June 27, 2016

A Food Entrepreneur Tackles Questions Around How Best To Grow (PODCAST)

HummusChick-2 In this one-on-one conversation with a food entrepreneur, we talk about her struggles to grow her business while keeping a handle on production and operations and how (and when) to approach investors for the finances necessary to grow.  


Jennifer: Hi and welcome to the Small Food Biz podcast. I’m Jennifer Lewis, and in this podcast series we’re focusing on the issues food entrepreneurs face and the questions you have as you work to accelerate your business’ growth.


Today, we’re talking with Javaneh Hemmat from Hummus Chick. Company website is www.Ilovehummuschick.com. Javaneh actually came to the United States as an international student in 1998 to attend business school, and she actually felt there was very few Mediterranean fresh food options, and so that’s what prompted her to start up her business. I’m going to let her tell you a little bit about it. I will also mention that Javaneh’s been entrepreneur spotlight, and I’ll include a link to that in our website so you can read a little bit about her business where it was that we actually did the entrepreneur spotlight about a year in advance of this podcast. If you’re interested, you can always go back and read and see where she was and then where she is today.


Starting with, if you wouldn’t mind to tell us a little bit about your business. When did you start? Why did you start? What’s been going on between when you initially started your business and where you are today?


Javaneh: Hi Jennifer. Thank you so much for having me. It’s nice to speak with you again. I started Hummus Chick in May 2012 as a part-time opportunity. I had the pleasure of making hummus for ten years prior to that, and based on the compliments and the gathering of friends that I had during college and after college, my passion for Mediterranean cooking increased and my recipes kept getting better and better and the serendipitous opportunity of people asking me to purchase the product combined with where I was in my career coincided and Hummus Chick was ultimately born. It started as a part-time weekend opportunity at the farmers’ markets, and I immediately, as soon as I entered the community, I was truly welcomed and I used the time to test the product, receive feedback, and improve the recipes. Just because something tastes great to me doesn’t mean it’s a great fit for the marketplace. I had to put my pride away and it was actually a very good decision, because from that one authentic hummus recipe that in the Middle East or Mediterranean countries are enjoyed, we now have about 7 or 8 different flavors, and they’re all unique in their own way. I used the farmers’ market as a great platform to learn, connect with my fellow foodies, and really learn the supermarket industry.


That gave me enough sales to go full-time in January 2014, and that’s when you and I spoke, and since then, I’ve balanced the farmers’ market community with wholesale, and now I’m at a place where I’m almost running out of space, Nashville’s a growing city, and we’re going beyond Nashville and Tennessee altogether.


Jennifer: That’s excellent, especially in your first full year of wholesale.


Javaneh: Thank you.


Jennifer: When you wrote in about being part of this podcast, you mentioned that there was one specific issue your company was facing, or I’m sure there’s more than one, but you had mentioned there was one you were facing when it came to sales. Do you mind sharing with our listeners what that is again?


Javaneh: Absolutely. Currently, where I am, because of the amount it’s growing, I am trying to go beyond my comfort zone, which is middle Tennessee, especially Nashville, and trying to scale a little bit wider. That scale requires distribution, finding the right fit co-packer, and of course the funding for it. My question was, as I’m growing, I’m interested in finding out how to connect the distribution aspect, the right co-packer, and the funding altogether so as I follow the steps to grow, I don’t make too many mistakes.


Jennifer: I’m only laughing because I love your attitude, because the reality is even with a completely experience person by your side, and I’m not saying that I’m that experienced person, but even if you had that person right by your side daily, we are still ultimately going to make mistakes. That’s a simple part of entrepreneurship.


Javaneh: Absolutely. That’s my daily life.


Jennifer: That’s very true. That’s how we learn. Where you are right now, I guess my next question is, what do you currently have in place when it comes to … You mentioned three main topics: distribution, co-packer, and funding. I’m not necessarily asking you to divulge specific figures, but which of those pieces do you have potentially in place right now? Are you working with a co-packer or have you identified a co-packer? Do you have somebody that you were working with for distribution or have you brought a salesperson on or working with food brokers? Could you just give us a little bit more background about some of those pieces?


