Tag Archives: Consulting

NECCO Wafers, Sky Bars, And Misplaced Effort

Sky Bar

(Photo credit: Wikipedia)

Our topic this Foodie Friday is the plight of The New England Confectionary Company, makers of NECCO wafers (did you know the name was an acronym?), Sky Bars, and Sweethearts, among other well-known candy brands. There is a fair chance that the 120-year-old company will soon be out of business. Their factory was sold and the company is actively looking for a buyer. The company has notified the city and state that layoffs may soon be coming. The situation is pretty dire.

Even though most of their brands are not really great candies (Sky Bar being the exception in my book), panic has ensued among fans of NECCO wafers. An article on Grubstreet highlights how fans have responded to  one candy-selling website:

The site says that during the month of March, after the panic began, it received 253 emails and 167 phone calls from customers looking for Necco-brand candies. Twenty-nine people offered to pay at least double the going bulk rate, and three reportedly said they’d perform free labor in exchange for priority treatment. One woman wanted 100 pounds of Necco’s glorified Tums, which she planned to vacuum-seal to keep her prepper stash fresh “for years.” (A standard 24-wafer roll weighs 2.02 ounces, so she was requesting about 800 packs.) Another woman said she’d trade her late-model Honda Accord for all of CandyStore.com’s remaining Necco candy.

There is a lesson in this for any business since these hard-core fans seem to be preparing for a funeral rather than figuring out how to cure the disease. All of their panic buying is misplaced effort since what they should be doing is trying to get the company the capital it needs to continue operations. While 420 people may have asked how to buy candy, only 73 people have donated to a GoFundMe campaign the CEO has organized. He, by the way, is apparently clueless about the difference between donation crowdfunding and equity crowdfunding since he had to amend his campaign to say he can’t offer stock:

We have been informed by several people that we cannot offer shares in the company in return for your donations. We are sorry, we do not know if they are right or wrong but we can’t take the chance . If you would like us to return your donation just let us know.

He is apparently in panic mode too and hasn’t sought advice from anyone who is familiar with equity crowdfunding or maybe even an initial coin offering.  Running scared will do that to you, although I know $20 million isn’t just laying around the street anyplace. I’d rather find customers than investors.

Worrying about the symptoms instead of the disease is generally a futile exercise in the long-term. I recognize that when someone is bleeding out you have to staunch the flow before you can worry about what caused it, but in this case, the efforts that have been made by fans of the company (buying up all the product) won’t be as effective as sending the money directly to the company. The company, for its part, hasn’t been very proactive. The factory was sold a year ago and this situation has been coming ever since. I don’t know how they involved their supply chain and their customers in stabilizing the situation, but the fact that they’re down to asking for money on GoFundMe (and it would be among the largest non-blockchain crowdfunding projects if it works) tells me that a lot of time was wasted.

Stay tuned!

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Pay Me Now Or Pay Me Later

One thing that frustrates me is some folks’ inability to understand cost and value. There have been a few times over my last decade of consulting when that inability manifests itself in a particularly bad way. I’ve begun work with clients on more that one occasion where the client has spent a lot (in one case, close to a million dollars) of their seed money to build websites that didn’t accomplish what the client needed them to do. Most of the reason for this was that they hired the lowest-cost option. They failed to see that the value they needed was in their provider understanding the client’s business and delivering a solution that met the business requirements. Instead, they hired someone who made them a beautiful website that was fairly useless from a business perspective. That’s cost vs. value. They saved on cost and failed on value.

Startup companies are notoriously short of funds. Often the founders are working without pay and the thought of paying consultants, lawyers, accountants, and other professionals is anathema to them. That’s a big mistake. I worked with another startup that took intellectual property advice from “a friend who had done this before” instead of a lawyer. I noticed a potential problem with their name immediately but they were happy to go with their friend’s advice despite my asking about a legal opinion. As a result, once they launched their brand, they received a cease and desist letter informing them that they were infringing on another trademark. That resulted in a major depletion of their remaining funds to rebrand and to pay a lawyer to respond to the C&D. Cost vs. value in action.

What’s my point? If you’re venturing onto new grounds, hire some guides before you get lost. You’re going to be paying these professionals at some point and you might as well do so early on. Yes, it’s a cost you don’t think you can afford, but the value you receive can prevent very expensive mistakes and will ultimately save you money in the long run. Had I or any reasonably smart consultant been involved early, we would have talked about what analytics we needed from the website to make actionable business decisions before we worried about anything else. Every dollar spent on the site afterward would advance the business’ goals and not to making art rather than commerce.

Pay us now or pay us later. I think the sooner the better. You?

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Retraining For Retaining

As usual, I have golf on the brain this morning. It’s probably because I’m in the midst of planning the annual soiree to Myrtle Beach that has been the highlight of my year for the last 23. I’ve written about how it’s my annual Board Of Advisors meeting and I highly recommend a similar trip – whether golf-related or not – to each of you.

With this much golf on my brain, I got to thinking about what’s going on in the golf world these days. As it turns out, it has a lot to do with what’s going on in nearly every business. If you have read anything at all about the golf industry over the last few years, you keep reading about the need to grow the game. According to the latest from the National Golf Foundation, interest in playing the game continues to grow but actual on-course participation has been flat at best. Much ink has been spilled over the need to make the game more accessible, lower the cost and speed up play so that new people will become regular participants. I suspect your business spends some time thinking about how to attract new customers too.

What some folks in the golf industry are beginning to realize is that they don’t spend enough time on customer retention rather than customer capture. You might have heard (you certainly could have read it on this screed!) that it costs five times more to get a new customer than to retain an old one. Why not focus on something that is 80% less expensive?

Let me put it in golf terms and I think you’ll see the parallels. If you go to some courses, particularly the high-end courses, you’re often treated like they’re doing you a favor for letting you play. It’s almost like the customer is a distraction rather than the sole reason for the business to exist. The course does nothing to help speed up play. If conditions are poor (shabby greens, standing water in fairways, etc.), that’s never said before you pay or even acknowledged after your round is done. How about stating that you’re sorry for the course not being in top shape and offering to buy a drink or lunch at the end of the round? How about a coupon to come back at half price when the course is in better condition?

You’d be shocked if you encountered some of the rude employees I’ve met in my years of golfing. There clearly hasn’t been an emphasis on customer service at some places. Instead, the emphasis is on holding their hands out for a tip. All they want to do in the shop is to sell you overpriced shirts, hats, and balls with their logo on it. None of that aids customer retention.

What they – and you – need to be asking yourself is what can I do to improve the customer experience? How can I get this customer to come back? Little things go a long way – it can be as simple as a towel on a cart or ice in the cooler or enough sand to fix divots. I’m sure you can think of little amenities you can offer – it can be as simple as a bottle of water on a hot day to customers entering your store or a personalized thank you note for a past purchase. What are the things that will help retention?

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Looking For The Truffles

This Foodie Friday I’m going to run the risk that I’m going to burst a balloon. If you received some truffle oil as a holiday gift, the odds are overwhelming that there isn’t any truffle in your truffle oil. That’s right: much like true extra virgin olive oil, which is generally often neither “virgin” nor “olive oil,” truffle oil is generally some sort of oil infused with something called 2,4-dithiapentane. Sounds yummy, no? As Tony Bourdain said, truffle oil is “not even food! About as edible as Astroglide and made out of the same material.”

Norcia black truffles.

Norcia black truffles. (Photo credit: Wikipedia)

I should not really be the real bearer of bad news here. As far back as 2003, publications were reporting on this and the NY Times did a piece last September on it that was widely read in foodie circles. You might think I’m going to use this as the jumping off point for another rant about deceptive advertising, and as appealing a thought as that is, I’m heading in another direction. Much like the “Where’s The Beef” question, seeing truffle oil on a grocery shelf (heck, even Walmart sells EVOO with “truffle aroma”) makes me wonder where exactly the truffles are. Real truffles in oil don’t last long, you know, so they’re probably not in things that sit on a shelf.

