We're getting ready to sign the lease (we hope) in the next week or so for an 1860 square foot space in a tiny little business/industrial park in the San Francisco Bay Area that we hope to transform over the course of the next couple of years into a successful fine chocolate (bean-to-bar) and artisan confection business.
Clay suggested the idea of starting a discussion thread here on Start-up Central as a way of sharing what we learn along the way with others either already involved in their own start-up or still contemplating jumping in. We really liked the idea -- it fits well with our commitment to always 'paying it forward' in life, and with the idea of one hand up, one hand down (one hand reaching up to accept the help/wisdom of others who have something to offer/share and one hand reaching down offering help/wisdom to those with whom we have somethign to offer/share). We'll share what goes right, we'll share what goes wrong -- open source, nothing held back or edited. We welcome your thoughts, questions and suggestions along the way.
Snapshot of where we are today:
- Custom molds are paid for (~$8k), but on hold until our trademark registration is approved (wouldn't be much fun to have molds that we can't use...). Hope to be cleared to move forward by January.
- $1400 trademark search with Thomson Compumark completed. The attorney has reviewed it and is now in the process of filing the registrations (another $1k +/-)
- We're a newly formed S-corp. (Total legal fees to date, including the above ~$4.5k)
- We've designed our packaging, but won't order it until our trademark clears.
- Leslie is going to be full-time, I'll be part-time (mainly on weekends) since I have a day job that (a) I like, and (b) will let us support/sustain the chocolate business through its first couple of years. We'll hire help as soon as the work load dictates.
- We subscribe to the Lean Start-up approach -- an iterative build, measure, learn process; pivot (change direction) when needed, etc. and to the idea (as articulated many times by Brad Churchill in his posts on this site) that making a profit isn't a 'nice-to-have', it is a 'MUST have'.
- Oh yeah, we make a pretty decent bean-to-bar chocolate. At least WE think so. And so do some (possibly biased) friends, family and co-workers. But we all think our own kids are cute, so just to be sure we're not kidding ourselves about where we really are, we're sending bars out this week for formal 3rd party evaluation (~$1k)
- We plan to spend a good part of the first year perfecting our systems. We're not going to scale to any kind of volume until we've worked the kinks out and are capable of delivering a consistently excellent (and profitable) experience to our customers.
- For manufacturing flexibility and resiliancy we plan on using multiple small scale pieces of equipment rather than single larger volume pieces.
- We know that we don't know what we don't know. We plan to contract with Clay for consulting services, both on the plant layout and on the business side.
- We're utilizing SCORE resources to learn more about the accouting, insurance, legal, and sales and marketing sides of the business, and to make contacts.
There's more, but you get the general idea...
Next major milestone for us is seeing if the landlord will accept our proposed lease addendum and mark-ups. That will be our next post...
David and Leslie
I love the idea of "ONE HAND UP, ONE HAND DOWN" , a very California approach. I also like the 3rd party evaluation and the nothing held back or edited. Thank you for sharing your journey
Very nice and thank you for sharing. Couple of things, crossed my mind. What is going to be the source(s) of your beans? What people always ask me, what is my niche? I would also be curious to know if you plan on having a retail presence?
I am also starting a small farm to bar chocolate making business with my wife focusing on the use of Dominican cacao. Our website is lachorenachocolate.com if you want to know more about who we are. I have spent the last three years using liquor at home in a small Cocoa Town melanger and using a small chocovision tempering machine, mostly making bars. I have spent the last three summers in the DR really focusing on what happens with cacao on the farm, farmers' cooperatives, women's cooperatives and exporters.
I currently teach in NYC and am doing my best in transitioning into a full-time chocolate maker as soon as possible.
We have formed the company and need to apply for a trademark.
I have been speaking with a number of chocolate makers over the last year about doing a private label until we can secure the funds to open our own small factory, very close to the size you mention. We are starting the process to apply for a SBA loan and I am putting the final touches on a business plan. We will be developing quality business relationships with people in the US and the DR that we trust. When we are ready, I also plan on using Clay's services to set up the factory and source equipment.
Sourcing quality Dominican cacao or liquor and finding somewhere to process it, has been a big part of us getting started. As the business is developing, we will work toward sourcing beans off farms owned and managed by my wife's family. Export permits and import capabilities will be established. Right now I will source raw materials from reputable people I know and have met. There is quite a bit going on in the DR concerning genetics, improving post harvest handling and separation of quality beans from bulk.