Javaneh: Absolutely. When I started full-time, I knew that I couldn’t be the person lending full-time. My search for a co-packer was the first point of focus. I finally, after going all around the country, I found the right co-packer. They’re actually located in Tennessee too, which I’m really proud of because I’d really like to keep the flagship in Tennessee. Then, of course, to secure a co-packer and give them the confidence, it would require volume. My next step was to find a distributor and a broker that would find the sales and identify shelves that we could fill in order for us to give the order to the co-packer. It was a little bit of a back and forth. We’re still in a motion of completing things, and from an entrepreneur it’s sort of one of those things that keeps you up at night where you’re like, when is this going to happen? I’m ready for the next step, but of course that patience aspect is huge.


Jennifer: Yes.


Javaneh: That’s where I am. I have the co-packer. I’m still working to find the right distributor and the broker. The distributor and broker need to go hand in hand, and then to find out how much would all of this cost? Not just for the next, let’s say, 3 to 6 months but for the next 18 months to 2 years?


Jennifer: When it comes to funding, again, I realize this is a sensitive topic so I’m not going to ask you to divulge figures, but do you have access to capital either through your own financial means through cash at the companies throwing off, or are you seeing this as something where you’re going to have to be looking for an outside capital injection into your business?


Javaneh: It’s definitely going to be an outside injection. Hummus just started with $40. We bootstrapped the whole entire way. My personal life has been trimmed in order to make this a success so far. Now that we’re looking at a bigger opportunity, it’s something that I personally can’t fund myself and I’m interested in finding angel investors that would have a food connection or partnerships. I’m also looking for great partners that are interested in food and the overall wholesomeness of the product that they would like to invest in.


Jennifer: You mentioned that you’ve done a lot of work in terms of finding the right co-packer, which is a huge step, by the way, just finding that right company to work with that you feel confident that your product’s going to be as good as it is when it’s in your hands. Then, that added fact that it’s also based in Tennessee, not only is that wonderful, but that is a great piece of the story that’s going to play really importantly to the Tennessee audience and to the surrounding states that, truthfully, this isn’t a product that’s being made across the country is going to be really important to folks. You’ve done a lot of work with that. You’ve made headway towards finding distributors and brokers that might be a good fit, though it sounds like that piece is still a work in progress, and correct me if I’m wrong. With the financing piece, have you gotten to the point where you’ve been able to identify potential angel investors or potential partners who might be able to lend both food expertise and mentorship and the financial resources to your company?


Javaneh: I have found the resources, we have a fantastic group of community based organizations, such as the Entrepreneur Center in Nashville, which I’m a member of. Where my kitchen is, we have another great community center where they’re constantly looking for grants and also expanding on resources. I have not pinpointed the details of who would be a good fit for me and who would have the resources so we could grow together.


Jennifer: I guess a follow-up question to that is, have you, and it might not have occurred understandably because some of these other pieces are still in motion with regards to the distributor and whatnot, but have you identified, again, you don’t need to divulge this, but have you identified approximately how much you’d be looking towards for when it came to a capital raise, like you said, that could really help sustain the business for this closer to 18 months rather than just a short term cash infusion?


Javaneh: I think for this next phase of scaling would be about $250,000. With this funding I think would go to the co-packer, the distributor, and I would say about maybe 30 or 40 regional stores. Then, once we grow from there, either the company could … That’s something else that is sometimes on my mind is can the company survive on its own or do we need more investment past that? I think where I am, transitioning from a very small business to maybe a little bit medium size, I would think 250,000 would be a good beginning.


Jennifer: Now, when you’ve done your calculations, does that 250k also include potential promotions or working with distributor that you might need to do to help get a new product onto the shelf in some of these stores where you might not be as visible in person? Have you taken into account promotions and some of the other things that you might need to do to incentivize retailers to carry it?


Javaneh: That’s a real good question. That was not on my list, but thank you for bringing that up.


Jennifer: You’re like, great, thank you for telling me I might need more money. You may not, but that is just one of those pieces that I would make sure to take into account that you might need to do promotions. The right distributor and/or food broker can help you suss through what that’s going to look like and what the right promotions are for the stores based off of their relationship with the store buyers, but you might want to be prepared to do that both to help you get onto the store’s shelf, but then also to help you sell through so that a customer who’s been used to purchasing XYZ hummus off the shelf, that there is an incentive for them to spend money and purchase yours for the first time.


