Yikes! Our Harvestcare brand has just been invited to participate in the next Handmade Markets in Canberra at the end of June. For people not familiar with this quarterly event, it’s one of the largest locally-made live markets in the southern hemisphere. I’ve wanted to trial our brand there since we began, but Covid has prevented these live markets until now.
While I just accepted the invitation, I admit I hesitated at first because of a number of challenges.
Insurance – Finding insurance for a soap and beauty brand was harder than I anticipated. None of the available market stall insurance policies would cover us. Luckily the Handmade Stallholder group on Facebook was able to point me towards the few insurance companies that would.
Inventory – I have to make a lot of inventory in the next 30 days, but I have no idea how much. Will the pandemic and the lack of markets bring more or less people? How much can I possibly sell in 3 days?
Schedule – I’m scheduled to be out of town for both work (consulting business) and pleasure for a good part of June. So, making this volume of products is going to be a schedule challenge.
Cashflow – Ingredient costs have already cost me thousands of dollars in the last few days while I have some stockists that are late on paying their invoices. This has forced me to personally lend even more money to the company to pay for this new stock.
Injury – Ugh! I’ve managed to hurt the L4 in my back over the weekend. This has already put my product making behind schedule.
Pandemic – In Australia, we sometimes forget that we are still in a worldwide pandemic until there’s another outbreak. Melbourne just reported 4 new community transmissions last night. How will this impact me if 1) the markets are again cancelled; and/or 2) I get stuck in isolation as I’m supposed to be in Melbourne for work quite a bit in June?
Despite all the uncertainty and challenges, my gut is telling me to go hard anyway and prepare to sell as much product at the Handmade Markets as I can possibly make anyway. So, here goes nothing!
There are days when I feel like I have a business with a broken mission. When I started The Refoundry, I intentionally started it with the goal of reducing plastic waste. When I did this, I was originally thinking about new products made from recycled plastic. Unfortunately, I couldn’t find the market fit with the first few ideas despite investing heavily in R&D.
Then I started Harvestcare with the plan to reduce plastic waste in hotels by offering an alternative to single-use plastic amenities. Of course, Covid has put a damper to these plans and other challenges have popped up since then i.e. my soapmaker having to tackle a very serious medical issue.
The consumer side of the Harvestcare brand is doing okay in the meantime despite the lack of marketing. In fact last week, I had one of my biggest reorder weeks in a while from stockists. The problem? Sometimes I feel like I generate more waste than I save, and therefore have a broken mission.
The reality of waste in manufacturing
As an example, all of my product labels are plastic and come on vinyl sheets that cannot be recycled. I started with paper labels, but soon had complaints from customers that the ink was coming off of the bottles. I quickly had to invest in waterproof plastic labels to fix this.
Speaking of labels, I also have thousands of dollars of labels I cannot use because the ingredients changed, the package size was slightly different or the product proved to be a market failure. I have no choice but to throw these away. Even Officeworks has struggled with this issue with vinyl labels despite all their good efforts. Check out my podcast where we chat about this.
Then, there’s the plastic packing waste that comes with almost all my ingredients for products. At least a lot of it is in hard plastic that can be recycled.
There’s also waste from mistakes and perishable products. I have about 100 bottles of conditioner I need to throw away because it’s past the shelf-life. I’ll recycle the bottles, but I still have to throw away the plastic pumps and ingredients.
And even last night, one batch of my lip gloss didn’t smell right and so I had to throw it all away. Ugh! This waste drives me crazy!
Plastic in packaging
I also have the challenge of some plastic in my packaging even though I mostly use, very expensive aluminium. The plastic can be found in the bottle pumps as I have found no other option for these types of liquids. At the beginning, I was encouraging people to swap the bottles and reuse the pumps, but found few stockists that wanted to sell this option. I even had to reduce the bottle size from 500ml to 150ml because that’s what the customers wanted.
There’s also a small plastic insert in the lid of each aluminium tin. If I ordered a large enough quantity, I could ask the manufacturer to leave it out for our solid products like hand balm and lip gloss. Unfortunately, we are no where near this quantity yet.
However, for the liquid products we originally designed for the hotel industry, the insert is still needed to prevent leaks.
I’ve looked at all other types of possible packaging available in the marketplace right now, and unfortunately there are no better options yet.
The quick fix to my broken mission?
Last night I spoke to the Plastic Collective about plastic neutral credits. They’ve offered this before, but now it’s backed by an international certified scheme, much like carbon credits. Through their program, you can pay for a certain amount of plastic to be picked up in developing countries to offset the plastic we’re generating here.
Unfortunately the mandatory audit requirements are too expensive for a small business like mine. However, I’ll probably invest in it anyway at the individual level without obtaining the official “plastic neutral” certification. At least, I’ll feel a little better about our waste issue.
