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
Very good David and Leslie,
Your posts are very helpful. I took the food handlers class yesterday and will wait 10 days for the results of the test. I took the course at a rental commercial kitchens in Englewood, NJ. The owner and manager of the place is arranging an attorney to do the trademark for a group of us and has said product insurance will be around $700-$800 yr. and will have more information about the policy next week.
I have spoken will the in-laws in the Dominican Republic about purchasing 5000 pounds of beans for the next harvest. I will be attending the World Cocoa Foundation partnership meeting in Santo Domingo in the middle of October and will be spending an additional three days to check on the fermentation boxes and the women cooperatives I work with down there.
I also received a crankenstein, a wonder junior, and built a PVC winnower like the Potomac built one. This will allow me to practice roasting and do test batches in my basement. I will test out the winnower after I get my first bag of beans (in the US) tomorrow.
I have quit my teaching job and am focusing on this full-time now.
Please let us know how the Wonder Junior works for you. It's an intriguing inexpensive option. Makes peanut butter, hope it does a good job grinding nib.
Congratulations on all fronts -- especially the last part about being able to go full-time now! I can't wait until we get to that point. Your posts are really helpful to us, as well -- it's great to hear how you're tackling similar situations and approaching your business. In a lot of ways we're at similar points in our respective journeys. Leslie just took her food handlers class in August, I'm going to take mine in October; we're working on getting our insurance, sourcing beans, etc. Please continue to keep us updates on how you're making out and what you're doing. Wishing you well and success in the Dominican Republic and safe travels -- it sounds like you have a unique and special opportunity down there.
There's been a really fun discussion going on lately at http://www.thechocolatelife.com/forum/topics/dust-deputy-for-winnow... -- not sure if you've seen it yet or not. Ben talks about his system on there, I've shared a couple of things I've learned from my Dust Deputy system, Clay has been active in the thread -- really good reading if you haven't seen it yet. Lots of room for further development and innovation if your like DIY...
Ditto, love hearing your journey, very inspiring and helpful for us newbies :)
Yes, I have seen the dust deputy winnow thread and anything else I can find on winnowers. I will be participating soon.
This week we learned what a CPA costs (at least THIS CPA) -- specifically, $300 a quarter before we start to generate revenue, then $550 a quarter afterwards. $750 a year to prepare corporate taxes. Unlimited, no-charge consulting on accounting and taxes. Do those numbers seem in line?
We also got our September invoice from our attorney -- this one adds up the fastest by far -- $3800 for a combination of work on our lease agreement, preparing (part of) our trademark registrations (which go out this coming week), and formation of our S-corp. To date, the attorney has cost us around $8000 -- and we're not done yet. Most of the legal heavy lifting should be done by the end of October (we hope).
Things are looking hopeful for signing the lease next week, at which point we'll schedule our building inspection (we have an escape clause in the lease in case we find anything that we consider to be a show-stopper) -- that will be another $750, please. We'll look at the structure and the utilities, as well as ADA compliance since we're potentially on the hook for bringing the facility up to code (both building and ADA compliance). This is where we negotiated a cap on our max exposure and another escape clause. Once we take possession we start the process of bringing the facility, as quickly as possible, up to the point where we can schedule the health department inspection. Until we have that in hand we can't bring our first (non-R&D) cocoa bean into the place, let alone start production
This week we got the formal evaluation results on five of our bars back from Mark Christian at C-Spot. What a GREAT experience and worth every penny paid. Happily, there were no major negative surprises – we agreed completely with the ranking (which was the same as our ranking for the bars we submitted), the scores were well explained and made sense, as did the overall assessment and recommendations. There was a wealth of insightful, helpful and eminently useful information. Four of the five bars that we submitted scored quite respectably for this point in the game, and the one that didn’t score as well we pretty much knew would not (this particular chocolate really needs to age for several months before it starts to come into its own, and this was a very recent batch). That being said, it’s clear that we still have some room to improve – especially with regard to our tempering (these were all tabled, very small batches), molding (no cooling tunnel yet) and refining. The thing that got the most positive feedback and encouraged us the most is the one that we feel is most important – flavor. This independent data point was really important to us not only as a guide to future improvement, but also as a sanity check.