You might also want to be budgeting in, I’ll use the word budgeting kind of loosely, but also mentally budgeting in there might be time that might need to be budgeted in for you to go out and be doing in store samples, because that’s usually the biggest driver of initial sales from a promotion standpoint is if you can be there, sharing your story and telling people why they need to buy the product. It at least lets them taste the product and helps them gain a taste for the product, if you will. That may not necessarily cost as much as some other promotions might, but there is the cost of your time associated with it.


Javaneh: Absolutely. I’m glad you brought that up. Sampling does drive sales and the local, independent stores that we’re in right now, we do carve out time to connect with the customers and the sampling is a definite … It’s a 100% sale motivator. That’s the question I’m always asking is, what is the cost of sampling?


Jennifer: Great question.


Javaneh: On a small scale, I can definitely cover a lot of ground myself, but when it comes to being in regional stores, what does that mean for the bottom line and how does that look for the company? Basically what you just covered, how do you incorporate that in the budget?


Jennifer: Some ways that you can sometimes do it, and again, keep in mind different retailers are open to different promotional ideas, so it’s not like what I’m about to say every retailer would jump on, but sometimes if you’re looking at your schedule and your life and you’re saying it’s simply not possible for me to go around to 40 stores all the time, be doing in store samples, you might be able to, depending on the store, include free packs of hummus and encourage them to open it up and allow their customers to taste it. If you walk by any cheese area of any supermarket, they usually have some cheese out there, and oftentimes that is not at the supermarket’s cost, that’s at the manufacturer’s cost, but it’s a way to get you to try the product when you might otherwise not. You’re absolutely right in that you do need to take that into consideration, that cost into consideration.


That was part of what drove that 250k question is making sure that you do have a buffer in there for promotion, for the sales promotion, so that people will try the product because you have an incredible product, you have an incredible story, but to get somebody to try it for the first time, especially when you’re not there at the farmers’ market being very personable in front of them is a really hard leap for a lot of consumers to make.


Javaneh: Absolutely.


Jennifer: Again, going back to this trifecta that we’ve been talking about with the co-packer, distributor/broker, and then the financing piece of it, which of those pieces do you think is the biggest hindrance right now? If you were to say, okay, I want this one piece to fall into place and then I feel like everything else can move forward, or are they so intertwined that you’re like, actually everything has to come together at the right time?


Javaneh: I feel the two biggest pieces that spurred me to connect easily would be the co-packer and the distributor. I feel that when those two are balanced, then we have a product and we will know how to get them to the consumer. I feel pretty confident about the funding aspect because the story’s so good and the product has been selling, so we have proven the concept. I just feel that logistically how to get the distributor and basically introducing the distributor and the co-packer to each other would be the biggest hurdle right now. It might be that it’s my biggest question today.


Jennifer: I guess my question is, why are you concerned about the introduction of the co-packer and the distributor, because ideally you’re the go between between the distributor and the co-packer. I mean, sometimes the distributor will work directly with the co-packer, though it’s not often and you sometimes want to be careful that you don’t be get too cozy a relationship between the two of them so the distributor doesn’t decide to kind of create their own brand based off of similar recipes, ingredients. I may not be understanding your question correctly. I can see how having the right co-packer is absolutely an issue. I can also see how having the right distributor is definitely an issue. I’m just not sure that the two need to interact with one another.


Javaneh: I see. Okay. I think what I meant to say was I need to have the co-packer to be happy with the volume and I need the distributor to be happy with the service that they can provide and the broker they can sell and I need maybe somebody on my team that can coordinate that. I think coming up with a clean plan on how to make that work from the Hummus Chick side, I should’ve said that. I should’ve phrased it better.


Jennifer: No, and what you just said makes perfect sense. You’re right, because you’ve identified a great co-packer and you want to keep them on your side. In order to do that, they need to have faith that the product’s going to see to begin with because it’s taking up capacity in their manufacturing process that they could hand out to somebody else. That does make sense.


