12 months ago today we were in 10 stores. We’ll end January in 800 stores. Whenever I talk to new entrepreneurs about our path in Year 1, I always find myself saying this one sentence over and over again: “we just did it ourselves”. This definitely deserves a disclaimer that it may not work for everyone – but for me, what was instrumental to our growth in Year 1 was outsourcing as little as possible. If you are a self-funded business like cocokind, this matters even more (sometimes it isn’t even a choice).
In order to do this, however, you have to be really honest with yourself about your capabilities and your product. Are you a creative person? Yes? You MAY be able to create your logo and packaging design yourself. Are you passionate about selling? Go door-to-door before asking any brokers to rep you. Are you not so great at accounting? Then, you should probably hire an accountant.
For us, everything from creating the product formula, packaging design, selling, shipping & packing, accounting, and more is done in-house TODAY (we are on month 14). I’m not saying this won’t change in the future, as I know it will. In our first year, however, I a) could not imagine not doing things myself as I wanted the knowledge and b) focused as much $ as possible on our team, improving our product, and selling.
To give you an example, in creating the brand and packaging, initially, I enlisted the help of my brother’s college friend ($300 for seven products + logo). I would give him direction such as “I want a faded coconut in the background with the text cocokind over it, with a sketch on each package of the ingredients”. He would turn over a couple of options, and I would pick, tweak, etc. He did a really great job – but I soon realized that there were many things I could actually do myself.
I downloaded a 30 day free-trial of Adobe’s InDesign program. I would tweak his drafts so much that I was basically starting over, and I learned how to use InDesign pretty quickly. Within two weeks, I realized that the only thing I needed externally was some artwork of our ingredients (which now I know how to create myself, by the way). Since then, we have created all of our packaging in-house – I have become fairly proficient at InDesign, and I know all the basics in Photoshop. Disclaimer: Although I have no professional background in packaging or design, I’ve always enjoyed art, drawing, graphic design, and painting – and I do have a creative side of me. (Be honest with yourself about your capabilities).
Shelling out $5,000-$30,000 for someone else to create my brand/packaging didn’t make sense to me. I had a very strong vision for what I wanted the brand to stand for and what the look and feel of our products would be. If I didn’t have a strong vision, I understand where an external consultant would help. But if that’s the case, and it is your brand, I think you should ask yourself why you don’t have a strong vision?
In the future, there is definitely room to improve our packaging and I’m sure we will enlist the help of a professional graphic designer – but we’ll be in a much different position than when we were first starting out with zero sales.
Other Examples of Things We Did In-House in Year 1:
Sales: I hired my first teammate (Graham) in Sept 2014. As soon as the products were ready in November, Graham and I started calling around to stores everywhere in the country (cold calling!). We went door-to-door in Northern California, truly, for our first ~50-100 stores. Whenever I went on a trip somewhere outside of California, I would drop off samples at local stores.
Today, we have a great broker network – but we’ve always waited to sign on brokers until we have locked in a key account (a chain that has 30-100 stores at least). One of my dear friends in the industry gave me advice that you can’t expect brokers to pioneer your brand in a new region. We LOVE our brokers – but for new regions, we initially get key accounts ourselves, then get recommendations from stores for good brokers. And by the way, already having a key account helps with receiving in-bound interest from reputable brokers (and with contract negotiation too!).
Production: Since Day 1, we have made our products ourselves and we STILL do everything internally (vs. using a contract manufacturer or what industry peeps call “copackers”). BUT, our production processes have changed a million times. Just 12 months ago, we would make 50-100 units at a time. Over the course of one year, we’ve had to change this to 5,000-12,000 at a time. That’s a big difference – and this has required a lot of real-life learning and changes in our production process.
Keeping production in-house has allowed us to scale with our sales. This also has alleviated the pressure to have a TON of capital for inventory. Even today, we only carry a little over a month’s worth of inventory (vs. the typical 3+ months) because we have the flexibility to increase production days with the snap of our fingers (or with the receipt of an email with a large order!). Sometimes, we hold inventory for 30 minutes before it’s out the door – just ask our Operations Director, Jenna.
I’m not saying we won’t ever use a copacker, but in Year 1, keeping production in-house taught us so much about our products, allowed us to stay flexible, and ensured that the quality of our products did not decrease as we grew.