Come to think of it, vanilla extract has the same issue. Much of what you see in the stores isn’t real vanilla and there’s no vanilla in most vanilla things, but vanillin, a chemical compound. Unlike truffles, you probably can buy the real thing at your local store but it’s not 98 cents a bottle, believe me.

What does this have to do with your business, other than making you feel as you did when you found out there isn’t a Santa Claus or Easter Bunny? More than you’d think, actually. When you put up a sign or create a website that announces you as a service provider of some sort, people have an expectation that you can, in fact, provide said service. When you advertise a product, customers expect that the product will do what you say it will. They don’t want to have to look for the truffles nor do they expect that what they’ll find will be fake or something that mimics the real thing. If you’re selling your expertise, have some, even if it’s narrow. I’m surprised sometimes when I speak with people who claim to know something about a piece of this crazy business world how little they actually do know. They might have read a book and can fake their competence, but there really isn’t a truffle there.

A vanilla-flavored extract isn’t the same as vanilla extract. Truffle flavored oil assuredly has no truffles. Make sure there is validity in whatever you’re claiming to be or much like olive oil brands and truffle oil distributors are being sued (there were “four class-action lawsuits filed in New York and California accusing Trader Joe’s, Urbani Truffles, Sabatino and Monini of fraud of ‘false, misleading, and deceptive misbranding’ of its truffle oil products'” you’re heading for big trouble.

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Want Fries With That?

Foodie Friday at last and this week the topic is, once again, fries. I see that Taco Bell has joined damn near every other quick-service restaurant and is now offering fries. Not just any fries, though. Nacho fries, which I gather are fries with a bit of Mexican seasoning and some nacho cheese on the side. Sounds good, right? Well, maybe, but not from a business perspective and let me tell you why (and how it might just apply to your business too!).

English: Taco Bell crunchy shell beef tacos

(Photo credit: Wikipedia)

When I think of Taco Bell (or any other taco chain), fries don’t enter into the equation. I realize that a few of Taco Bell’s direct competitors have fries (more on that in a second) as does every burger chain and chicken joint. Do you really think that diluting the brand is worth capturing those people who MUST have some fries with the burrito?

Moreover, Taco Bell has actually done a great job in positioning itself as having healthy alternatives and, in fact, has some of the best options for healthy eating in all of fast food. While they don’t tout themselves as being healthy (they respect that much of what’s on their menu isn’t and know it would be inauthentic to claim to be), the fact is that they can now offer “choice” while competing against Chipotle and other “healthier” alternatives.

The chain has also done a great job in coming up with weird menu items that are true to the brand. While I’m not rushing out to grab a naked egg taco or a firecracker burrito, those items are true to the brand identity. Even the California Loaded Fries burrito rings true while just plain fries don’t. A better idea? How about offering carne asada fries, which are common in Southern California and taking them nationally? Sort of a Mexican version of poutine, Taco Bell could have stayed true to their brand while offering something they believed was lacking in their menu. Del Taco, a SoCal competitor, offers chili fries. Here is a chance to one-up them and take a regional specialty into new areas.

Ask yourself this. Would you head to Burger King for a taco? Maybe for a breakfast burrito but I wouldn’t classify what is basically an egg sandwich wrap as “Mexican.” McDonald’s tried and failed with pizza, and it wasn’t just because of the product. If you’ve done a good job of branding, your customers have a focused expectation of your product. Diluting that image or causing cognitive dissonance with a new offering helps neither you nor them.

My local taco place doesn’t serve fries. It serves papas, and only as a side on the kiddie menu. Frankly, I was upset when they went to a menu in English because it hurt the authenticity of the place in my mind. Fortunately, the food spoke louder than the language change. See your brand from the consumer’s eyes and you won’t get too far out of bounds. You with me?

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The Food Business Isn’t Just Food

It’s Foodie Friday and the topic today is business. I know: that’s pretty much the topic every day, but let me explain. I read an article on one of the restaurant sites I frequent that spurred a thought that goes beyond the restaurant business.

