We did a raise!
But before we get to that, let's talk about how we got here.
I had various schools of thought when it came to raising money for SwitchGrocery. Things I thought seemed "better".
A good company makes a profit
A good company does not need funding
A good company focusses on its customers, not investors
A good company can figure out how to have revenue without running sales
A good company does not need to run ads to grow. Organic all the way.
My schools of thought were challenged as I understood the food industry (or let's say the physical products industry).
You need money BEFORE sales - You need up front cash to buy inventory. That's it. In any food business specifically, you need to buy the food or make the food before you sell it. The more you sell, the more you need.
You need more $ to service customers - Profitability and growth fight with each other. Let's say if I want to have $50,000 left over after all expenses. First of all, that's actually REALLY hard. And once you get there, things are blowing up already. You may not be able to keep up with customer service. You may be running out of inventory. There are multiple demands on your time now which means the experience you want for your customers who are paying their own hard earned money for your products - is not what you want it to be.
Customers appreciate sales - Pricing! Well, you see, I did think fair pricing all year round would attract customers. It does. We dropped our shipping to flat rate $6.99 from $9.99. That attracts customers too!
But let's be real. We are all watching our budgets during this pandemic. That's not going to change. And I realized sales are important for a few things:
- it's a concrete way we can value our customers friends' budget
- we can show our customer friends just how much we appreciate them. New customer friends are important for any company including ours. But if you shop with us right now, well, a sale is how I get to say thank you.
- try something new at a lower price
- buy in bulk and save
Suppliers appreciate higher $ orders - Our suppliers can do more for us if we buy in bulk. They can plan their inventory, their production, their staffing better if they understand demand and seasons.
We need ads to even sustain our business, much less grow - We are in the business of selling food. This is a competitive business. We don't have a paywall (like Costco or Thrive Market in the US) and we don't believe in pressuring customers to buy with subscriptions. We offer subscriptions for JOI nutmilks and Keto Chow meal replacements but that is at our customers' choice.
This means we will have customers who either never buy with us again after trying us once or they will pause for a while (completely understandable). So basically, we need to bring on new customers to contribute to our revenue.
My hesitancy was in running ads was likely borne out of self judgment of what will people think. I got over this by realizing I am ultimately extremely proud of our business model and what we sell, and reaching more Canadians would be a wonderful thing.
How did you fund your ads?
In January 2020, we started running ads on Facebook and Instagram. We got our first $10,000 based on revenue to date from Clearco - using their ad funding product. We repay them periodically with a % of sales and a 6% fee. You can find that product here.
This gave us accountability and incentive to put our ad $ to good use and we continue to use this product today.
TELL ME THE NEWS!
Did you raise funds?
YES! We closed a round of funding from Clearco's new ClearAngel Program which is Michele Romanow (Canadian Dragon) and Andrew D'Souza's company. Clearco is now valued at $2 billion dollars and you guys - this is a born in Canada company!
You can find more about the ClearAngel Program here. This is a royalty deal with 2% of revenue for the next 4 years 2021 - 2024 in exchange for an investment and an advisor who is a founder themselves and understands the pressures of running a small business.
I used to have this vision watching Dragon's Den! Wow, the founders raised money which must mean they can take those big vacations!
Unfortunately or fortunately, that's not true (another myth busted). The funds can only be spent on our business. It is to support our business growth and I get to work with an incredible advisor who cares about our company and our customers.
I can't emphasize this enough. This is such a proud moment for the company. You may not know but I moved to Canada when I was 13 years old. I had an accent that I would try to hide and change (I don't anymore). I didn't grow up with a network in Canada but I got my first shot at a company called Ernst & Young (fellow CPA, CA's where you at?)
What are you going to do with the money?
Inventory - This is our most significant cost and we can buy more inventory because we know it's hard for our Customer Friends when we run out of stock.
Customer Service - We have been slower to respond sometimes to questions/comments. We have a little one at home right now and it's the impossible choice some days between caring for our customers and caring for our little one. Last year you will remember we had an awesome person on our team - Sofia - who helped us! We are going out to bring on a team member to help us with customer service.
One of the reasons I knew we needed to bring on someone to help us is because I have kind and loving emails from some of our customers, and I actually feel like crying that I have not been able to respond to them. It's usually midnight by the time what I consider the basics. This funding will give me the time and space to write back which fills MY cup.
Breaks for our small team - People need a break! Extra vacation days for our small team. It's been a tough year for everyone and this would be so nice for our team to have.
Ads - We brought on a small team out of Edmonton (yay!) for 90 days to help refresh our ads. We are going to be trying Pinterest ads. We are also looking at ways to meet our customer friends - text and messenger.
So what is a good business?
My definition of a good business has changed:
- a good business is personal. It's what works for you and your customers and that changes over time.
In some ways it's just like our health.
What works for me, may not work for you and what works for me today may not work for me tomorrow.
The Why is Important
- We exist to provide support to our customers’ individual health journeys. They are not alone.
- We exist to make it easier for small businesses to get their food products out to customers faster than traditional retail channels.