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New Bbq Sauce
6/27/2017 at 11:01 PM ET
I launched a new BBQ sauce in August 2016. We are currently in 127 stores in 3 states and recently picked up 2 distributors, with 2 more potential distributors. I'm not very tech savvy and don't really understand internet sales or getting funding. We are growing rapidly. I do have a business plan but what is the best way to go about this, funding or loan? So far it's been all out of pocket.
6/28/2017 at 11:31 AM
If the driving issue here is that your AR is now bigger than your pockets, it may be tough to get either. Sometimes you just can't ship product to everybody who wants it. Especially not without keeping close tabs on financial tipping points.
6/28/2017 at 1:56 PM
What did your business plan include as far as growth and funding? We've consulted on a number of consumer packaged goods, and this is a recurring theme: inventory, receivables, and distribution expenses always seem to grow faster than gross profit.
That's because you have to pay for the product when it's produced, but you don't get paid by the retailer until 45-60 days after you ship to them. And if you give them an introductory discount to secure the distribution, you may not even recover enough on that initial order to cover the cost of inventory and shipping.
And if the product doesn't sell through and merit a re-order, you could end up with returns or sell-through allowances. Meanwhile you will have had to pay for advertising and promotion expenses to create consumer awareness.
It's a tough business. I have dents in my helmet to prove it!
6/28/2017 at 7:39 PM
Also consider investors. Each of the options for getting more funds has its pros and cons, and it depends on your financial planning/skills.
6/28/2017 at 8:21 PM
Sophisticated investors are reluctant to invest in FMCG brands/companies because the assets are not readily marketable in the event that sales don't materialize. Their investment mostly pays for marketing and promotion expenses, and once those are done there is nothing left. They would much rather invest in machinery and fixed assets (land and buildings, etc.).
Lenders will sometimes lend a percentage of inventory and receivables, but without a strong track record you might not be able to get much more than 60% of the value, and that usually isn't enough to make a big difference.
When we do business planning for FMCG brands, we project cash flow on a monthly basis for the first 3-5 years -- until the rapid growth phase is over. Despite that, lenders are nervous about lending money to companies in which the majority of expenses are related to sales, marketing and promotion. It's partly that they don't find it comfortable, and partly that they've seen too many of these kinds of projects fail.
6/28/2017 at 9:02 PM
Funding or a loan? I suggest OPM = other people's money. Venture capital or angel investors
6/29/2017 at 11:48 AM
We have worked with brands to launch into the grocery marketplace and have come across similar issues. First, you are very fortunate to get yourself included in such a mass slot as BBQ Sauce. Congratulations on that. We worked with HEB on a couple products and know that even though you are on the shelves...you still have to outsell the next strongest brand to stay there.
Over the past 6 years, as Senior Mentor with Mid Michigan Innovation Center (Incubator), now Midland Tomorrow Innovation Center, we've had great success obtaining funding (through Angel and VC groups...for startups with promise...one of our recent clients just sold for $683MM) and assisting with the creation of online (e-marketing) strategies. Michael, Gary and I could fill these pages with recommendations, suggestions on co-packing, distribution and marketing...it could be never-ending. So, let me suggest this: Call us...let's "talk" through the issues you have and see if we can create a guide toward a solid solution. Click on our names and let's talk.
7/10/2017 at 9:35 AM
Randall message me your number via Red'z Bulgogi BBQ on Facebook please thank you, Teresa
7/10/2017 at 9:37 AM
One other thing there is no competition that I can find.
7/10/2017 at 12:42 PM
The competition is other condiments. People are not likely to use your BBQ sauce AND another BBQ sauce (or mustard, pickle relish, or steak sauce) at the same time. The competition is what you displace.
You very definitely have competition. It's all the other things clamoring for consumers' money and all the other products seeking shelf-space in the supermarket.
Your point-of-difference might be the taste/recipe/Korean, but don't delude yourself by thinking you don't have competition.
7/10/2017 at 12:57 PM
I'm sorry I meant with that style or type, not in general, thank you.
7/10/2017 at 1:03 PM
My initial question wasn't very explicit, my concern is getting better equipment and I am also investigating creating an Incubation kitchen where I am at now. I have 3 other businesses that would be interested. My fear is it may be more than I bargained for.
7/10/2017 at 2:18 PM
It sounds like you need a revised business plan that deals with your equipment upgrade as well as all the other expenses of running and growing your business. The business plan is more for YOU than for any investors or lenders.
What if you find that your projections don't generate enough profit for this to be worth the personal investment? How much will you need to spend to generate a new customer? How much profit will the average new customer bring in?
This isn't about creating a fancy document that will impress an investor. It's about making sure you can really deliver for yourself ... before you do something you will regret.
7/10/2017 at 2:44 PM
Very true, I'm actually in the process of that now. I'm further along than I thought it would be at this point. There is also the question: I have 6 varieties, how and when do I Introduce them? Wait until this one gets more established or slowly introduce it now?
Right now I don't owe anyone anything not even myself, am I at a point of stepping to a new level or wait awhile and see? Advice?
7/10/2017 at 2:53 PM
Finish the business plan first. That should answer your questions.
7/17/2017 at 5:27 PM
I am closing this question since there hasn't been much recent activity.
Thanks for participating!
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