The Online Community for Food and Beverage Startups

   6 WAYS TO       INCREASE PROFITABILITY   

Hey ,

It's Monday! So if you're wondering which new name I chose for Good Food Brands, check out the next section below...BUT FIRST, one of the biggest questions I'm hearing right now from founders is "how do I become profitable?" This is due mostly to investment funds slowing down for new and existing founders who previously took investor funds. Now if you know me, I'm a huge fan of taking VC money for a slim number of scenarios but don't believe it should be the default funding method for business.That said, I wanted to share 6 ways to increase profitability and hopefully reach breakeven or profitability. 

1) IDENTIFY AND FOCUS ON SELLING YOUR MOST PROFITABLE PRODUCTS. 

It's important to create products with high-profit margins from the start because margins only decrease as you grow. That said, if you have existing products, look at your current assortment to focus on the most profitable products or pack sizes. With TeaSquares, I used to sell our energy bars wholesale with an inner pack minimum. Then I increased the minimum to a master case, and then to half pallets. While you might lose some smaller customers, it increases your profitability for every customer you are serving.

2) BREAK DOWN YOUR MARGINS AND PROFIT BY SALES CHANNEL.

As brands, we often lump all of our sales and cost data together without taking a per-channel view. E-commerce margins will be drastically different than all-in retail margins. Be sure to measure and report on each channel so you can create the right assortment mix for your brand.

3) LOOK AT YOUR COGS ON A REGULAR BASIS.

Regularly review your supply chain costs, pricing, and relationships. I had a decent almond supplier in Washington state that shipped to our Chicago warehouse. BUT, shipping accounted for 30% of our ingredient cost, upward of $400 per shipment. I was able to find a Chicago supplier with free dropoff, reducing our costs 30% and increasing our delivery speed. Make sure you're regularly optimizing your supply chain.

4) CHART YOUR CASH CONVERSION CYCLE AND PLAN AROUND IT.

The hardest thing about having an inventory-based business is that you have to pay for inventory in advance before you get paid for selling it. That means you need to have an ever-increasing amount of working capital on hand to support the initial investment until you get paid.

5) MAKE SMARTER, MORE STRATEGIC DEBT AND FUNDRAISING DECISIONS

Founders (including myself) are often hesitant to take on debt for their business because they aren't profitable and aren't sure how they'll pay it back. That said, strategic debt can be a huge boost to your business with the proper mental and financial planning around it. Just make sure you have a clear understanding of your margins by channel as stated above, so you can understand exactly how much money you have to pay towards interest.

6) CONSULT THE RESOURCES IN THIS PDF BELOW

I put together a number of free resources and information with the help of Brad from Accountfully to help you have a better understanding of your financials. Download the PDF and click on the links to read even more.

GFB REBRAND JOURNEY

   INTRODUCING JOYFUL CO.   

I'd like to introduce you to my new brand, Joyful Co. Thanks for all your guesses on the name, we had a number of people who guessed correctly! Why Joyful Co.? Joyful Co. exudes the emotion of giving and receiving a gift and comes with warm and happy feelings. I LOVED the feeling of delivering joy through uniquely curated gift boxes and can't wait to bring that feeling to the world. Plus, I feel like the world needs some joy right now.You're seriously one of the first people to hear of the new name... so keep it under wraps for now until I publically launch at the end of summer. So now that I had the name, I started working with one of my favorite branding agencies, Riser Design. They designed our logo above. I fell in love with their work ever since I saw B.T.R. Nation's branding and knew that they had an awesome eye for visual aesthetics and for CPG products. One of the biggest problems I find with many design agencies is they don't understand the nuances of CPG brands or know how to position them to sell on-shelf and online. Founders Paul and Camila come from a CPG background, so understand how to create a hierarchy and interest for products. I've been working with them now for a few weeks and they design our awesome logo above along with our branding kit and photography.Next week I'll share how our website and packaging design came together! 

WEEKLY UPDATES

   APPLY FOR NIQ       PITCH SLAM   

Have you applied to the industry’s largest pitch slam, the NIQ Founders Pitch Slam?

NielsenIQ is looking for the most innovative emerging CPG brands (like yourself!) to pitch their company to a panel of industry leaders, brands, and retailers!

The 1st place winner will receive more than $500K in prizes, including $50,000 in cash!

Why settle for a single or double? Go for a home run!

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   HOW NATURAL PRODUCT       SHOPPERS ARE RESPONDING       TO INFLATION   

While price is important in any recessionary environment, it’s also about shoppers’ values and priorities. Learn how consumers are adapting their behaviors and spending patterns with data sourced from Social Nature’s community of 1M shoppers.

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Watch Webinar

STARTUP TO SCALE PODCAST

106. Debt Financing for New Food Businesses, Arik Markus, Herbn’ Pantry

Financing a new food and beverage business is a huge hurdle, especially when investing in growth. After being a bootstrapped small business with a local fan base and distribution for a couple of years, Arik Markus, Founder of Herbn’ Pantry picked up the largest account he could have imagined- Fred Meyer. The PO came in for 4 pallets of his sauces, a pallet of each, a total of over 11,000 bottles and 30 day delivery terms.

Arik turned to James and the Aion Financial team to fund that order collateralized by the PO. This funding allowed Arik to launch with Fred Meyer while only taking on a reasonable interest rate.

Listen on Apple Podcasts or Spotify

LINKEDIN POST OF THE WEEK

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