Recently, I was invited to a new effort to help aspiring entrepreneurs in the food business. It is being spearheaded by Jim Koch, founder and president of the Boston Beer Company , maker of Samuel Adams beer. He teamed up with Accion, a microfinance organization, to create a new program called Brewing the American Dream.
Part of the program is something they call speed coaching — an interesting process they are doing all around the country.
It works like this: Tables are set up with signs like operations, finance, marketing and so forth. Each table has a sign-up sheet with 20-minute time slots. Each table is staffed with either an employee of one of the sponsors or a local expert or business owner. Every 20 minutes a new session starts, and participants change tables.
This whole thing seems to work on several levels. First, it is inspiring to hang out with aspiring entrepreneurs. And 20 minutes seems to be long enough to assess the situation and get someone pointed in the right direction — or to at least keep the owner from going in the wrong direction. It also works because building a successful business requires being competent in many areas, so being able to cover six topics in one night can be critical to assessing weak spots and opportunities. This addresses a big problem for entrepreneurs, which is that many either don’t know where to go for help or don’t think they need any — an occupational hazard of being optimistic, confident and driven by passion!
I helped out at the marketing table for a couple of sessions and was able to see first hand how it works. One woman wanted advice on how to market her packaged baked goods to a major grocery chain that she was already selling baked goods to in bulk. She and her mother were doing all of the baking, using premium ingredients. She wanted to start selling them packaged goods because she hoped the gross profit would be better.
The use of the word “hope” raised two red flags. “What is your gross profit?” I asked. She said it was about 10 percent. “Isn’t that low?” I asked.
“Yes,” she said. “I am told it should be about 40 percent.”
That made more sense to me. But I asked another important question: “How much are you paying yourself and mother per hour?” Eight dollars, she said.
“Did you figure FICA taxes, workman’s compensation and unemployment compensation?” No, she had not.
That means that when she has to pay someone else to do the baking, there will be no gross profit, and she will be losing money on every sale. Or, she and her mother will continue to work for next to nothing. She explained that she wanted to further develop a relationship with the store and its people told her the price that they were willing to pay. (I recently had an extended conversation with a woman who makes cookies and has had similar issues.)
My colleague at the marketing table, a Boston Beer marketing person, explained that she either needed to get them to pay more, or find stores that will. I explained to her that great marketing will not make up for bad math — in fact, if she gets better at marketing a product that is losing money, she will go out of business even faster. She seemed to accept that. She seemed appreciative and enlightened, and my partner and I certainly felt we gave her valuable advice. Will she take the advice?
I hope so. I am confident that there was a lot of good advice given out at the event and that many of the participants will be successful. The loan programs and guidance that Accion offer are helpful, and their default rate is low. It is not a cure for all issues entrepreneurial, but it is a good start. It would be great if every entrepreneur could find a mentor to help navigate the difficult waters of growing a business, but they are not easy to find. And maybe they aren’t always necessary.
Successful entrepreneurs are by nature resourceful and quick studies, and a 20-minute conversation on a particular subject might be all they need to get over a hurdle. In reality, the biggest problem starting a business is not knowing what you don’t know, which can often be revealed in 20 minutes. Gaining the skills to surmount what you don’t know will take longer, but there are many resources out there that can help. There is one catch. You have to ask.
You know how when some guys are lost they will resist asking for directions and keep driving? It is something like that, but instead of staying lost or finding their way, there is a third possibility — they crash.