is to improve upon the product and offer more services to the customers we already have, instead of trying to expand geographically and reach more customers. The good news for The Fresh Diet is that our model and infrastructure has a strong barrier to entry. While it would be very difficult for any of the aforementioned companies or others to get into our business, it would be quite easy for us to get into theirs.

You can find me on Twitter (@ZalmiD) and learn more about my work at www.ZalmiD.com

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Originally published at www.forbes.com on May 26, 2015.