7. The Growth
2017 turned out to be a year of growth for us as we made some big moves and grew by over 65%.
We were getting closer and closer to profitability.
We were finally able to focus on developing the business as opposed to scrambling to just stay alive.
One of those key things was getting our small bag machine going which helped add about 35% to our top line revenue by opening up the convenience store channel with a ‘grab-n-go’ size bag.
We were making real progress, BUT from a financial standpoint we still weren’t profitable. Since I was financing the business with a line of credit, there is only so many months you can be in the “red” before you have no more money. You’ve all heard the concept … like a plane trying to take off before it runs out of runway (i.e. money). I was just trying to get the business profitable before we ran out ….and I knew I needed to start looking for other financing options. Raising capital was my best option based on where I was.
After a few months of “beating the bushes” with potential investors I remembered that Alabama had an annual competition called Launchpad Alabama. There was close to $200K that would be split between 3 companies that won the contest. There were 3 rounds that consisted of an online application, 1st round pitch contest in Birmingham, and the final round was another pitch contest with the finalist in Mobile.
I submitted the application with little to no confidence in anything happening, but low and behold we made it through the initial round. The next round was the first pitch contest in Bham.
Sure enough I made it into the top 5 and on to the final round in Mobile for a chance at $100K.
Just a side note to show where my head was at at this point in time … money was tight, I mean really really tight. …If I didn’t win things would be looking pretty dire if I was to continue.
Welp, we won. We won big …$107K to be exact which was the most they had ever given out to date. Hard to describe how pumped I was …so grateful!
We planned to use the money to help us become profitable …and here were a few of the key things that I felt would do that:
- Launch a new flavor to increase sales volume per store
- Improve our profit margins by reducing waste in our production process — upgrade our packaging machine so we could become more accurate and much faster.
- Improve our Instore execution — investing in more instore demos, couponing, merchandising, etc.
- Exhibit at key food shows
Winning the competition could not have come at a better time, and I was ready to get after it.
From the list above:
The new flavor we decided on was a Sea Salt Caramel and started going to work on recipe development, package design, costing, where to launch it, etc.
To improve our profit margins …get ready this is technical …
We would go from a linear scale (video)- to — a combination weigh scale (video). What this would do is improve the accuracy in packing our bags — this would save us a lot of money. The combination weigh scale was also much faster as we were able doubled our speed. We went from 12 bags / min to 24 bags a min with the same amount of labor.
The price difference of the 2 above is quite significant if you’re purchasing from a North American company. However, as with everything China has a ton of companies making these machines for 10–15% of the cost. I was obviously cautious when considering a China made machine, but with the cost difference I decided to look into it further.
I made a bunch of phone calls, watched a bunch of YouTube videos, and ended up finding one on eBay located in Delaware. It was less than 10% of the cost of new one …still not cheap by any means but I felt like it was worth the risk.
2 days after finding it online I flew up there to look at it in person. I should’ve just turned around when I arrived based on what the business looked like. It was “sort of” a warehouse in the projects of Willmington, DE. There was a sketchy “Free Candy” van parked in the parking lot that was over grown with vines …and the side door was just open. I peaked inside the door and started yelling “HELLO, HELLERRR…”
Finally this guy (pic below) comes around the corner …just use your imagination as to the look on my face.
When I first called they told me they would let me see it running if I flew up there…but surprise surprise they didn’t have it setup to do so when I arrived. They didn’t even have it out of the crate.
I was concerned …but undeterred so I ended up purchasing the machine in spite of all the “signs”. The price was too good and we needed the machine.
**I actually got the call while I was there that Winn Dixie would be adding another 150 stores… so it made the decision even easier.
I also needed other parts of the line to actually use the machine such as a platform to put it on and a bucket elevator to feed the cookies into it. I ordered those from over seas thru Alibaba — with about a 60 day lead time.
I’ll try to shorten the story a bit.
We got the machine in and built a temporary stand for it out of 4x4'x and 2x4’s — and started trying to figure out how to operate it. Remember it’s a China made machine …so we had to try and decipher “chinenglish” on all the buttons and readings to understand what the heck was going on.
We figured out enough of it to get it going. During the first production run we started to notice some of the bags were getting lighter and lighter after the machine was running for a few minutes, but the machine was still reading the correct weight. I’ll save you the time, the machine was a dud …a true “POS”. The guy had screwed me …but don’t feel sorry for me it was my fault to trust the guy…all the signs of a schyster were there. We tried everything to get it working right even getting a few engineers involved. I tried getting my money back, threatened to sue him, but ultimately I just had to lick my wounds and sell the machine for scrap.
It was an expensive lesson, but I did learn a lot about these machines during the process. I ended up finding a manufacturer in China that actually did have a good reputation in the US — and I started looking for a replacement. I ended up finding an importer in Miami and bought another machine …and about the time I received it the other important parts of the line had arrived as well.
Still our all in cost with the Scale was about 10% of what it would be if I bought a North American brand. We wouldn’t have been able to do it without these savings.
The 2nd machine ended up being a boss …huge improvement in our speed, accuracy, and increased capacity.
Below are images of the original weighing machine vs the new:
As far as in-store execution I had a few key focuses that consisted of increasing in-store demos, improving our position on shelf by increasing facings, offering shippers and permanent displays, creating secondary merchandising locations in-store, and launched a coupon program …and actually a few other things but that gives you the gist :)
I hired our first full time salesman as well to help execute all of the above …aaaaannnndddd purchased a Van to cruise around in doing the above.
Here is her coming out pic …we called her “The Moon Buggy”
We also planned to exhibit at a few food shows …such as the Atlanta Gift Market where we picked up about 100 direct wholesale accounts. It was good practice for us as we were planning to attend the Fancy Food Show in New York that summer.
We did just that in July of 2017 and had a great show. We met with some of the largest retailers in the US and as a result had more opportunity than we could handle.
Some of the retailers included: Costco, Delta Airlines, Sam’s Club, Fresh Market, Fairway Market, Amazon, Whole Foods …and the list goes on.
A few things we learned by attending was that we confirmed we needed to fast track another flavor. Two flavors just wasn’t enough for a distributor or retailer to get excited about …3 to 4 would be ideal. Makes total sense in hindsight..
All in all it was a great show as we made some really big sales and got into a handful of premium retailers.
As we approached the end of 2017 things were looking good …
We doubled our sales in the 3rd and 4th quarter that year from the previous year and just about outgrew our ability to keep up.
The Launchpad Competition money was really helping us ramp up our marketing efforts as well as make some strategic moves that were working.
By the end of 2017, things were getting a little crazy and going into 2018 I knew I needed to get our processes a bit more organized …but felt like I had a plan.
Next: The Crumbling (pun intended)
If you want to read them all now here are the links:
