Food & Finance High School Coffee Shop a Winner

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This past October I was invited to speak about Restaurant Profitability at the Food and Finance High School in New York City. I met with a group of students who were planning a “pop-up” coffee shop, Murphy’s Beans ‘N Dreams that would be located at the entrance of their school and run for one week in December.  The students impressed me with their questions, including one about how to turn around a business in trouble.   I answered that one key strategy would be to get an honest appraisal of what is going on, which would require various team members to provide open and honest assessments.  (For more on this see Alan Mullally’s description of how he did this when he became CEO of the beleaguered Ford Motor Company, in “American Icon.”)

Students also asked how a business owner knows they are getting good prices from their suppliers. Answer: get competitive supplier quotes, based on your product specs. They also asked, how they could  stand out in the competitive restaurant space. Answer: know what makes your offering truly distinctive, and publicize that aspect.

Another satisfied customer at Murphy’s Beans ‘N Dreams

They did successfully complete their project and it was terrific to see it in action. I stopped by and was pleased to find that the Murphy’s Beans ‘N Dreams team was handling the morning rush efficiently, the place was attractively laid out, the coffee was delicious, and there was an impressive assortment of baked goods, fruit and sandwiches too.  Congratulations to Ms. Loehr’s class.

 

 

Key Marketing Practices for Start-ups

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Marketing

Knowing how (and where) to look for help

Marketing has become a very specialized field, and there are talented resources available to start-up businesses in each of these specialty areas: Branding, Public Relations, Website Design/Development, Social Media, Search Engine Optimization, Market Research, and eCommerce Business Development.  Because there is so much more specialization for outsourced marketing help than for say outsourced financial resources, it is important that the start-up business owner have a point of view on what type of marketing resource he or she needs.

Starting with a marketing generalist might be a good first step – someone who can assess the business’ marketing needs, and what elements of marketing will be most gainful.

That said, a start-up business owner who can answer the questions listed below for him or herself will have a more fruitful first conversation with a marketing generalist.

  1. What is special about the product/service versus existing offerings? What characteristics will attract customers away from competitors?
  2. How could that specialness best be conveyed to potential customers, i.e., through branding, packaging, website, testimonial by “influencers”, word of mouth across peer networks, or point-of-purchase materials?
  3. Would sales be best driven through more of a “push” or “pull” strategy?
    • Push — contact potential customers/distributors one-by-one to close sales.   A push strategy would be sales intensive, so it could be that marketing spending needs to be kept minimal, to preserve budget for sales commission, brokerage fees, etc.
    • Pull — Create consumer awareness and demand so they will seek out a way to purchase product/service. A pull strategy would be marketing intensive.
    • Hybrid — Do some of both

If an owner is prepared with answers to these questions, the conversation with a marketing generalist should go quickly and either confirm, deny, or enrich the owner’s perspective.  It is also possible that if an owner feels they have a particularly strong  perspective on these questions then they may be able to save money and time by serving as their own “marketing strategist” and deciding on their own which strategy to employ and which specialized area of marketing is the one which would give them the best results for the spend.

Key Operations Practices for Start-Ups

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This is the third in a series of blog postings about various aspects of running a start-up:  Finance, Human Resources, Operations, and Marketing.

Operations:  who should manage operations at the beginning?

Operations can be difficult, because the entrepreneur must balance his or her time and efforts between assuring the supply of product needed in the months to come, and spending time creating a strategic plan for how to grow the business and how to operate the business once it is up and running at full speed.   If the business founder gets too immersed in day-to-day production issues, it may leave him or her too little time to plan future Operations. never mind other key activities such as Sales, Marketing, and meeting with potential investors.

One strategy would be for the founder to get a great Operations lead early on to supervise day-to-day production.  If the Operations lead has expertise in logistics planning, sourcing and/or quality control, so much the better, because then they can also support the entrepreneur in planning for more strategic aspects of Operations going forward.

