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.
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.

Failed product experiments

We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress.”

-Richard Feynman

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.

Failed body lotion experiments
Failed body lotion experiments

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!

Melting soap pods in another failed experiment
Melting soap pods in another failed experiment

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.

Truly Local Manufacturer

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.

So right now we are using:

Box of local beeswax
Another delivery of fresh Canberra beeswax – rescued this time from the Jerrabomberra Wetlands

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.

Going slower to maintain control

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.