Challenges of business during a pandemic

The Handmade Markets were cancelled again. This time Canberra went into full lockdown late on 12 August. The market was scheduled for the 14th and 15th.

Fortunately, this time I was ready for this sudden change of plans as these are the challenges of business during a pandemic.

Others were not so fortunate. There were businesses that had perishable products like food that would be thrown away if they could not be sold in other ways. As for me, I still had plenty of products made for the July market that was cancelled. And so, I didn’t have a big workload leading up to this event. In fact, I didn’t plan to pack up my car until the last minute knowing the risk of cancellation.

This Canberra lockdown is tighter than the previous one though. Most my stockists were unable to trade at all until a few days ago. At least the government is allowing no-contact pick-up or deliveries now and access to their physical stores to service the orders.

Ugh…quarantine!

Regardless, I couldn’t provide them or consumers any products anyway as I was confined even further to 14-days of quarantine after I learned I was in the athletic centre at the same time as a confirmed Covid case. It turned out to be completely unnecessary as they recategorised the contact later (Day 12 of 14) to only the gym part of the facilities while I was at the pool.

Had I received any product orders then, they would have been stuck until I was released. And if I were dependent on the income generated from selling my Harvestcare line, I would be in major financial trouble (again). I can only hope that other local retail and service businesses are able to financially ride-out this Lockdown #2.

Maybe a Christmas market?

At this time, the only hope is for things to be reopened by Christmas when the majority of Australians are vaccinated. Then, we just have to learn how to live with the virus threat like other countries.

I was really hoping to use this financial year to make some major decisions about the future of Harvestcare and The Refoundry in general. Unfortunately, there’s a good chance I’ll have too much inventory and not enough information to make that call so soon.

These are just some of the challenges of business during a pandemic, and so I guess I’ll keep going for now.

aluminium packaging

Recycling aluminium packaging again

Today I took a massive Ikea bag of Harvestcare aluminium packaging to the recyclers again. The guy at the weighting machine told me that the price was up because of the challenges with supply. So, today, converted 5 kilos of aluminium for $5.75 in change. Ugh…

ikea bag of aluminium packaging

I keep wondering to myself if it’s really worth the effort for me to do this. Like the tins I took to them in January, this waste was largely created because some of our products expired. It took hours and plenty of water to empty the bottles.

I spoke to the metal recycler owner briefly. He was proud of the tonnage he recycled and the money he was making. Most of the other metal there was from construction sites, household goods and cars. Still, he admitted it took a lot of energy to convert this metal back into something useful. Some of it is done in Australia. So, I guess that’s one good thing.

Yet, am I really saving the planet (even a little) by using aluminium packaging instead of plastic for our products?

A better way than aluminium packaging?

I feel like there is a better way, but it will likely require an even bigger investment. There’s some technology overseas that I’m interested in licensing here, especially for the hotel sector.

Hopefully, I’ll be ready to make that investment once the industry is back to normal and willing to try new things again. For now, I’ll continue to save for that day because this issue weighs heavily on my mind.

Calculating Cost of Goods Sold

With the end of our second financial year, I just spent my entire Sunday calculating Cost of Goods Sold (COGS) for Harvestcare. What a chore! Despite having a financial system in place, it’s still a huge burden. Luckily, I have a solid cost accounting background. Other businesses tell me they use spreadsheets too.

Last year I did a full review of all the available financial systems and none of them could properly calculate COGS for a small manufacturer. I even verified this with my tax accountant. It doesn’t exist.

I could have added a complicated manufacturing plug-in for Xero, but it was completely overkill for what I needed, especially at its monthly price.

I can’t handle this amount of manual work each year. So, I plan to build a database for calculating Cost of Goods Sold and keeping track of inventory since there is nothing available.

Who knows… maybe by doing so I can solve a problem for other small manufacturers too. After all, how do they even know how much their products cost to make if they don’t know cost accounting?

Handmade Markets postponed

I’ll have to wait a few more weeks to gauge consumer interest for our Harvestcare brand as the Handmade Markets in Canberra were just postponed. This is due to the recent Covid outbreak in Sydney.

Handmade Markets Postponed

While I’m a bit disappointed (and exhausted), I really have nothing to complain about. From the stallholders’ Facebook page, it’s clear that some of the interstate vendors had just arrived in Canberra or were on their way. Some have thousands of dollars in very perishable items too. My heart goes out to all of them who have lost money.

I have none of those concerns. Yes, I need to move a planned trip to Melbourne that I had scheduled that weekend. However, in the middle of a pandemic, I’m really one of the lucky ones because my primary income job (consulting) allows me to work from home. For that, I am grateful.

Counting down to the Handmade Markets

The Handmade Markets in Canberra is this weekend. I’ve spent every possible hour of free time the last few weeks to make products and prepare for it.

In volume, that’s about 30k of shea butter, 15 liters of olive oil, 4k of beeswax and endless other ingredients. From a labour perspective, I’ve personally spent 100+ extra hours on this, and I’ve also had about 10 hours of help from friends.

shea butter block and oil oil drum
This is what 25 kilos of shea butter looks like with a 25 liter drum of olive oil next to it.

What will this translate to in terms of revenue? I have no idea. People in the private Facebook group side kept saying to make as much product as possible. However, a friend just told me that a good market for them would be less than $5k in revenue. If this only translate to $5k, then I’ve truly wasted my time.

So, stay tune for the results of our first Handmade Markets. I’m planning to have a massage and some time afterwards to really think about the future of our Harvestcare brand.

Handmade Markets – Here we go!

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.

Current 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!

Picture of our very first live market in 2020
At our very first live market (tiny) in 2020.

A broken mission

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.

Vinyl label sheets
Vinyl sheets – waste from our packaging labels

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!

Wasted lipgloss due to a manufacturing mistake
Wasted lipgloss due to a manufacturing mistake

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?

Truthfully, I’m really not sure yet.

myob xero quickbooks logos

Xero, MYOB or Quickbooks for a small manufacturer?

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.

Harvestcare products on shelf

The blessing and challenges of stockists

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.

Chasing payments

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.

If only, they were all this good!

Walking on a thin wall

Risks of running a small business

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.

So, what does this mean for The Refoundry?

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.