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.

No profit in recycling packaging

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!

Receipt from metal scrapper

Another Shift in Target Retailers

It’s been such a strange journey for Harvestcare as I’ve learned more about my customers. I originally envisioned the line to be focussed on the tourist industry. However, during the lock-down I realised that there was a local demand too. Now, I feel the need to do another shift in our target retailers.

Original Retailers

When I originally started targeting local retailers, I thought first of natural food stores since they already carried similar lines. Wrong! I was only able to get into two. One placed a small order and then refused to pay me. The other has never done a reorder.

Having no luck with the natural food stores, I started targeting normal ones and found that a really easy sell. Yet, only two have done reorders. Personally, it’s always felt a little weird selling my tinned products in these stores anyway as it’s so hard to display them properly.

I also tried the higher end food/deli type places. Yet recently, one of my best customers had decided only to carry my “gift type” range moving forward. The others haven’t placed any reorders.

I’ve had a little more luck with the “gift shop” type places, but the Canberra Visitor Centre (which I thought would be one of my best customers) still hasn’t sold it’s original stock which I find really odd.

Another Shift in Target Retailers

Then out of the blue, I had a large unsolicited order from a hair styling place. They did gift baskets and had some specific requests for new products. While, they weren’t interested in any of our hair or soap line, they loved the tin products that I made personally. And suddenly it occurred to me that I should be targeting the hair and body care / spa places instead.

To do this, I need to make more products they can use in their businesses which will take more time and money. However, it makes so much more sense to me than trying to sell in IGAs across town.

So, I have started testing some new ideas around a body butter scrub and some other things. I’m waiting for more customer feedback, but I think we’re getting closer.

Harvestcare body butter scrub
Work in progress on a new body butter scrub

Now it’s just a matter of time to see if I have finally found the right match for target retailers.

The challenge with perishable products

In March this year, I packaged about half the hotel pilot order for our all natural shampoo and conditioner products. The conditioner was a brand new product that met the pilot’s needs, but we didn’t have time to work out a preservation system in it before I had to order the printed tins with the ingredients list. Given that all of the products were scheduled to be used within the next month, that didn’t seem like a big issue at the time. Yet, there’s the challenge with perishable products.

When the pandemic hit, the pilot was put on hold. Fast forward to today, and I’ve been living with the stink of something crossed between lemon toilet bowl cleaner and a dirty cat litter box. Sitting in the corner of my office were those boxes of old conditioner.

Knowing the shelf life risk, I realised by month five that I would have to redo the entire pilot order if it ever got the green light again (which it did). Still, I couldn’t bear to throw these unused tins away which is why they were still there stinking up my office.

So this week, I’ve taken hours of my time to open and wash each of the 1000+ tins so that I can take the aluminium packaging to be recycled. Unfortunately, I can’t get the smell out of them, and therefore can’t reuse them – loss of money and lots of time.

Empty used tins to be taken to the recycler
Empty used tins to be taken to the recycler

Such is the challenge with perishable products. At least our current version of the conditioner now has a preservative in the recipe to last a bit longer.

Expanding the Harvestcare line

There’s a natural sunscreen brand that I know about in Australia. Despite being around for a few years now, they still only have one product. I find this unusual as I’m always asked by customers about expanding the Harvestcare line, and I find it hard to say no. That is until I made up some clear rules to help decide.

As an example, a friend asked me this weekend about adding an all natural cologne/perfume line especially since the industry mark-ups were known to be high. Most people do not realise that Body Shop actually started this way in the UK with their first store. However, I said no.

Today I made some candles from essential oil and beeswax as a Christmas gift for a friend. Someone asked if I plan to sell these on Harvestcare too. I said no.

Making candles
Making some all natural candles as a gift for a friend

Other friends have asked me to make household cleaning products like furniture polish and floor cleaner. While I admit that I still sell the alcohol spray that I made in response to Covid before I developed the criteria, my answer is no for future cleaning products. And I’ll only sell the alcohol spray until I run out of the very expensive ingredients I bought months ago.

Criteria for Expanding the Harvestcare line

So, what’s my criteria for expanding? It goes back to the mission of reducing plastic waste. The reality is that most cleaning products come in recyclable containers. Furthermore, candles are not found in plastic since the packaging could melt. And as for scents, most of the times they come in glass bottles.