**One thing to note: we are a case where our demand exceeded our supply in Year 1 and we had to increase our production capacity like crazy. However – I had no idea that would happen. What if you had to purchase 10,000-20,000 units from a copacker (standard minimum quantities, at least) and had a rough start getting your products into stores? The shelf life clock starts ticking immediately, and that’s dangerous. Keeping production in-house reduced my risk significantly.
Accounting: We use Quickbooks for payroll organization, but we use our own Excel sheets for our books and records. After all, I majored in Finance/Accounting in school and used to build company financial models for a living.
This will change one day (most likely late this year), but for now, this system works for us.
I keep on saying “this is good for now” right? That’s because what works in Year 1 or Year 2 may not work in Year 3 or Year 4. Your operations may become too complicated, or if you’re lucky, your budget may increase (woohoo)!
The only thing you can guarantee with your startup is that things are going to change: you should never invest in an area of your business with the assumption that it will stay constant (at least in the initial year or two). Think about the fact that an investment that works for you now could be a disastrous sunk cost later. Staying flexible is key, here.
Self-funded startups don’t have a lot of money to play around with – and the price of investment risk for a self-funded startup can be VERY different than the price of risk for companies backed by capital. You have to be extremely cautious about spending large sums of money in the beginning. This will reduce the chance that you find yourself in a very, deep, dark hole.
Things You Are Not Good At:
I actually think it’s more important to know what you “suck” at and what are non-negotiables for you. If you know there is absolutely no way you can do something (not even 1% chance), then start looking for outside help. Everything else – try…and if you’ve never done it before, figure out how to try.
What were our weaknesses? What were things that we just COULDN’T do by ourselves? I’ll give you some examples here too:
Website: We use Shopify for our ecommerce. When we first launched in November 2014, I designed an incredibly simple website (we used the “Launchpad” theme – Shopify changed their themes and the closest one I could find now is the “Solo” theme). All you need for these themes are a couple of thematic pictures and individual product pictures. Initially, this was perfect for us – I wanted something we could put up immediately and allow us to start selling.
And we did start selling almost immediately with the help of Facebook Ads! I HIGHLY recommend FB ads depending on what product, but more on this on a different day. A couple months in, we had started receiving some feedback that our website was too simple. It was true – it was VERY simple…in fact it was so simple that it cost me $0 to design.
At that point, we were in the beginning stages of selling into retail but already had 10-20 stores that were carrying our products. Many Whole Foods stores in our region were about to bring us in too. I knew we had to “upgrade”.
I purchased another Shopify theme that cost me $180 and redesigned this myself. Looking back, there is nothing more embarrassing to me than the second version of our website. I have no idea what I was thinking…it was TERRIBLE. This is a perfect example of sucking at something, and how I was sluggish to pay for external help when I REALLY needed to.
In April 2015, I got a recommendation from my friend Jason for Charlotte Bender’s website design services (see her work here). We put together the photography for her, and she helped us put together an amazing website. Fast forward seven months later, I’m itching to make it a little more advanced and I know we’ll be calling up Charlotte soon. But I still feel very good about where it is today. Enlisting Charlotte’s expertise was some of the best spent money in Year 1.
Photography: All pictures thus far in the game have been taken by us. They aren’t great, admittedly. Today, 14 months in, I’m finally ready to bring in a professional photographer, and we’re soon redoing our pictures with the help of Jen Kay (see her work here). This has been much needed for a long time, but I don’t blame myself for not doing this earlier because we could barely get by with our pictures and as always, there were other things on which I had to spend money.
Complicated products: We will most likely use a copacker for new sunscreen products. These sunscreen products are considered “drugs” by the FDA and are currently beyond our production expertise. We are working with a copacker that has the same “clean ingredients” standard and a lot of experience working with the FDA. Perfect example of absolutely needing to go outside.
The bottom line, know what you are bad at, and try your hand at almost everything else. Don’t be quick to assume you can’t do something – most likely you can! Doing things ourselves has helped me understand my business – and whether or not we keep things in-house in the future, this knowledge is invaluable. Not to mention, it helped minimize the capital needed and risk taken in Year 1.
In a separate blog post titled “Recommended Vendors and Service Providers for New Consumer Startups”, I list many partners that we’ve worked with (and already vetted)! I hope this helps new, self-funded, consumer startups make good decisions in Year 1. As always, feel free to email me at firstname.lastname@example.org with any questions or comments.