After our first holiday season passed, we regrouped and debriefed the improvements we could make for the coming year.  This became a practice that we adopted for each subsequent year and found this to invaluable when it came to planning and strategizing.  One of the biggest inefficiencies was our manufacturing process.  We were still operating out of our separate apartments with inventory scattered between each location.  We had started our SCOBY farm in a storage room located in Derek's apartment, while most of the production and shipping supplies were located at my apartment.  We drove back and forth between our apartments on varying days to produce our finished products and ensure that orders were sent out in a timely manner, and we knew we had to address this time suck.  

With limited capital, minimizing overhead was critical, so in February 2018, we decided to rent a 200 square foot garage as our new "headquarters".  The space was barebones as you could get; it had a garage door, one window and did not have a washroom. Its primary function was our packaging, shipping, and logistics facility, while SCOBY production remained at Derek's apartment.  The other benefit of operating out of a garage was the capacity to receive and ship pallets of supplies and finished products.  Previously we had been shipping individual orders directly to our customers, which was very costly and required a significant amount of time to pick, pack, label, and ship.  By sending pallets of finished products to Amazon's fulfillment warehouses and utilizing Amazon's logistics program, Fulfilled By Amazon (FBA), it would not only provide us with discounted shipping rates, but would significantly reduce our labor for each order.  Our overall fulfillment costs reduced anywhere  upwards of fifty percent after we started using Amazon FBA.  

Lesson: Debrief your wins and losses on a regular basis to identify the areas that can help improve your business.  This can lead to compound growth when obstacles can be addressed or avoided. 

Having weathered our first holiday season, we recognized the need for swift expansion to sustain the business. While we optimized our operations, we expanded our product offerings with SCOBY multipacks, individually packaged tea bags, and additional accessories.  We also expanded into the US marketplace through Amazon's platform.  This provided us with easy access to a significantly larger customer base and more opportunities to reach an underserved market.  As we scanned the e-commerce landscape, we knew that our small kombucha home brewing business was quite a small niche and had to leverage our knowledge to expand into new product categories to further our growth.

Over the last year, we honed our expertise in shipping, product research and development, and how to best cater to niche markets. Identifying demand for products that provided a unique, personalized experience akin to brewing kombucha was our goal, so we tirelessly scoured the market for suitable alternatives. While we continued to grow Brew Your Bucha, we refined our criteria for our next brand/products based on some of the challenges we presently faced:

• Our kombucha kits were large, heavy and fragile which resulted in more expensive shipping and higher rates of damaged/broken kits.  This led to higher rates of customer service inquiries and replacements, which also were costly in terms of time and actual refund/return costs.  Our next product needed to be durable, light and small to address these issues. 

• Although our SCOBY were one of our most profitable products since it cost very little to produce (sugar/tea/water/time), it was also a perishable product.  We had a limited amount of time to sell our SCOBY once they were picked and packaged, so this added a level of complexity to our operation.  We had to plan our production and moderate our sales volume to ensure we could accurately predict spikes in demand.  Our next product needed to have either a long (one+ year or indefinite) shelf life.  

• Brewing kombucha does not require a significant amount of knowledge or experience; however, it is like a science experiment.   Varying factors, such as temperature, amount of sugar, pH levels, contaminants, etc all impact the quality of a kombucha brew.  This resulted in a lot of customer inquiries, product testing, and potential refunds if a customer wasn't satisfied.  Although creating a large array of resources and providing the support for our customers was a defining part of the success of Brew Your Bucha, this consumed a lot of time which was so valuable in operating the business.  Our next product would require less education for the consumer, but would still have a component of instruction.

Ideally, we sought a product that was compact, lightweight, non-fragile, and possessed a distinctive personal touch, making it difficult for competitors to replicate.

After extensive research, we discovered that crafting cocktails offered a similarly immersive experience. Our attention fell upon a cocktail kit with some of the necessary accessories and ingredients (except the alcohol), albeit at a steep price. Reading reviews of existing cocktail kits, we were confident in our ability to create a more upscale, premium version at a more economical price. 

Lessons:

1. Debriefing the wins and losses from the previous year is a great way to help plan and strategize for future improvements.  This can be an invaluable practice which can help compound the knowledge and experience you learn.  

2. Starting and operating a business is challenging; it can be even more challenging with business partners because you become accountable to one another. It's important to ensure that the goals and aspirations of each partner are aligned; however, it is important to be willing to adjust to evolving circumstances. Having tough conversations is necessary to smooth out the bumps along the way, so have them early to ensure everyone is on the same page.

3. If you have a business partner(s), draft up a partnership agreement. It doesn't need to be set in stone, but utilize it as a starting point to document the commitments of each partner. 

4. Listen to the market. Your paying customers will direct your business to where it needs to go.  By being flexible and adaptable, you will be able to modify your product offering or service to meet the needs of new and existing customers.  Be nimble; you can potentially capture the attention (and dollars) of customers you weren't initially targeting.