You’ve mentioned that you’ve done a lot of work to find the right co-packer and that you’ve started to work down paths towards finding a good distributor and/or broker relationships. Can you just talk a little bit about what you’ve done to start finding those folks?


Javaneh: Absolutely. Nashville is focused on food and fashion. We actually, even this weekend, we have a food and wine festival that’s going on. We have amazing talent. Really [inaudible 00:18:14] in leveraging these little opportunities and making them better. I’m, like I was mentioning earlier, part of the Entrepreneur Center and they have great connections to different investors, but aside from that, I feel my initial role has to be to secure Hummus Chick in a more profitable spotlight before I can approach investors to give them the security that this is a good decision.


Jennifer: With regards to finding distributors, you mentioned that it sounds like you’ve had preliminary conversations with folks, but how have you started to find those folks?


Javaneh: It started with a phone call. I called UFI and asked them, what do I need to do to find distribution? They basically sent me a link to their West and East brokers, and I contacted as many as I could and asked as many questions. I always had … Basically, the criteria of questions that I had were relatable to my business, obviously, and that’s how I found an individual who was very helpful and we basically started a conversation and they sampled the product and it could be a good fit for us to work together. The conversation has begun and I’m thrilled to see where it goes, but I’m pretty hopeful it’s going to work out.


Jennifer: The fact that you’ve had a great conversation like that from a nationally recognized, obviously, distributing company, that’s in addition to a solid business plan, but like you said, you have the sales behind you, personally I think that you probably have enough to start talking to potential investors, even if it’s just, at this point, conversations with them. Oftentimes certain investors are looking to get in at a point like this, because essentially they get more bang for their buck. The minute that you have that signed distribution contract and you really start to grow your business, the amount that their money can buy decreases. Also, finding that right angel investor and starting those conversations now, the right people in your community, they’re going to be able to help you reach out even further to distributors and brokers because a lot of those folks are going to … The food community is small enough, and especially when you narrow it down to one city. As you look for potential partners and talk to potential angel investors, you might just find, through their networks, other people who can help you grow your business.


Based off of what you’ve told me with regard to the fact that you have the logistics piece of the co-packing more or less figured out, you’ve identified the right person, and again with the fact that you’re keeping it local to you, and that you are closing in on or have been making headway and at the very least have shown that you have the tenacity to go out and just make the phone call when need be, which is something that not every entrepreneur is willing to do. Sometimes entrepreneurs are more hoping that it’s going to come to them as opposed to them going out and putting themselves on the line. Those two things, combined with a business plan that’s going to show, this is what I’m estimating in the next year to three years worth of growth for my company is going to be, I think that you actually might be in a good position to start talking to potential investors.


Javaneh: That’s very comforting. Thank you.


Jennifer: I wish I could sit here and give you a couple names of investors, but I think that part of what’s going to help you find the right partner in your business, this is just going off of my gut, I think that they’re going to be local to the Nashville market, or at the very least to the Tennessee market, because I think that you have a very strong story to tell. I think your product certainly can go across Tennessee borders without a problem. I think, however, that there is a fair amount of Nashville pride, both in your company and in your community, and I think that ideally where I would start looking for potential investors and angel investors would be within your immediate network. Potentially talking to folks at the Entrepreneur Center that you’ve mentioned earlier and starting to see if they might be able to share names with you, maybe look to see are there business competitions? Sometimes even university business competitions are open to people who aren’t in the university or are there city-wide business competitions? You might want to start looking at some of that stuff too, because oftentimes people think at business competitions, the goal is to win the competition, it’s not. The goal is to actually just get a couple investors who are sitting in the audience, who may not even be judges, get them to be really interested in your product.


Javaneh: That’s wonderful. Thank you.


Jennifer: I’m hoping before we round out our conversation today, because you have gone from a part-time business, working at farmers’ markets, and now you’ve grown it to wholesale, and like you said now you’re on a cusp, which is a scary cusp, by the way. The first scary one was deciding to start the business. The next scary one was to go full-time. Now that you’re on this cusp of needing the additional outside investment to really grow your business forward, there are a lot of entrepreneurs out there listening who want to get their business to the point where yours is and to be facing the problems that yours is right now. I was wondering if you could share any lessons learned along the way to any of the folks listening.