Photo by Helloquence

The piece was all about the financial statistics a good restaurateur needs to watch. I’m always surprised when a place with good food in a great location goes out of business but it seems to happen a lot. Sometimes it’s that the chef leaves and things slide downhill but more often than not it’s because the business part of the food business overtakes the food part of the food business.

One needs only to watch an episode or two of the show Restaurant Startup to see how a food business is not especially different from any other startup. I assume what I’m seeing on the show reflects the new restaurant world at large and today’s article confirms that belief. Many of the contestants have no clue about the first, and maybe the most important statistics any startup needs to grasp: Cost Of Goods Sold. In a restaurant, that’s food. In a service business, we usually call it cost of sales. In either case, it’s the cost of producing whatever it is you’re selling. You’d be surprised how many businesses don’t know this number.

That number is part of a bigger one called overhead, which includes rent, salaries, services such as accounting and legal, and things like keeping the bathroom clean (your restaurant has one; hopefully, so does your office). These numbers are critical because if you charge too little for what you provide you won’t be in business very long, and you can’t figure that out unless you know your monthly nut.

Once you have the Gross Profit (or Gross Income) number, you can subtract your expenses to get Net Income or Net Profit. Divide that by your sales and suddenly you have a profit margin. That’s something you can use to benchmark your results against other businesses of the same type. In the restaurant business, it’s generally not very big, which is all the more reason why a complete grasp of the numbers is critical. There isn’t a lot of room for error.

I spend a lot of time with my clients on their numbers. It’s not just so that they can present themselves well to potential investors either. Like your web traffic or any other piece of data, they can illuminate a lot and help you make critical decisions. Ignore them at your own peril.

By the way, I’m writing this as a sort of thank you to my late brother who was my CPA and who beat accounting into me many years ago. He passed 5 years ago next week and I miss his guidance and the clicking of his calculator every day.

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What Restaurateurs And Founders Share

It’s Foodie Friday, and this week an article on a restaurant trade site caught my eye. It’s all about the things restaurant owners wished they’d known when they decided to open a place. Having spent a lot of time working with startups, what I find interesting is that many of their statements are not unique to the restaurant business. In fact, I’m willing to bet that you will nod your head in agreement with these if you’ve even started a business or worked with one in its early stages. You can read the entire piece by clicking through here.

Photo by Bank Phrom

First and foremost, the time involved. One owner said she wished she’d known “That I was going to spend the first couple months basically living in the store and two years married to the business. 86 my social life!” I’m often amused at the founders who still have side gigs, especially if those gigs are not consulting positions that are very flexible. One startup with which I’m working has two founders who don’t seem to be able to focus enough time on their company, and as a result, their progress is very slow. What should have taken them several months has taken them a couple of years. In part it’s a financial decision – the gigs help fund the startup – but I sometimes feel as if they don’t really get that you need to be married to the business, as this owner says.

Another owner wishes he’d known “To have enough money reserved to be able to wait to open the doors to the public.” There is something to be said for throwing a lot of tests out there and iterating, but I’m a believer in making sure you’re putting your best foot forward. That doesn’t mean every beta has to be perfect but it does mean, to paraphrase the words of the old Paul Masson commercial, not selling any product before its time. The world is too cluttered and I’m not sure any business gets multiple chances after a bad customer experience (think about how many apps you’ve deleted recently or a restaurant at which your first meal was your last).

Then there is the point never underestimate the value of private dining. As the owner put it, people wanted a place where it was quiet and personal. I think that makes it as much about the experience as it does the product. Personalization is key!

Finally, I love another owner’s point: “To build your squad. We always knew that having good people was important, but I’m not sure we realized how important.” As any business grows, the founders can only do so much and your success is in the hands of the people you’ve brought in and trained. Your job as a manager is to help your team to do their jobs, but it’s also to be sure that every person is carrying their load. Nothing will bring a business down faster than a weak link in the chain that causes resentment among the rest of the team. Hire well, don’t be afraid to admit you’ve made a mistake with a hire if you have, and do everything in your power to retain great talent.

Yes, the food service business is different in many ways (you probably don’t have the health department visiting nor do you deal with many cuts and burns), but as the piece demonstrates, every startup faces many of the same challenges, don’t they?

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