We are also working around harvest seasons and will need to plan on sourcing the appropriate quantity of beans to get through a six month period.
In order to jump in and get started, I am sourcing some liquor from a few people and will mold drinking chocolate to market within the Dominican community here in NY/NJ. If you look at the website, I have four different women's cooperative highlighted. They are all receiving support from the Dominican government to mechanize and to get approved to export their chocolate. I will be working with these groups to market their chocolate in the US when the time is right.
I was at the Philadelphia Confectioners Trade Show today in Atlantic City and a melting cabinet, shelving units and some custom made molds will get me started, a little less than $10,000. There is a place in Englewood, NJ where I can rent commercial kitchen space and start working. I will be taking my food handlers license there at the end of the month and they can connect me to the other aspects of starting a food business.
I also pay very close attention to Brad's posts.
Clay knows me fairly well and has been a big help in my learning about the industry. I have spent a lot of money on fine chocolate over the last few years and have developed a pretty good palate for tasting chocolate. After 20 years of working in difficult schools in NYC, I have to go. Chocolate is where my passion is and I find almost everyone in the industry has been helpful and kind. I will keep everyone posted as to our progress and hope to have some bars in hand by December, or Janurary.
Thankyou David, Leslie and Thomas for sharing your journeys. I'm sure many here will benefit from all your experience, I know I will. I'd love to take my chocolate to the next level when I'm more experienced in the future. For now, I do several farmer's markets and agricultural shows here in Australia. It is a great place to start and the feedback is priceless!
I don't know if we qualify as 'more experienced' yet either...but I'm sure we will be this time two years from now!
Farmers markets and agricultural shows are part of our 'go-live' plan, as well -- our facility is not set up for retail (although we can do limited will-call, as well as seminars and tastings). We're also looking at art and wine festivals, chocolate salons/shows, and collaboration with local restaurants and fruit/nut growers to help spread the word. All just a twinkle in our eyes right now, though...
We have a number of sources for our beans - Chocolate Alchemy has been a very good source, we buy some Madagascar beans through a distributor, and we source other beans direct from the source - we're ALWAYS looking for new beans and new sources. We don't (and won't) hesitate to pay a premium for special beans and other ingredients - our niche is handcrafted micro batch fine chocolate and artisan confections. We have to distinguish ourselves through an overall exceptional experience, from first contact to the product itself to fulfillment and follow up.
Your story is a great one - I wish that we were in a position to do tree to bar the way you are. I'll check out your website this week - I'm quite interested in your business model and especially in your work with the local growers and cooperatives. We wish you great success in your venture and look forward to following your story as we write our own.
Great! Thanks for sharing and I wish you the best for the next chapter of this great adventure. I'd love to hear about the equipment you're starting off with?
Our equipment is pretty basic (and well known on this forum) -- Santha melangeurs, Chocovision temperers, food processors, hand-built winnower, Crankandstein grinder, etc. We're planning on making our own static cooling tunnel once we get set up. We have a line on some used refrigerators, etc. The roasting oven decision remains open, but I'm leaning toward a Moffat Turbofan with digital controls and steam injection. We're all ears for suggestions/recommendations on equipment (and anything else for that matter).
Wunderbar sharing! Best to you on the paying it forward like that.
Thank you fro sharing your experience. Very helpful to some of us who are slowly dipping our feet into the chocolate making world.
Wishing you all the best.
We sent our marked-up copy of the lease to the leasing agent, received the landlord's response, and sent our counter-proposal back to them late today. Our main objective in the negotiation at this point is to limit our maximum possible financial exposure -- the lease, as it is written would have us on the hook for reparing pretty much anything that is broken and or breaks (our fault or not), bringing the facility up to code if there are changes, paying for any required ADA upgrades, etc. You can see how this could quickly run into the tens of thousands of dollars or more in a perfect-storm scenario. We're negotiating a 24 month lease and attempting to cap our maximum potential exposure to $15k over the course of the lease. The landlord offered to cap at $15k per year in his original response. Most of the rest has already been agreed to -- this is the last potential deal-breaker that we have to resolve. We should know something early next week.