5. Focus on people. By creating an environment that made our team happier and offered opportunities for growth, we had lower turnover and reduced training cost. We could trust our team to execute on our objectives and this allowed us to focus on the highest level priorities.

Our resourcefulness in procuring ingredients and accessories had become second nature and we began developing our next brand, The Cocktail Box Co. We developed our first two minimally viable products (MVPs), The Old Fashioned Cocktail and The Champagne Cocktail Kit, and launched using similar tactics to Brew Your Bucha.  By September, we had obtained our trademark, produced over two thousand kits and fully launched our kits in Amazon Canada and US.  We were confident in our approach launching The Cocktail Box Co.; however, we were unsure whether we'd be able to sell all of the cocktail kits we produced.  Since all of the profits we had made to date went into building the brand and stocking up inventory for our second holiday season, we were under pressure to execute on our plans. 

Day in and day out, we toiled away in our cramped garage, occasionally taking breaks to trek to the nearest Starbucks for restroom facilities. Huddled around a single portable propane heater, we braved the cold Vancouver winter, fortunate to have avoided any fire code violations and other mishaps (i.e. asphyxiating ourselves). We were delighted; by the end of November, our complete stock of cocktail kits were sold and had a long list of backorders to fill.  This actually created a headache for us, because we were required to fulfill all of these backorders through our traditional carriers rather than through Amazon, which again became significantly more time consuming.  We had learned that it is significantly more advantageous to have slightly more stock in Amazon's warehouses to ensure that they can be fulfilled from Amazon FBA.  By the middle of December, we finally caught up with our back orders and could relax until the end of the year. Closing the books on our second holiday season, we surpassed $180,000 in revenue.

An added level of complexity arose in that fall when Derek's wife accepted an opportunity to move to Singapore permanently for work. Derek stuck around for the remainder of the year, but then started working remotely after he joined Tina in Singapore, early 2019.  It was a significant change to the way we had to operate our business and would later became one of the ongoing challenges that Derek and I faced as our partnership and the business evolved. 

The momentum in sales volume and positive customer feedback year over year was very encouraging.  We agreed that we needed to take the next leap of faith and move our operation to a larger production facility.  In addition, we needed to look into hiring a production team.  We soon found a shared production facility which was occupied by three other small local businesses, and fortunately it had windows, heat, and washrooms!  This new facility offered us four hundred square  feet of dedicated storage/warehouse space and an additional seven hundred common work space that we could access throughout the week.  

With the additional space, we were able to 'hire' our first employees; by 'hire' I mean, we had very generous volunteers which happened to be Derek's parents. Between growing scobies, producing cocktail kits, shipping finished products, and managing our sales channels, we quickly became overwhelmed with tasks.  After two months, we listed our first two job postings which were for our production team, and we received applications from students attending a local university. Once we had them up to speed in our processes, we were off to the races trying to ramp up our production to meet demand.

While Derek was away for three to four months at a time, a natural segregation of roles occurred in which I managed all of the operations (human resources, accounting, finance, production), and Derek managed the marketing, website, and supplier relationships. We eventually brought on an additional two team members as interns, one which would assist Derek on the marketing and another assisting with the website development. By the summer of 2019, we had a team of nine, mostly part-time staff, including Derek's parents and his sister.

Shortly after we received our first full twenty foot shipping container of raw materials (previously we only had capacity to order in pallet loads), we were notified by our landlord that we would have restricted access to the shared workspace to only three days a week for five hours a day.  This wouldn't be sufficient for our production needs, so we immediately started a search for a new production facility.  Within a few weeks, we found a commissary kitchen that would offer us similar working space, but we would be the lead tenant.  We deliberated the risks of becoming a lead tenant and signing a one year lease, and decided to proceed to ensure we had time to prepare for the holiday shopping season.  

It just so happened that our move in date to the new facility was shortly after Derek had planned his return flight back to Singapore, and he wouldn't be returning until the first week of December. The responsibility of managing the move for all of the raw materials, equipment, and finished product to our new location fell on my shoulders.  Fortunately, all of our team members agreed to remain with the company and moved with us.  It was a stressful few weeks as we had to set up our new operations and create new production flows. 

When we created our production targets, we built in a level of growth but soon learned that the projections had been too conservative.  We had underestimated the impact Amazon would have on the way consumers shopped and the popularity of our new cocktail kits and assortment of Brew Your Bucha products. Our sales swelled throughout October and November; by the beginning of December, we had sold out of many of our skus held at Amazon.  Similar to the previous year, the team worked overtime to fulfill the backorder.  By the time Derek had returned, we had almost caught up with all of our orders and were preparing for the slowdown right before the holidays.  

