$10k in the Hole w/ Acquired Business - What Could I Do?

[conservativechristian]

About 18 months ago I purchased a local coffee brand from people I knew in my local business community through networking. The business was 3 years old at the time.

I believed I could repackage the product with better design (design is my “day job” as a full-time entrepreneur specializing in service marketing rather than e-commerce) and build a systemized online platform to sell the product, and when combined with a good product I could eventually scale the business. So for ~$8,000 I bought the name, any packaging they had, and a couple pieces of small equipment. Also a list of ~50 previous customers.

I have a very tasty single-origin coffee product in whole beans and, mostly, 100% recyclable K-Cups. The roast is not too dark, not too light, and when fresh roasted & ground smells absolutely amazing. It’s been my daily coffee for over a year (yes, consuming my own merchandise… someone has to, plus it is great not buying coffee to fuel my day job). Unfortunately, I had to also invest in fresh inventory so buying green coffee beans, having them roasted, having some of them turned into k-cups, and buying additional packaging + website + some ad spend.

I’ve had a handful of customers. A couple repeat buyers, only one of which is from the list of previous customers. But I’ve invested around $10,000 in the business to date and monthly revenues average around $30-$60/MONTH. No one bought my Black Friday promotions, I’ve gained no new customers since July. There’s about $2,500 of inventory left to sell and the season is coming up where I could buy fresh beans if demand increases to even as little as $500/month steadily.

I know I could cut my losses and shut it down, just drink the rest of the product for a couple years and write it off as a hard-bought lesson.

But I would like to open the floor to recommendations. I’m back in bootstrapping mode, I’m out of capital and hoping for an EIDL loan advance.

Can you think of any creative ways to pull this business up by its bootstraps and scale out of the $10,000 hole?

 

[biblejourney]

@conservativechristian What are you doing to sell?

1. I notice community organisations are already listed, but do this.
   
2. Approach Cafes and offer to white label their own kcups for them, or wholesale your own brand to them, as an additional revenue stream. Many cafes are doing this in Australia. For a white label solution, charge a setup fee to cover your costs
3. To the everyday consumer, build a subscription model so you get repeat customers. While I was drinking from a pod machine, the only online supplier I repeatedly used was the one with a subscription. Kcup coffee just isn’t THAT amazing that I’m going to go to a website to do a new order every time I run out instead of picking it off the supermarket shelf. Subscription mode solved that problem for me.

 

[conservativechristian]

@biblejourney I agree that the subscription model is a good idea, and I have implemented the tools for it - just need the subscribers now.

Sounds like building a network locally is the next step - I do have a good community reputation because of my other business, it’s just been hard to spend time on this while working on my primary income source. Good advice, thank you.

 

[biblejourney]

@conservativechristian If time is your primary limitation, then consider two things.

1. B2B is much kinder to your time because one sale can mean thousands of dollars.
2. Consider approaching trustworthy friends and offering them a cut if they can offload some stock. This will take time pressure off you.

Also, hospitals. Some have these machines in every staff room and waiting room.

 

[conservativechristian]

@biblejourney Love this, thank you.

B2B was one of the biggest intended markets - sounds like I simply need to start fostering those relationships better in the next few months.

 

[logansc]

@conservativechristian So you sank 10k into this.

What kind of numbers did the previous owner do monthly?

Crazy idea, pick up the phone and start calling farmers markets to see if you could set up, restaurants, cafes and small businesses.

 

[janblessed]

@logansc Farmers markets are a great idea. OP says his coffee is extra tasty. So he should go to farmers markets and sell cups of coffee so people can taste it, and then sell them bags of coffee to make at home. Emphasize the local connection or whatever.

 

[conservativechristian]

@logansc My sample size has been small but most of the people who have tried it have told me that it’s one of the best they’ve had - people who repurchase and also people who haven’t.

For some people it’s the format (k-cups and whole beans don’t work for everyone), for others it’s the price (high end single bean for a craft product means it’s going to be more expensive than your typical local blends and national franchises).

 

[logansc]

@conservativechristian Do you not offer a ground version instead of whole bean that isn’t kcup?

 

[conservativechristian]

@logansc Not currently, mostly to help with quality assurance until we have a higher demand for it.

I have a pro-grade grinder though for when that seems viable.

 

[onecontent]

@conservativechristian Are you relying solely on online channels? If so that's your biggest problem. I sell candles, which sell 10,000x better in person than online since no matter how good my copy is to describe, people can't actually smell them. You need to get out there in person and pound the pavement to get this product in people's hands. Is this really something you want to do though? It seems to me you might've thought this would be an easier experience than it actually is, in which case I'd write it off and move on.

 

[conservativechristian]

@onecontent It’s true that I thought a mostly online presence would be enough, and it seems I’ve been mistaken. My goal has been to turn it into a self-sustaining business that I can own but not always have to run, of course that will take volume.

 

[ciprian]

@conservativechristian I own a cafe and 6 yrs in, we are MAYBE getting it to a self-sustaining business. You basically bought a startup so it’s impossible to be hands off.

1) you need to aggressively market B2B by scheduling meetings with cafe owners. Know your market and don’t bring up K cups if they’re using whole beans. Bring a pricing sheet to show them what discount they’re getting in wholesale vs the avg consumer (it should be roughly a 50% discount). Also offer to sell beautifully packaged bags of coffee that they can resell to consumers for a decent markup.

2) not sure where you’re doing your direct to consumer marketing right now but Tiktok has worked great for us. We got almost 50k followers in about a month and this free form of advertising single handedly got us thru the pandemic to higher than ever sales. Making videos can take a lot of time and dedication tho so if you can’t afford to do that then the next best thing would be to see if any influencers would be willing to team up with you in exchange for free product. Maybe offer them a cut in exchange for using a promo code.

 

[conservativechristian]

@ciprian Not having a physical cafe has been helpful, for sure - glad that you’re at least getting close to that being self-sustaining!

My plan is certainly to beautify the bagged whole beans for resale, at the moment I have bags that are frankly rather ugly but I’ve used them since they were already in my inventory.

Your point about TikTok is interesting, I haven’t considered using it for this business but I will look more into it!

Thank you for your insight.

 

[onecontent]

@conservativechristian Roger that. In that case, I'd write this one off and try something else/focus on other projects.

 

[mombowlin]

@conservativechristian You keep talking about what you have but not about what you’ve done to sell it. Who have you talked to? What local shops have you tried to get your product in? What cafes are you offering to white label for? How are you advertising? Who are you targeting?

 

[matt123]

@mombowlin

You keep talking about what you have but not about what you’ve done to sell it.

Agreed. OP, you just offhandedly state that of the 50 previous customers only 1 had re-ordered. But why?!? That existing customer list is the first place to start making sales calls. If they're not ordering, call them and ask why. That's really valuable info.

Your description of your work on the business sounds like you built it and expected them to come... that's not really how it works even though it did in the movies. In the real world, you need to be working on the sales part all the time. Keeping in touch with existing and past customers, looking for ways to reach new customers, doing active outreach. And if that isn't something you can do (it's not something I enjoy so I get it), then you need to spend some money to hire someone to do that sales and marketing work. It will be the smartest money you've spent so far.