Weekly Update May 16th

Build a Company That Doesn't Need Investors

May 16, 2022

Hey , 

Happy Monday. Today I want to talk about financing your business. There have been a lot of people posting on this topic recently including James Richardson and Wil Schroeder. Below I share my financing journey growing TeaSquares and beyond.

PS. If you were forwarded this newsletter, please 

. 

  Build a company that doesn’t need investors.

Starting a CPG company is expensive and you need money to start, there's no way around that. Similar to most founders, I thought the first thing I needed to do was raise money from investors to start TeaSquares. What I didn't realize is that once you raise money from investors, especially VCs, future exit options become limited. VCs expect you to build a massive brand that can pay them back 10x their investment through a large strategic acquisition or an IPO.

While a business making $500,000 in annual profit may be life-changing to you, that doesn't fit within the VC model. By building a business that doesn't need investors, you can choose if and when to bring them on and maintain leverage. 

To clarify, when I highlight

NEED

, I specifically mean situations pre- product market fit where your business will run out of money or won't make payroll without investment. 

This is contrasted to

WANT

, as in, we have an awesome product and great business model, now we want investment dollars to accelerate growth.

  So how do you build a business that doesn't need investors?

First, you have to build a product that finds a product-market fit. Create a product that tastes amazing with a potential consumer base who are already eager to buy. Then you need to build a go-to-market strategy to get products to them while making a 50-60% gross margin. The more education your product needs to explain, the more expensive it'll be to build your business. 

Your next focus should be to create a Profit First Business, which means getting to breakeven as quickly as possible. That includes being able to pay yourself a basic salary. Getting to this point means only working with profitable selling accounts and not working with stores that require free-fills and high promos. This may take 1-2 years to achieve, so you need personal financial support from your savings, a part-time job, spouse, or family to make this happen. 

Why Create a Profit First Business?

First, it relieves an incredible burden, where you feel like you aren't fighting for your personal and business survival every day. You'll be able to build cash reserves and invest in growth initiatives on your own terms. 

Now that you have an amazing product and business model, your business is much more attractive to investors. You can now make the decision to grow with your own cash flow, grow with debt, or grow with VC funds. 

If you decide to pursue VC growth, you can be patient meeting with investors, as you won't have the pressure to make a deal or go out of business in 3 months.

  How expensive is it to start a CPG business?

When I started TeaSquares, I invested $10,000 of my own savings, $15,000 more from my other co-founders, plus my free labor. That meant we had $25,000 to start the company. At first, $25,000 seems like a lot, but that money goes fast once you start spending it.

Experts from James Richardson to Zach DeAngelo estimate that you need at least $250k - $900k in the bank to start a CPG brand and have a good chance of being successful. 

Of course you can start for cheaper, but founders who do so face an uphill battle for survival. At first, I went this route, and leveraged existing relationships and assets to save money. For example, my family owned a commercial kitchen and my co-founder and I made all the product, so we were able to save ~$3,000 a month on rent and labor the first year. 

We did take on investment from an early-stage CPG investor and angel investors that were crucial to financing our early days. If you do raise money early, do so with investors who have accurate expectations on growing a CPG brand and the time to do so.

  The 3 Ways to Launch an Early Stage Company 

I've found that there are 3 ways to launch 

Come with an audience.

Come with customers.

Come with money.

You can still be successful if you don't have one of these 3, just plan for it to take you a lot longer.

Wow, that was a lot. Let me know if you have any questions!

Jordan Buckner

Foodbevy

WORKSHOP: EXPANDING WITH DISTRIBUTORS

As a CPG Brand, distributors are crucial to your expansion, but building strong relationships isn’t always easy. Chargebacks, missed shipments, and delayed payments are all challenges to growth. Join me for a panel with founders discussing how to best navigate growing with regional and national distributors.

  PANELISTS

Jim DeCicco, Super Coffee

Renee Dunn, Amazi Foods

SWEETS AND SNACKS EXPO MEETUP IN CHICAGO

Do you live in Chicago or will you be there for the Sweets and Snacks Expo in a few weeks? We're co-hosting a Minority Meetup Happy Hour with Foodbevy member Brian Lai, founder of The Only Bean. While I won't be there, it'll be a great opportunity to connect with like-minded minority founders and diversity leaders.

Register today as space is limited!

Free D2C Design Brand Review

The first 10 founders can get an expert review of your CPG brand website, ads, and emails to see how to increase your D2C sales and design a roadmap for growth with the awesome Benson Sung. 

offers unlimited design and development for CPG brands for less than the cost of an agency. Perfect for emerging brand founders. 

LOOKING FOR NEW INGREDIENTS?

Have supply chain disruptions left your team scrambling for alternative suppliers just to make your next production run? 

ShelfLife launched it's free-to-use ingredients marketplace to alleviate the stress of sourcing the right ingredients. With ShelfLife, you can search and discover thousands of specialty ingredients, connect and communicate with suppliers, and organize their entire purchasing workflow all-in-one place. ShelfLife saves operations teams hours each week spent tracking down suppliers, sending out purchase orders, and sourcing new products. 

is completely free for brands! You can sign-up for an account

or reach out to

directly to discuss your sourcing needs.

AUTO-APPLY THE SMALLEST DISCOUNT THAT GETS EACH CUSTOMER TO BUY MORE

I'm personally using this great new tool to create personalized discounts for each of my Good Food Brands customers and products and you should too.As a brand, it's incredibly important to make sure that you’re profiting as much as possible from each sale and not overspending on discounts with universal promo codes, email pop-ups and point loyalty programs.You may not know it, but you are likely losing money by offering too much discount on products to shoppers that don’t actually need it to checkout.Why offer a 20% off SUMMER promo code or email signup pop-up when the same shopper would still purchase with only a 9% discount?Veeper is a Shopify app that auto-applies the smallest discount that gets each customer to buy more - increasing average order value by net 14%.Test Veeper on my own Good Food Brands site and request an intro

NEW PODCAST EPISODE: 42. Three Lessons from Failing at Retail with Yuval Selik

The reality is that most CPG brands will fail and go out of business. By learning from the lessons of others, you can have a chance of succeeding. Join me for a conversation with Yuval Selik who previously launched a CPG brand that failed at retail. Yuval now runs Promomash, a platform to help founders manage promotion and demo strategy and execution so they can succeed at retail.

DISCOUNTS

- Mindful Goods 

is an awesome Amazon expert that can quickly get you started or optimize your pages for strong ROI. 

 use code FOODBEVY.

- Maverick Lab 

allows you to create individually personalized videos (with a customer's name) welcoming them to your community. Foodbevy members save 40%. Reply to this e-mail for an introduction.

- Chop 

is a

that allows you to drive in-store trial, collect customer shopping data, and build customer profiles to further drive your business. Foodbevy members save 20% off. E-mail me for the discount.

- Stripe 

is now providing $20,000 in fee-free processing for new and EXISTING customers.

The Accountrepreneur 

is your go-to outsourced CPA and CFO firm for the food and beverage industry. Receive

- Airtable

 can store information in a spreadsheet that's visually appealing and easy-to-use, but it's also powerful enough to act as a database that businesses can use for customer-relationship management (CRM), task management, project planning, and tracking inventory. 

With your help we're building an amazing community of Food and Bev entrepreneurs helping each other!

Jordan

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