By the end of our third year in business, we had topped $470,000 in revenue and had sufficient profits to pay ourselves nominal salaries. We felt like we had "made" it. Even though we couldn't really survive on such small salaries, we saw the guiding light; we just had to continue incrementally scaling our brand awareness, product offerings, and team.  Although we ended the year on a positive note, my relationship with Derek had started to fray.  Due to the number of unforeseen challenges (i.e. moving and selling out of inventory) and the growing demands of our team,  I felt there had been an inequity in how the responsibilities were divided.  This led to many long and hard conversations around our levels of commitment and the amount of time Derek would need to reside in Vancouver to help me manage the business.  We came to the agreement that Derek would stay in Vancouver for three month stints at our busiest periods of the year (March - June and mid-September to mid-December).  In reality, we knew this wasn't optimal for Derek's relationship or the business, but it was the best plan we had for the coming year.  

Lessons: Starting and operating a business is challenging; it can be even more challenging with business partners because you become accountable to one another.  It's important to ensure that the goals and aspirations of each partner are aligned; however, it is important to be willing to adjust to evolving circumstances.  Having tough conversations is necessary to smooth out the road bumps along the way, so have them early to ensure everyone is on the same page. 

Lesson: If you have a business partner(s), draft up a partnership agreement.  It doesn't need to be set in stone, but utilize it as a starting point to document the commitments of each partner.  Derek and I revisited our agreement a few times throughout our partnership as a reference guide to manage the needs of the business.  It was a useful tool to ensure everyone is accountable. 

We set our sights on the elusive seven-figure revenue target for 2019.  It was an ambitious goal, but given our growth rate year over year, we were confident we could develop a plan to release new products and expand to new marketplaces to reach that goal. Creating two new cocktail kits (our Moscow Mule and Gin & Tonic Cocktail Kits) and expanding internationally into the EU (pre-BREXIT) was our objective. We wanted to differentiate our cocktail kits from all the other kits on the market, so we tested various suppliers and recipes for months and finally found the perfect solution. We discovered a unique packaging company who could package our proprietary syrup recipes into single serve sachets which hadn't been seen on the market.

Our minimum order quantity (MOQ) of our syrups was equivalent to seven thousand five hundred kits of each flavor which was quite substantial for two brand new products. It was the largest order we had placed from any supplier, and we were nervous as to whether the new kits would be successful. Prior to receiving our inventory, we had hired an additional four team members.  Once we received our inventory, we realized we had underestimated the amount of space we needed, so we stacked our inventory from the ground to the ceiling and rented a shipping container to house the overflow of inventory.  

There certainly were growing pains as the team expanded, the number of skus in our portfolio grew, and the number of active marketplaces increased. When we first started the business, Derek and I were jacks of all trades where many of our tasks would overlap.  However, as the number of team members grew, managing the day to day operations became overwhelming.  We determined that a Warehouse Manager would be needed to manage the production of all of our skus and provide oversight to the team.  We had interviewed a number of candidates, but couldn't find the right fit until one of the businesses that shared the warehouse space with us was closing down.  We had gotten to know one of the employees and she had helped our production team on a number of occasions.  She had demonstrated a number of qualities that we were looking for in a manager, so we decided to test her capacity to manage the team.  Over the next few months, we provided guidance and training and she became adept at providing direction and meeting our production targets.  

With our team fully trained, we felt we were completely prepared for the remainder of the year.  It seemed like our team was executing on all of our targets and objectives, and both Derek and I could focus on overseeing the business and growth.  It was the first time that we felt that we could be more proactive rather than reactive.  As certain team members were stepping up to take on additional responsibilities, we learned to segregate our responsibilities to leverage our strengths.  

Some would say that having a partner would make operating a business challenging, which it certainly did at times, but having a sounding board and someone else to go through the ups and downs helped each of us work through the speed bumps we encountered. We felt much more seasoned as we approached our fourth holiday season, we could foresee the potential roadblocks and could create solutions ahead of time.  With ample raw inventory on hand, we had prepared enough back up inventory to send directly from our warehouse.  By the end of the December, we didn't hit our million dollar revenue target, but we were still ecstatic that we had more that doubled our revenue again to $950,000. 

After the year end, we completed our debrief and learned the following: 

• Listen to the market.  After we released our cocktail kits, we started to receive inquiries from corporate gifting companies and large corporate entities (i.e. Google, Facebook/Meta, etc) to personalize the kits.  As we dug deeper into the corporate gifting space, we realized this was a completely new marketplace we could offer our products.  We wouldn't know how pivotal this deep dive was until the following year.   

• Focus on people.  Derek and I worked at organizations where we felt profits were put ahead of people.  We vowed to create a culture in which  our people felt valued and were happy to come to work.  Despite having a limited budget, we held frequent team bonding activities and monthly parties, and eventually provided health benefits, education benefits, and a team bonus plan for our team.  By creating an environment that made our team happier and offering opportunities for growth, we had lower turnover and reduced training cost. This allowed us to focus on the highest level priorities. 

In my final article, I'll be sharing how COVID had accelerated the growth of our business and how we finalized the acquisition of our company. 

Thank you for reading!  If you found and of what I shared useful, please feel free to share.