Question

Topic: E-Marketing

New Bbq Sauce

Posted by tmauldin on 6/27/2017 at 11:01 PM ET 250 Points
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.
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RESPONSES

  • Posted by Mike Steffes on 6/28/2017 at 11:31 AM Accepted
    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.
  • Posted by mgoodman on 6/28/2017 at 1:56 PM Moderator
    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!
  • Posted by Jay Hamilton-Roth on 6/28/2017 at 7:39 PM Accepted
    Also consider investors. Each of the options for getting more funds has its pros and cons, and it depends on your financial planning/skills.
  • Posted by mgoodman on 6/28/2017 at 8:21 PM Accepted
    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.
  • Posted by Gary Bloomer on 6/28/2017 at 9:02 PM Accepted
    Funding or a loan? I suggest OPM = other people's money. Venture capital or angel investors
  • Posted by tmauldin on 7/10/2017 at 9:35 AM Author
    Randall message me your number via Red'z Bulgogi BBQ on Facebook please thank you, Teresa
  • Posted by tmauldin on 7/10/2017 at 9:37 AM Author
    One other thing there is no competition that I can find.
  • Posted by mgoodman on 7/10/2017 at 12:42 PM Moderator
    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.
  • Posted by tmauldin on 7/10/2017 at 12:57 PM Author
    I'm sorry I meant with that style or type, not in general, thank you.
  • Posted by tmauldin on 7/10/2017 at 1:03 PM Author
    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.
  • Posted by mgoodman on 7/10/2017 at 2:18 PM Moderator
    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.
  • Posted by tmauldin on 7/10/2017 at 2:44 PM Author
    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?
  • Posted by mgoodman on 7/10/2017 at 2:53 PM Moderator
    Finish the business plan first. That should answer your questions.
  • Posted by Shelley Ryan on 7/17/2017 at 5:27 PM Moderator
    Hi Everyone,

    I am closing this question since there hasn't been much recent activity.

    Thanks for participating!

    Shelley
    MarketingProfs
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