Nonetheless, this is not the kind of fix I dreamed of when starting this company. So, a big question on my mind is, do I continue with this broken mission (and gamble the hotel industry to be interested and my soapmaker to be healthy again), or do I try something else?
With all the software packages out there for small business owners, which one should you pick? Xero, MYOB or Quickbooks? It’s not that simple for a manufacturer, even a small one like my business.
When I started The Refoundry, I struggled to decide because none of them seemed to calculate inventory and Cost of Goods Sold for manufactured products properly. So, I ended up doing all my books on a complex spreadsheet. When it came time to do my company taxes last year, it was horrible! I couldn’t even file electronically without using an agent.
Having learned my lesson after that very time consuming, end of year process, I decided that had to make up my mind and choose something this year. My soap maker was using Xero, but needed to add another manufacturing app to make it work. Given the size of their business, it made sense, but I couldn’t justify the additional cost for mine yet.
I also found Xero extremely restrictive at the lower level plans. It was cheap if you only had a few transactions a month like I do with my consulting business. However, The Refoundry did more than 300+ transactions last year. Also, I didn’t like how restrictive it was for things like customising the invoices.
With MYOB, it’s a more complex system and allows for a lot more customisations. While I used MYOB a bit at my last job, I still found myself looking at the help page too often because it wasn’t as intuitive. I also found it limiting to set up automations for future transactions.
Quickbooks was my favourite of all the packages that I tried, but it too had its quirks. For one, my bank was not on their list. So, I actually had to set up a new account with a new bank to download the transactions. I wouldn’t have bothered if it were not for the fact that it allowed the most customised features and automations for the price.
To be clear, none of these packages calculate Cost of Good Sold properly for a manufacturer. It will only do it if you’re reselling products. Instead, you have to add another inventory management package that integrates with the accounting software. I can’t justify that additional price tag or the time to set that up right now. Instead, I’ve decided to continue to do that part in a spreadsheet and manually transfer that over as needed via a journal entry.
So, is it Xero, MYOB or Quickbooks?
I chose Quickbooks because it was the most intuitive and would save me time later via the automations. Still, it certainly isn’t a perfect fit for my manufacturing needs, but neither are the others.
Choosing to use stockists for our Harvestcare products has been both a blessing and a challenge. Today’s email from one of them just reminded me once again how hard it is from a cashflow perspective to depend solely on wholesale.
I actually do prefer to deal with wholesale orders rather than retail because even though the margins are lower, they buy in volume. Plus, I often get repeat orders without even trying. The direct to consumer model is much harder in my opinion, but I think a healthy balance between the two would be ideal.
I tend to send weekly reminders if a stockist misses a payment date. I do it personally rather than via automated messages from my accounting system because I tend to get a better response. Most of the time, it’s just a misplaced invoice, but other times there’s a high chance I won’t get paid for products already delivered.
Today, I sent a weekly reminder to a stockist that was late once before but did communicate with me and eventually paid. I was tempted to force them to pay in advance for their second order, but decided to take a chance that it was only a one off issue. I should have listened to my instincts as the first time I met them to drop off extras as samples, they immediately said, “Sorry, I’ll make sure you get paid right away,” even though they weren’t late yet.
When I sent the email today, they replied that they had to close their shop due to matters now in court, but they would pay me soon. I now have a little bit of hope since they did respond, but there’s still a big risk that I won’t get paid.
The first difficult stockist
The first time this happened to me though, the stockist wasn’t as nice. After multiple follow-up emails, I finally called the store and asked for the owner. When he answered, he said that the products weren’t selling, and that I should pick up the remaining stock. He then accused me of pushing product on him, and that the only reason he did order was to “support local small businesses.”
For the record, I only followed-up because he kept telling me to check back, and then all he bought was a $100 box of lip gloss. He wasn’t being fair to me, and I gave him have a piece of my mind in response.
When I finally did pick up the stock, items were missing, and everything was out of the display box and shoved in the crack between the cash register and the counter. Of course, no one was buying the product! He obviously never had any intention of displaying the product properly or paying for even the few he sold.
I had to throw it all away because I had no way of knowing if it had been tampered with.
But most stockists are good customers
Despite these experiences, I don’t want to paint a picture that all stockists are bad. In fact, most are very good, and I have some really lovely wholesale customers that even pay me early. They’re the ones I always prioritise when I get a new order.
I’m still trying to process some really sad news I received yesterday. My soap maker’s brain tumour has returned. This not only has devastating impacts on him and his family, but it will likely put our growth plans together on hold as he potentially undergoes chemotherapy. These are the risks of running a small business.
Fortunately, he does have an employee that can continue to do the heavy lifting of soap making. But this does limit any expansion plans this year. This includes our ability to do anything with our big hotel chain client other than the second pilot itself. The ability to expand into all their hotel locations would be impossible at this stage as I don’t have the knowledge or resources to do this work myself.