We also started our consulting with Clay this week and exchanged our first e-mails. It’s clear even at this very early point that this is going to be money very well spent. Avoiding just a couple of (easily made) mistakes will save us potentially thousands down the road, and on the flip side, doing certain things right or better than we would have otherwise will make our product and business that much more robust. Lots to digest, ponder, and investigate this coming week on these first exchanges.
The coming week: Once we get a final read on the lease, hopefully Monday or Tuesday, we’ll get our liability policy (about $1200 a year). If the stars align just right we’re hoping to sign the lease later in the week and get the keys shortly thereafter.
David and Leslie
David and Leslie - Thx for sharing your journey! With regards to insurance, I too was quoted around $700 for product liability insurance (which includes general)... so if you have the time, you might want to shop around a bit more.
Thank you for that input, Michael, greatly appreciated -- will definitely reach out for additional quotes tomorrow! I love this forum!!!
A week goes by really fast sometimes…the needle didn’t move as much as we planned. It’s not so much a case of two steps forward, one step back as it is of taking two steps up a steep pile of sand. We didn’t get the lease signed this week like we were hoping to in our optimistic scenario (some final back and forth on terms, details), but we are hoping to get the final ‘wet copies’ early this coming week to sign. Keys the following week? We’ll need to lock down the liability insurance by then (more shopping this week to see if we can find a lower cost policy than the first one we were quoted), get the electricity turned on, start checking on internet service, learn about security systems, etc. After two-plus months of lawyers and lease negotiations, we’re looking forward to this next part.
This afternoon we got a crash course in QuickBooks and our CPA set it all up for us. Accounting isn’t an area of expertise (or particular passion) for either of us, but definitely something we’re going to have to master regardless.
We spent quite a bit of time this week refining our vision and mission statements, and working on our business plan generally. We embrace Eisenhower’s idea that “plans are nothing, planning is everything” – we have no illusions that things will play out even remotely close to what we spell out in our plan, but what we learn in the course of our planning is invaluable, and updating our plan dynamically is a cornerstone of our plan.
High on the agenda for this coming week (in addition to getting the lease and insurance nailed down), we’re expecting to get our second formal evaluation results back – hope to be able to share how that turned out next week...
Thank you again for sharing. My big accomplishment this week was to build a second winnower. This one I followed the plans shared by Clay using wood in a box shape. I had a capture rate of 80% compared to 65% on the PVC winnower. I will play around with the air flow on the PVC when I roast my next batch of beans. I have pictures and will post them soon.
I have also been looking more into packaging and labeling. For the balls of drinking chocolate I am trying to get the two to around $.10 a unit. The blog on packaging and the clearbag.com website looks like a very good one. I haven't really looked more at the bar packaging being they probably will not be ready until the Spring. Hoping they go for $.25 or less per unit.
Getting a custom mold in the shape of a cacao pod has not been as easy. I met someone from East Coast Mold who had a great price but has not been following up with me. My step father carves wood so I've given him the dimensions and asked that he do a model for me. Who knows if I will end up making my own molds.
Can't wait to get the DR next week. The World Cacao Foundation Partnership Meeting, checking on fermentation boxes and figuring out how to ship CONACADO liquor to the US to use for the drinking chocolate.
David and Thomas - thanks for sharing your journey . . . it is very interesting for the rest of us to read
We met with our attorney Friday afternoon to go through the final version of the lease, and as long as we don’t find any surprises in our own final review of the docs this weekend, and as long as our insurance agent comes through with the certificate by Monday morning, we’ll be signing and getting the keys to 1850 square feet of future chocolate making mid-day Monday.
And then the REAL work begins. We can’t wait to get started! Job one is going to be generating a dimensioned floor plan that we can share with Clay so we can start planning the layout. At the same time we’ll start sketching out the project plan and timeline – prioritizing what has to happen and when so that we can get to the point of being able to schedule our health department inspections – our next major milestone – as quickly as possible. In the absence of anything better right now, we’re estimating 4-6 months – we’ll update that estimate in future posts as we start to fill in the plan details.
Many thanks to Thomas and Michael for their feedback on our insurance question – we were able to get a policy from The Hartford through Wells Fargo for a little over $600 a year – MUCH better than our original quote of almost $1500 a year. We opted to not get an umbrella (another million per incident in coverage) at this point – we’ll re-evaluate that once we get our permits and start selling – that was another $300 a year that just didn’t seem necessary at this point.
Two hearts are beating a little faster this weekend in our humble little abode here in San Jose…!
David and Leslie