What I learned from talking with over 20 Craft Producers: Part 1 Infancy

The past few months I've been interviewing various craft producers. Think chocolatiers, coffee roasters, brewers and other specialty food products - essentially where the majority of my disposable income goes.

I've decided to focus on serving this group with my coaching.  I wanted to dig deep and learn more about where each business is at and what challenges they face.  I have my own experience of owning a cafe and coffee roaster for eight years but I wanted to learn about other's challenges.

I spoke with owners from Canada to Chile, all at various stages of business. Some were second generation family owned and some just a few months old. Their structures ranged from sole proprietors to businesses with numerous investors and partners.

Three distinct stages of business emerged: Infancy, Leaving the Nest and Mature Adult. I found myself comparing each stage of being a business owner to being a parent. (Maybe because I have three kids under six and parenting is always on the brain).

During the infancy stage you're excited and nervous. You don't really know what the hell you're doing, but you've jumped in with both feet. Your business is needy and demands your time, attention, and finances. It’s a roller coaster of emotion. Things keep chugging along and hopefully you raise a business that is ready to move on to the next stage (rather than live in your basement playing video games into their 30s).  

In stage 2, Leaving the Nest, your business is ready to be on it's own and doesn't need you for all of the day to day things. You have been giving others more responsibility and letting them test out their wings. You are there to guide and help with the big picture and are getting your team in place to help grow the company. 

In stage 3, Mature Adult, you are the owner and parent and your leadership team is your family. You all have strong opinions and ideas about what is best for the company. You've got to communicate with each other so you know what's going on in each department while holding everyone to the core values of the company. The biggest challenge here is communication and accountability.  

Within each stage I found five distinct areas your business needs attention: Vision, Finances, Metrics, Systems, and People. Without giving each the proper attention, your business will stagnate and won't move on to the next stage.

What is the best way to grow a thriving, successful business? Here are the things I found are the main challenges at each stage and the actions you should take for success.  

Stage 1: Infancy 

Congratulations, it’s a…...business!

You’re excited, nervous and a little scared. You are doing the best you can but this business is really needy right now. Your business is completely dependent on you and it is hard to step away.

Vision

Where do you want your company to go?
What are your goals?  

Sounds logical but you'd be surprised by how many business can't answer this question.  Should you turn left or right? How are you supposed to make decisions if you don't know where you're going?  

Without defining your endpoint you may be going in circles.  When you know the destination the answer is clear.  

Observation:
"Bigger" is not a vision of where you want to be.  Just saying you want to grow revenue isn't very helpful.  Many people I talked to were too vague.  I spoke with two owners that had physical retail locations that said they wanted to open additional locations, yet their current actions didn't seem in line with their vision.

In both cases the owners ran their retail locations and were very involved in the daily operations. However, they seemed resistant to hiring more people and giving more responsibility to others. This is a big disconnect with their vision.

A key part of having a vision is connecting it to the present and what actions you need to take to achieve your vision.  

Action:
Set your vision for your company.

Prescription:
Think of where you want to be in three years in terms of 1) Revenue 2) Profit 3) Big Picture

You need to start thinking of where you think you can realistically get to in three years.  The first two are numbers, very easy to know when they are achieved.  The third item, big picture, is more descriptive.  

For your big picture describe in detail what your company looks like.  For example "I want to open an additional location and I will have a full time store manager"  or "I will have a larger capacity coffee roaster and will have hired a coffee roaster to replace me."   

Once you’ve set your long term vision, you can work backward to figure out what needs to be done each year to arrive at the desired outcome. For example, if you want to open an additional location and you’re managing the current location your one year goal would be to hire a manager, two year goal is to find a location and secure financing, and three year goal is open new location. By working backwards you ensure that each year's goal supports achieving the desired outcome in three years.   

Lesson:  
You need to know where you want to go in order to get there.  

Finances

Right now you need cash flow….. bad.  I heard this as a top challenge from numerous owners. You’ve invested a lot to start the business and now you need to start generating some revenue. Like most businesses, you’re not profitable yet and you’ve got to work like hell to reach the break even point, and then cross into the beautiful land of profitability.