Key operations questions to be answered in planning for growth of a start-up include:

  • Sourcing: Is it more appropriate to self-manufacture or engage a third-party manufacturer?  Both have pros and cons.  Either way, it is important to ensure that the capacity will be available as demand builds, to avoid missing out on sales opportunities, and possibly leaving an opening for competitors.  If the product is going to be made at multiple locations, there needs to be unambiguous specs and standard operating procedures, to assure a consistent product.
  • Logistics: What are the shipping and warehousing solutions that meet the business needs at the onset, and will they be sufficient as volume grows, due to business expansion into new geographies and/or channels?  As mentioned above, a strong operations lead can help with questions such as these, as well as just managing day-to-day production.
  • Cost Management: How to develop needed understanding of product costs across the organization?  Having a bookkeeper on board, even part-time, who has worked with other manufacturers can be an important help.  Further, the production team has to be willing and able to keep and share records about crewing, shift output, use of raw ingredients and waste.
  • Automation: How should the start-up reduce cost of goods sold in the longer term?  Often, automation is a key to bringing down costs.  With this as a consideration, the initial packaging should be chosen with subsequent automation opportunities in mind. The Operations resource also has to work closely with the Financial resource to decide on when to invest in automation or other cost reducing technology.

Key Human Resources Practices for Start-Ups

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This is the second of a series of four blog posts highlighting key practices for successfully launching a start-up business.   Each of the four blog posts will tackle a different functional aspect of launching a start-up:  Finance, Human Resources, Operations and Marketing.

 

HUMAN RESOURCES 

Staying Lean but Balanced

Savvy start-up entrepreneurs try to go with lean staffing while they are still proving their business is viable, getting team members to cover multiple roles when possible.   In order for this to be successful, it is important for the entrepreneur to know:

— which tasks can be deferred,

— which can be economically outsourced, and

— which team members have the ability to take on assignments outside their normal area of functional expertise and still accomplish them with excellence.

 

If many key roles are outsourced then it is incumbent on the entrepreneur to facilitate exchange of  information among resources who don’t see each other in person as often as they would in a more traditional business organization.

 

Getting Everyone on the Same Page

In addition to getting the right mix of specialties there is also the matter of getting people with the right attitudes, who will contribute to the culture that the entrepreneur has in mind for his or her company, and who are in synch with the challenges of a start-up.

 

One of the challenges of working for a start-up is that there is typically not a lot of money available to pay contributors, so being “in synch” may mean being willing to work on some sort of deferred arrangement.    This becomes more compelling when the business has a product/mission that the team members believe in, when it is easy to envision the long-term potential success, and when the entrepreneur has traits that build the confidence of team members.

 

It helps if the entrepreneur is good at orchestrating the talents of sometimes extreme extrovert or introvert individuals. On the TV show Silicon Valley, the mythical company Pied Piper is headed by CEO and founder Richard Hendriks who manages to keep a steady hand on the helm despite his soft manner and the array of brilliant but sometimes childish employees: hardware specialist Gilfoyle, software specialist Dinesh, dry-witted Ehrlich, and sensitive Jared.   This show is clearly fiction but it mirrors my real life experience in this one way: the best leaders communicate their company culture through their actions and just a word of coaching here and there.

Key Financial Practices for Start-Ups

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This is the first of a series of four blog posts highlighting key practices for successfully launching a start-up business.   Each of the four blog posts will tackle a different functional aspect of launching a start-up:  Finances, Human Resources, Operations and Marketing.

FINANCES

Managing the finances of a start-up entails spending money on what is essential and nothing more, to optimize the chance of attracting money from investors before initial funds are depleted.

Some business owners are able to decrease the up-front financing needed by launching a reduced version of  their product, or a so-called Minimum Viable Product.  This may have a lot of merit for a web-based service, where consumers are used to being offered both free and premium (i.e., freemium) versions of the same service.  However, in the world of packaged foods there may only be one chance to get it right.  If consumers don’t purchase and enjoy your “minimum viable” food product when it first is presented to them in a store, and those customers do not repurchase, retailers will likely pull it from the shelf as sales falls below their minimal expectations for turnover.  So MVP becomes a risky gamble.

In order to function effectively within your initial start-up funding it is important to have a current and accurate understanding of what you are spending. If budget is available to hire a part-time bookkeeper, then do so, and have him or her formalize how money is spent by creating purchase orders beforehand when that makes sense, and receiving, checking and recording invoices before vendors are paid.  All of these best practices will enable more proactive understanding of where your money is going, and whether spending is being managed within project budgets.

Savvy start-up entrepreneurs try to go with lean staffing at the onset. By getting team members to cover multiple roles when possible an owner can manage risk by committing fewer dollars to staffing until the business successfully achieves  critical early milestones which will unlock further funding. The key is knowing which tasks can be deferred, which can be economically outsourced, and which of your team members have the ability to take on assignments outside their normal area of functional expertise and still accomplish them with excellence.