Separately, we sent five different bars, all 70% single-origins, off to Martin Christy at 70% in the UK via FedEx for a paid formal evaluation and feedback. Next week we'll be sending three other bars off to C-spot for their similar service. This is the first time that we've had our chocolate impartially evaluated, and we're really looking forward to hearing not only what's good about it, but especially what could use further work. With a little luck we should have at least some of the results back within the next two weeks. Counting air shipping the bars, the total for the paid evaluations will be just shy of a thousand dollars.
This coming week we'll be opening our business checking and savings accounts, getting quotations on business insurance, and dropping off our business laptop to have our accountant set up our QuickBooks software. We've been diligently logging all of our expenditures in Excel up until now, but it's time to 'upgrade' to some real accounting software (and learn how to use it!). BTW, there's another $700 -- computer and software -- these little things add up quickly.
With a little luck when we post at the end of next week we'll be able to share some good news on the lease...
David and Leslie
Ahhh, those well laid plans. You know how they sometimes go. Bandwidth has been pretty severly constrained this week due to travel for Leslie and an unusually busy two weeks (half way through it) for me with my day job.
We haven't heard back from the landlord yet on the lease, although the leasing agent "sounds hopeful that the open issues can be resolved in a manner that is mutually acceptable"...according to our attorney who spoke with her. She's cautiously optimistic. We're more in the hopeful camp at the moment (and that includes the hope that we'll hear something firm in the early part of this coming week). We also didn't get to the bank nor to dropping off the laptop with our acountant -- both remain on the list for this week or early next.
Our attorney is working on the paperwork for our trademark registrations. We're really anxious to get these granted (or not) so that we can move forward with our packaging and molds -- both of which are on hold at the moment as mentioned in our original post.
Hoping to have more to share next week,
David and Leslie
Baby steps again this week, but steps nonetheless. We finally heard back from the leasing agent, and it sounds like the owners are willing to agree to most of what we were asking for -- and all of the items that we consider showstoppers. The biggest item for us, since we have to sign a personal guarantee on the lease, is that our total exposre be capped -- we've asked for a cap of $15k during the 24 month term of the lease (or we can terminate the lease if the owners don't want to pick up any additional liability beyond our $15k cap), and is sounds like they're OK with that. The leasing agent will be in town next week Thursday, so we're going to try to schedule a building inspector for that day, as well, to give it a thorough once-over before we sign. I all goes to plan we should get the keys before the end of October.
We spoke with an insurance agent today about a policy -- $1 million general liability, $2 million aggregate, and additional coverage for our equipment. We'll get a formal quote Monday, but it sounds like we're looking at something around $1500/yr for the policy. Does that line up with what you would expect for that kind of coverage?
This coming week our CPA is going to set up our books on QuickBooks and show us how to use it. $300. Everything comes with a price tag attached, and the little things add up quickly. The building inpsection will probably tack on another $500.
This weekend I'll send the image files to our attorney for our logo and trademarks so that she can file the required paperwork. We're anxious to get going on this since we're in a holding pattern on our molds and packaging until we get some clear direction on the trademarks.
We're also anxious to get the feedback from our two paid evaluations. 70-Percent has five bars and C-Spot has five bars. As much as we'd love them to tell us how wonderful our chocolate is, I think the reality is that we're still in 'beta' development and what we're really hoping for is some good constructive criticism and suggestions for future direction.
We kicked off the formal consulting arrangement with Clay today. My job tomorrow (Sunday) is to come up with the starting list of questions to work on and assumptions to be challenged. I'm really looking forward to this part of getting our business started.
Lots of fun this week working on some of our equipment -- and there's a separate thread you may want to read on that: http://www.thechocolatelife.com/forum/topics/dust-deputy-for-winnower . We want to automate EVERYTHING we possible can so that Leslie and I have more time to work on finding and developing customers and less time doing manual processes (like feeding winnowers in this case). Last night I finally had a few mintues to try out an idea for a feeder for our Dust Deputy winnowing set-up, and after a few adjustments, got it working well enought to call proof-of-concept a success. Today I found a battery powered rotisserie drive for under $20 and will try that out to driver the feeder so we don't have to tie up our KitchenAid mixer. Stay tuned (on the other discussion thread) and see if/how that works out.
Looking forward to a busy, and hopefully fruitful, week next week...
David and Leslie