At this early stage, the odds are stacked against you. You don’t have efficiency because your volume is low which makes your labor and product costs high. Right now you have one focus: grow revenue.

Observation:
The businesses that moved out of this stage fast were focused on growing sales of their core offering.  

The businesses that stayed in the infancy stage longer had their sales efforts diluted by being in too many sales channels, forcing their attention to be scattered and unfocused. They seemed to be easily distracted by "opportunities" that diverted their attention from growing sales of the core product.  

I spoke with one wholesale coffee roaster that has only been in business for two years. His intense focus of driving sales for the coffee beans has allowed him to move swiftly through the infancy stage and he’s now ready to level up. He wasn't distracted by all the other "opportunities" that come up and held tight to his core. He has grown his revenue based on one thing, selling beans. The amount of time you spend generating revenue is related to how long you stay the infancy stage of your business.

Action:  
Focus on growing revenue of your core product

Prescription:
You must focus 80% of your efforts on growing revenue. If you don’t generate revenue at this stage your business will die.  Keep breathing life into it by feeding it cash.
every.
damn.
day.  

Do an assessment of your time for one week, writing down what you do each hour. Highlight all the things that you are doing that generate additional revenue for your business. How do you spend your time? Are you driving sales? If not, you probably need to off load some tasks so you can focus on the sales.

Lesson:  
By growing revenue, you generate the cash you need to support your business. You also get to a point where you have some economies of scale and can start bringing your costs into a more reasonable range. The faster you do this, the faster you reach your breakeven point and can focus on profit.  

This stage is really make or break. No matter how good everything else is, if you’re not generating revenue, you won’t make it.  

Metrics

Yes, you need to focus all your efforts on revenue, but what action drives the revenue?  What do you need to do today to reach your revenue goals?

Observation:  
Of the companies I spoke to, only one in the infancy stage was tracking any numbers.  They had surpassed their goals for their first year in business.  All indications are that they'll be moving into the next phase pretty quickly.  Hmmmm, yes, I think there is a connection here.

Action:
Set a revenue goal for EACH WEEK.  Figure out what actions drive the revenue and measure that too.  
(I know, mind blowing right now!). 

Prescription:  
Lift your head out of the sand for a minute. I know, you’re deep in the weeds but let’s take a quick overhead look.  Where do you want this business to go? What is a good revenue goal for you to feel like you can take a deep breath? Now let’s break it down and track it on a regular basis to know if you’re on track to getting there.  

Now go get a piece of paper.
I'm waiting.......

Ok, write down your revenue goal for the year. Divide it by 52 (weeks in a year). Now you have a starting point for your goal. This is the number you need to hit each week to achieve the goal you just set. (feel free to tweak this so it is weighted heavier at the end of the year and lighter and the start. Just so it equals the total annual goal.)

Now we're going to take it another step. What action do you need to take to achieve that revenue goal. For example, let's say wholesale sales are your core sales channel. How do you increase wholesale sales? 

There are two ways: 1) add accounts and 2) increase the average order per account.

Let's start with adding accounts. What do you need to do to add accounts? You need to have more conversations with potential accounts that would be a good fit with your product. Ok, great. For each new account, how many people do you need to talk to?

I know it you may feel like you have no idea but start with something and you can change it based on your results. Lets just say you need to have 10 conversations to acquire one account. Write down “Conversations” and track whether you reach your goal, which we estimated at 10, each week.

Now take another step back. How do you get your foot in the door to have the conversation? We’ll call this "outreach."  Do you need to send samples? network? stop into places? Call? Whatever it is, measure the way that you need to reach out that gets the conversation setup.   

Your weekly metrics might be this:
Wholesale Sales: $10,000
New Accounts: 1
Conversations: 5
Outreach: 20

So now you know what needs to be done each week to add one new account.  

At this point you may be thinking I'm crazy and you're not into all this number shit. That's ok if you want to flounder and feel overwhelmed. But if you want to grow your business fast and efficiently you better start buddying up with you new friend Marcy Metrics.   

If you do this, you will learn where your customers come from, and you will succeed because you'll make sure to focus your time on the areas that give you results. So create a quick little scorecard and start tracking your metrics.   