Javaneh: Absolutely. I learned three very important lessons. One was understand your cost of goods sold. As a matter of fact, Jennifer, I used your template every single day. I lived by it, especially with fluctuating prices of lemons. Lemons is a huge part of my recipe, and as you know, there was a spike in lemon prices, and now cilantro. I just go in there, I plug in my numbers, and it gives me a good understanding of my price point and what I’m really profiting and what I’m losing. Understanding the cost.


Number two, when developing new recipes, to understand how can this recipe be sustainable, in my case, for more than seven days. A lot of people come up to me and ask me for avocado hummus or carrot hummus. Although I love both of those ingredients, but avocados brown, so if I were to package avocado hummus, it would not be a good value for the consumer because we have different eating habits. If someone keeps it in the fridge for let’s say 3 to 4 days and open it up to find this brown hummus versus this bright green hummus, then that would be a disappointment. Understanding when developing a recipe, it needs to be sustainable for a packaged value.


Number three, self-care. That helps your business. I took 5 days off. The only days within the 2014 business year, I took 5 days off and I was worn out. I had to sit down and meditate and understand where I am and really take care of myself, because I’m the core of the company. Just like most small business owners, we are so passionate about our businesses and our brands, we work all kinds of hours and we give up so much and sacrifice so much personal time and family time and everybody’s upset with us, but self-care is as important as the cost and recipe building, in my opinion.


Jennifer: You know, I would agree with you that you are 100% correct. Partially, I agree with you because it’s something that I’m working on right now myself as an entrepreneur. In looking back, I’ve definitely seen a lot of businesses go under because they don’t understand the cost or they’re not committed to a sales strategy, but on the flip side, I’ve also seen I would say 50% of the entrepreneurs just simply get burnt out and don’t want to sustain the business going forward, even if it’s a wonderful product. You are absolutely correct, and thank you for saying that because it’s something that a lot of people forget about. We focus so much on the marketing and the sales and the numbers that we forget about the actual person running the company.


Javaneh: Absolutely. It’s amazing what 8 hours of sleep does. I just tried it the other night, and I was more productive than ever the next day.


Jennifer: That’s very true. Well, hopefully you have a lot more 8 hour nights coming ahead of you. Definitely looking forward to touching base again in the future and kind of hearing how things are going. I will put on the site a link to the Entrepreneur Center in Nashville that you mentioned so that if there are other local entrepreneurs, food or otherwise, who are interested in looking into that because it sounds like an amazing resource for your community. Then there’ll also be a link to your website when we get this posted as well.


Javaneh: Awesome. Thank you so much. This is so much fun, Jennifer.


Jennifer: Well, I really, really appreciate your time and your commitment and your energy, so thank you so much.


Javaneh: My pleasure.


Jennifer: Bye.


Javaneh: Bye.


Jennifer: I hope you enjoyed today’s podcast interview. Based on feedback from listeners, we’re looking to incorporate more real life stories from food entrepreneurs, so if you would be interested in being interviewed, please let me know by emailing me at info (at) smallfoodbiz.com. We’re looking for stories from food entrepreneurs who are willing to share some of the challenges they’re facing or are willing to share the creative ways that they’ve overcome the challenges that all of us small business owners face. No matter if you’re a cottage food business, you sell at farmers’ markets and festivals, or if you have retail accounts nationwide, if you’d like to share your story and help other food entrepreneurs, I’d love to talk to you.


As always, if you find this podcast series informative, I invite you to tell other food entrepreneurs you know about it and subscribe to it on iTunes by searching for the words small food business. I would love it if you could leave a review, as that helps me know what’s resonating with you and helps other food entrepreneurs find the podcast in the iTunes system.


I also invite you to join the small food business community at SmallFoodBiz.com, where you’ll find a ton of resources specific to food entrepreneurs as you start and grow your business. Our Facebook page at Facebook.com/SmallFoodBiz is also a great source for food business information, and we’re on a host of other social media channels as well. I look forward to connecting with you. Thanks.


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