It’s really too early to know yet. Fortunately, my best selling Harvestcare products are actually the ones that I make myself, not my soap maker. And his employee can continue to support the soap product quantities he currently makes for me now.
I did ask my hotel client for an update earlier this week (before I heard this news), but haven’t heard back from them yet. I wouldn’t be surprised if a delay in this next pilot would be beneficial for them too while we’re still in the middle of a pandemic.
So, more decisions to come, but it does remind me again of the risks of running a small business in the start-up stage when so much of the operations is dependent on the founders. My own income streams right now are just as vulnerable until I figure out how to scale and create recurring revenue.
We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress.”
With every inventor comes failed product experiments. For our Harvestcare hand balm as an example, I made over 30 iterations before I found the right ingredient mix.
It takes a lot of time and sometimes supplies to get something right. And some of my friends and current customers have suffered through the trials. I think this is why I procrastinate so much on this important activity.
It also cost money to add products to the line from a packaging point of view. So, I try to limit the downside by only purchasing a small quantity of labels for every new product. This brings up my unit cost of course, but reduces cash stuck in unusable inventory.
Our body lotion product as an example still needs work though I’m pretty close to the end of that development process.
A number of my experiments haven’t worked at all. For example, I tried to see if I could create some sort of “mochi” single-use soap pods. The idea was that it would melt in your hands before use to eliminate the need for packaging for our hotel clients. So far, that hasn’t worked. Instead, the soap melts at room temperature with no ability to contain it… yet!
I say “yet” because every inventor/designer/developer will tell you that it takes a lot of experiments to find the right solution for hard problems. So, I suppose my failed product experiments are really just lessons learned in disguise with more work to do.
It’s been a really good week for Harvestcare stockist orders, but I’m struggling as a maker with no time to make. In fact, I’m constantly surprised with the reorders because I spend so little time on marketing and sales activities right now. I even had a new unsolicited stockist this week. Still, I’m out of stock for many of the products I make myself.
I blame it on cashflow. I’m doing a lot of not-for-profit consulting work in the IT strategy space to pay the bills. In fact, so much work that I pulled another all-nighter on Sunday to hit a deadline. I know this isn’t sustainable, but it’s necessary right now.
Fortunately, I really do love the mental challenges of consulting again. A good friend is trying to convince me to make this work public as there’s a real need to help this industry. So far, I’ve been living completely off of referrals which has been good. It has allowed me to justify keeping it a secret as I worry about confusing people when The Refoundry is my mission company. Still, my friend reminded me that everyone is wearing multiple hats these days.
She’s right. I will add this to my Linkedin profile when the time feels right. For now, I plan to begin work at 7am tomorrow to ensure that I’m still making even though I am a maker with no time to make really.
From the very beginning of the product development of Harvestcare, I wanted to be a truly local manufacturer. It was more than just making the products in Canberra. It was also about sourcing as many of my ingredients locally too.
I’ve also recently moved our label making from a Melbourne company to Prinstant in Fyshwick. This has saved me so many communication hassles I dealt with before.
We’re also using Australian ingredients like:
Sweet Orange essential oil
Lemon Myrtle essential oil
Unfortunately, not everything is available locally like our aluminium tins. Though I do have ambitions once we have sufficient volume to justify the cost of developing with moulds. So, for these items, I’ll have to continue to source them from overseas.
Nevertheless, I think we’ve already made good progress on being a truly local manufacturer of natural hair and bodycare products.
Product-based businesses are notorious for the time it takes to scale to real profitability. Despite this, I’m consciously slowing sales activities for Harvestcare to reduce my need to bring in investors at this time. Essentially, I’m going slower to maintain control.
This means that I didn’t actively chase my pending 2nd hotel pilot contract even though I knew Chinese New Year would delay the receipt of our packaging. I’ve also slowed my cold-calling to retailers so that I can spend more effort on product development to shift the line to spas.
Both of these activities take a lot of cash, but I can afford to invest further in these activities without debt or giving away equity to investors once I finish the consulting projects I’m doing right now. This time delay due to cash flow seems like so little time in the grand scheme of things. After all, I do expect to invest 10 more years into this business as a minimum.
Now the risk is that the hotel pilot will never move forward because I didn’t push it harder. However, the reality is nothing is certain in a Covid world anyway. So, I think that going slower to maintain control is the right decision for the business at this time.
If anyone thinks our effort to recycle our Harvestcare aluminium packaging is money driven, they’re wrong. In fact, I can honestly say there is no profit in recycling packaging – at least for our company. We do it because it’s better for Mother Nature.
Today I took 7 kilograms of aluminium to the scraper (and unfortunately forgot to take a photo). This was mostly the packaging from the first hotel pilot order that we had to redo because of Covid. I spent about 8 hours cleaning out the old product. Now, the business is $4.55 richer!