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How a young vet turned entrepreneur turned a family recipe into an $80,000 venture that just launched on Amazon

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Veteran turned entrepreneur launched family recipe secret sauce business

U.S. military veterans are a force to be reckoned with on the battlefield — and in business. Many choose entrepreneurship as their career after returning from service, equipped with a cadre of unique leadership and time-management skills. Currently they own about 2.5 million small businesses in America in a host of industries, according to the Small Business Administration.

One is Charlynda Scales, who inherited her grandfather's secret sauce recipe while serving as an acquisitions program manager in the Air Force.

As the third of five grandchildren, she was surprised to be singled out as the recipient of the family jewels, but set about learning to bottle and sell it.

"I was active duty, and my biggest goal was to buy a BMW with cash," said Scales. "I'd saved $20,000 and took everything I'd saved and had to make a decision — you're either gonna have a BMW or make this sauce company come to life."

Named in honor of her grandfather Charlie "Mutt" Ferrell Jr. — who served in the Air Force in Vietnam and the Korean War and whose call sign was "Mutt" for his ability to blend in, Scales launched Mutt's Sauce LLC in Dayton, Ohio, in 2013. Last year she sold 18,000 bottles at prices ranging from $3 to $6 (for wholesale and retail). The tomato-based sauce is now available online, in Kroger's stores and launched this week on Amazon.

Charlynda Scales with her grandfather Charlie "Mutt" Ferrell, Jr. at her Commissioning Ceremony on the day she went into the Air Force.
Source: Charlynda Scales

Scales bootstrapped the business and — with the help of mentors like investor and Shark Tank star Daymond John and a $25,000 cash prize as a grand prize winner of the Bob Evans Farms Heroes to CEOs contest — she has managed to grow the business without taking on any investors and owns 100% of the company. If she decides to raise capital, it will be from a strategic partner and would need to be from someone who will be as committed to the company as she is, said Scales.

"I have this one-team one-fight mentality, and I want my partners to be a part of my team," said Scales.

This year the tenacious entrepreneur is expecting sales to reach $80,000.

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It's a family affair. The first production of every flavor is taste-tested by one of the original five grandchildren to make sure it passes muster. Scales herself is allergic to pepper so can only consume the "Original" flavor, which Mutt developed especially for her so she wouldn't feel left out at the dinner table (the "real" original version is Sweet and Spicy).

The newest, limited-edition flavor, developed in partnership with Flat Rock Spirits distillery, a local brewery to support Ohio Tornado victims, is Mutt's Sauce Limited Edition Bourbon Sauce and clocks in at 12% alcohol.

"My mother taste-tested that sauce," said Scales. "She's not a drinker, so it was quite entertaining."

The family business keeps the lights on and pays the mortgage, but Scales is constantly looking for ways to save money and increase margins — her push into e-commerce is a big part of that strategy — and like many Americans, she is trying to figure out what the next year will bring for the U.S. economy.

"I'm going to stay conservative until there's a little bit of a recovery," said Scales. "I think a lot of people are penny-pinching probably and will be until after the election, so until then I'm just keeping things pretty consistent."

Preparing for a future economic slowdown

Like many entrepreneurs, Scales is looking for ways to grow her business against a confluence of headwinds. Trade wars, the 2020 presidential election and concerns about a possible recession has her strategizing about how to continue to expand the company in the months ahead. She is making an aggressive push into e-commerce, where her margins can be as much as four times those of traditional retail, while constantly looking for ways to save money in operations and build up her own personal savings in case things get tough.

"The steady paycheck of the military — the stability of a full-time job — is a stark contrast to being a small business owner," said Scales. "At every point, you're trying to save on overhead, and there's no part of your day that isn't involved with saving money."

She is not alone. Many are taking a cautionary stance on the U.S. economy. Some 65% of Americans think a recession is likely next year, according to the CNBC and Acorns Invest in You survey conducted by SurveyMonkey, released Monday. The survey polled 2,776 people in all age groups and demographic sectors nationwide from Oct. 21–25, 2019.

Younger generations (18–34) are more likely to think that a recession is coming, according to the poll. Of that group, more than 70% think the recession will hit next year.

The steady paycheck of the military — the stability of a full-time job — is a stark contrast to being a small business owner. At every point, you're trying to save on overhead, and there's no part of your day that isn't involved with saving money.
Charlynda Scales
founder of Mutt's Sauce

The survey also shows that political views also skew people's views on the economic trends. Democratic voters have the most bearish outlook, with 84% thinking there will be a recession in 2020. While 72% of Independents — a group politicians pay close attention to in an election year — share that sentiment. Among Republicans the number drops to 46%.

One reason for the concern is worries about trade wars with China and Europe. So far, Mutt's Sauce's manufacturer and suppliers have kept prices consistent, even as tariffs push up prices for things like glass bottles from China, allowing Scales to keep prices stable and remain attractive to more cost-conscious consumers. Still, some of her fellow small business owners are already facing rising prices, she said.

"I've been very fortunate not to see an increase in my cost of goods sold, but I know many of my friends who import some of their goods — like if you're a salsa maker and you import your chilies — sometimes they'll just stop importing them and you could go out of business," she said. "It depends on what's available and what is happening in import-export."

A majority of Americans (65%) say that they've noticed a recent increase in the cost of everyday items they buy (excluding gas), according to the survey. "Food" or "Groceries," in general, and specific products including beef, milk and fruit were most commonly cited as the items that have increased in price. (The Consumer Price Index shows the cost of some of these items has climbed in recent months — roughly in line with inflation; beef and milk are up 1.6% and 0.5% respectively, but fruit and vegetables are down 1.2%.)

Mutt's Sauce
Source: Charlynda Scales | Mutt's Sauce

Among those who expect a recession, nearly half say they are proactively paying down debt or cutting household spending to prepare for a downturn, and like Scales, a third say they're building an emergency fund, the survey found. While the younger generation is more likely to believe a recession is coming, they are less likely to say they're doing something to prepare for it.

Scales believes consumers will keep buying Mutt's Sauce, even as they trim back household spending. People recognize the importance of supporting a veteran-owned company selling an American-made product, and that will help support her business and others like it, said Scales.

"What we will see more of is that shift toward supporting our fellow countrymen, helping them stay afloat and recognizing that small business boosts the local economy," said Scales. "You'll see them investing in those small businesses more to help our economy recover."

Still, more than a third of all survey respondents (and 43% of women) say they will spend less this holiday season than they did a year ago. When it comes to personal spending, women are also being conservative, planning to hold steady (53%) or trim personal spending (27%) over the next 12 months.

Since women are the primary shoppers in 72% of households, it is important to pay close attention to what women say, according to consumer surveys conducted by MRI-Simmons. Women contribute $7 trillion to the U.S. gross domestic product annually, reveals the Center for American Progress.

Scales hopes that even if consumers are spending more conservatively this holiday season, Mutt's Sauce is something people will still be willing to pay for as a treat. The previous recession showed there are certain things people don't tend to give up, like getting a haircut or preparing special family meals, she said.

"I know a lot of my fellow Americans are saving," said Scales. "What I want to provide is something that is mainstream and worth your money."

CNBC's Contessa Brewer contributed to this report.

CHECK OUT: 4 places besides Costco where you can save money buying household essentials in bulk via Grow with Acorns+CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.