No, I think that if I were to expand the line in any direction I need to move towards cosmetics. This hard-to-change industry has only recently started to really offer “no animal testing” offerings. The mark-ups are also known the be high with branding built even more on the packaging as what’s inside. Right now, I’m not aware of any brand that has recyclable packaging.

So here lies both an opportunity and a challenge. If I do make such products, where will I sell them as my current stockists will be unlikely carriers? This is probably where I need to have the retail space and body bar on the factory before I can really make this work. Still, by have our mission up front, at least I know where to expand the line next despite all the other requests.

Harvestcare market stall

Lessons Learned about Markets

So far, I’ve done two small physical markets for Harvestcare: one indoor and another outdoors. Plus, I’ve done the virtual Handmade Markets for all four of their pre-Christmas events. Already, I have a few Lessons Learned about Markets from these experiences even though the big physical ones are still closed due to the pandemic.

Lessons Learned:

  • Know your market demographics – Suburban markets haven’t been that great for me though I’ve certainly done better with my products than other stalls. Everyone says that my products will sell with a younger, more environmentally conscious consumer at the physical Handmade Markets. So, hopefully they’ll be back on next year.
  • People buy what they can test – my biggest seller at the Markets has been the orange hand balm as I have it out with sampling sticks. It smells amazing, and so it’s hard for people to ignore it once they try it. My bottled products on the other hand have barely sold, and I have way too much stock right now as a result.
  • November is still too early for Christmas Markets – I didn’t sell but a few gift packs in all these markets. Instead, the attendees are still buying products for themselves.
  • Make sure to have products at different price points – I had products from $8 to $50 for sale at these markets. The biggest sellers were around the $20 mark.
  • Use the Markets for market research – I had plenty of feedback during the markets including that I should charge more for my products because they look amazing, and I needed a normal lotion. Yes, still working on that one!
  • Consider the Markets as a branding exercise for a new business – I knew that I might not recover the cost of the registration fees when I signed up. I had to take that risk though and considered it as a branding exercise. For the more people that see my logo, the more likely they’ll take a chance on it when they see it at a stockists’ store.

What to do with leftover stock now?

Since I have so much leftover stock from the Markets – especially in bottled forms, I need to ramp up my sales activities to stockists or online to see if I can move them. The challenge though is that I have a different pump on the bottles than what was sold to retailers previously because of the 3-month stock shortage. Furthermore, I usually mail bottles with the pump separately because of leakage. So, I’d have to throw away a lot of used pumps if I change the selling model now. I’m not sure that I have much of a choice though.

Oh well. I’ll chock it up to lessons learned about Markets. At least I had the chance to practice before the big ones reopen – hopefully next year.

Harvestcare hotel tins

Second Single-use Hotel Pilot

Conversations with our hotel client have been really positive in the last few weeks. Right now, we’re looking at doing another single-use hotel pilot with one of their locations for a 12-month contract.

This will be a part of the hotel’s much bigger sustainable vision. And the good news is they should know if they’ll deploy this to all their properties soon after it starts.

The biggest challenge for us now is finding the cash to pre-pay for a year’s worth of packaging from overseas. The minimum quantities that we need to get to a reasonable price point is 20,000 units of each design. That’s 80,000 units of sitting inventory.

At least by doing just one hotel and not all of them at the beginning allows my soap maker and I to figure out how to scale productions and packaging with a smaller order. It’s obviously a bigger risk to an investor or bank if I ask for $500,000 for machines and packaging rather than just $50,000. So, this is very doable.

If we do get the larger contract, my plans right now are to spin-off Harvestcare as a new company and bring my soap maker on as a business partner to run our operations. This is exactly the incubator model I had in mind when I started The Refoundry. So, it would be great to get this first fruitful idea out there fully.

In the meantime, there’s a lot to do for this single-use hotel pilot including a decision about whether or not the hotel uses our State Circle brand or our consumer Harvestcare brand. If they choose the Harvestcare branding, it would be like free marketing for our consumer-size products. So, I really hope they choose that one as we’ll definitely sell more overall.