Lesson:  
By tracking your sales each week and the actions that support your sales, you always know if you are on pace to meet your goals. If you aren’t meeting your goals, you can pivot and try new tactics to reach them. This makes you in control of the situation so you can be proactive rather than reactive.

People

Right now YOU are the main driver of your business.  You may have an employee or two, but most likely you are the only one with real responsibility and decision making power.  So how do you make the most of this and off load some duties so you can focus on your #1 task of generating revenue and not get bogged down in the busy work of running a business?

You automate and outsource as much as possible.  Now is the time to use technology and other specialists to your advantage.

Observation:
The most successful companies I spoke with (no matter what stage they were at) understood the benefit of off loading tasks that others could do. They happily hired bookkeepers, designers etc. and paid for software to help streamline their business.

Leveraging where you add the most value is extremely important. At this stage when you don't have a big team of people you must be ruthless with your time. Each hour you can devote to adding real value to the business will help your business achieve it's goals faster.

So why don’t people do this more? Many owner don't value their time. They get caught in the mindset that “I’ll do it myself and then I don’t have to pay someone.”  

Great - so you're worth $15/hour?!  If you have this mindset, you will be stuck in the infancy stage and always struggle to move to the next level. Go get a job if you think like this. You'll make more money and have less stress.  

Have you asked yourself what you are giving up when you spend time on tasks that you could outsource? It is like hiring someone to watch your kids so you can clean your house. Where do you make a bigger difference?

Action:
Focus your time on the activities where you add the most value. Create a plan to off load activities that others can do.

Prescription:   
Go grab that notebook again. (You may want to keep it handy, I love writing things down). Use your activity log from the finance section. Or if you didn't do that, go through your week writing down everything you spend time on.

I realize this sounds painfully tedious, but it’ll be worth it. Make two columns. In the first, write all the things you do that drive your business forward. You uniquely add value to these tasks and it wouldn't be the same if someone else did it. In the other column write the tasks that any trained person could do.  Who is doing the task is irrelevant, as long as it gets done.

Now prioritize the monotonous tasks in order of what takes the most amount of time and you dislike the most. That is the order that you can off load those responsibilities.

Lesson:
You are a true asset to your business when you spend time on things that add value to it. Otherwise you are contributing to lost revenue opportunities.  

Systems

At the infancy stage you don’t have many systems. You’re figuring it out and creating things on the fly. Where a lot of business go wrong is they never leave this mindset as their business starts to grow. Things continue to be knee jerk reactions and growth is painful because there are no systems to support it.  

It’s really challenging to hand off responsibilities when there are no systems in place. No one else knows how to do anything. It is all in the owner's head. Yes, in the moment it is fastest to do things ourselves because we know all the ins and outs of our businesses. But in the long term, creating a system that allows for someone else to learn and share the responsibility is the best route for the company as a whole.  

Observation:
There is a big disconnect from the owner having systems in their head and having them on paper. Your business will begin to shift when you start documenting how things are done.  The businesses that have put pen to paper to define things are seeing faster growth and it seemed that they also have less issues with employees, because things are clearer.  

Action:
Put systems in place starting with the things you do repeatedly in your business.

Prescription:
In the infancy stage, focus on getting something written down. Don't over complicate it. First, think about the things that are done repeatedly in your business. Examples would be order taking, packaging, shipping, making the product. Create a system for each thing that you do on a repeated basis.  

Write this shit down. That is the whole point of having systems. You want it so that someone new can come in and see how you do things. Write down all the steps that need to be done for each task. Go basic - just a word or google doc with steps 1-10. Don't overcomplicate it. (I know you can be good at that). Now make it accessible to staff and use the system. 

Lesson:
Y
ou have a vision of where you want your business to go. Getting systems in place will help you achieve that vision.   

____________________________

If you're still reading at this point you get a gold star.  Most likely you you read all of this because you own and run a business.  I hope I value bombed the hell out of you :).  Leave a comment below about what your favorite part was.  

I'm a social creature and would love to connect with you here. I'd also love to chat with you and hear more about your business. Get in touch, send me an email.  Let's set up a chat! 

Up next,

Stage 2: Your business is ready to leave the nest