Where Is Your Growth Path?

Most of the food businesses who come to us do so because they want to grow to profitability but don’t know how, exactly. While we work with businesses on a plethora of things from their accounting to how to raise equity, we often work on “the fundamentals” of their business model first, since the fundamental drivers of how the business makes money sustainably, at scale, lie in the model.

What often focuses our conversations with the client about their model is their path i.e. where their model will lead their business in the future. If they want to be a wholesale brand only, this usually necessitates an investor-funded rapid growth path with an eventual sale of the company to repay investors. If they want to stay local, there are paths that can make that work, usually involving some sort of retail or direct-to-consumer component, but they have very specific requirements and often have limited growth potential. Both paths are “OK” as long as the entrepreneur has defined their business model well enough that they know what path they are on and how to best finance it.

A path that often doesn’t get as much attention as (we think) it deserves are models that diversify the business, like allowing for horizontal growth, which, in addition to taking some of the risk out of the new business startup process, allows for financing of the related business separately. On our podcast this week, Jason Schleip talks about his experience building a restaurant and then growing his business’ revenue by turning it into a franchise. Essentially, by helping other interested parties expand his restaurant concept to new markets, he was helping other aspiring entrepreneurs open restaurants with the risk reduced for the franchisee and many of their processes/brand elements figured out while creating a nice recurring revenue source for his company. Other models include horizontally integrated local food companies that reach financial sustainability in a local market by developing a series of interrelated but distinct food businesses that share common a common brand, administrative services and marketing. Zingerman’s is a classic example of a horizontally integrated company of diverse business types.

The answer to “where is your growth path” lies in the company’s business model and their willingness to find creative solutions to how they can grow their unique brand and strengths. No path is easy, but we encourage entrepreneurs to consider creative ways they could grow, including horizontally, to reach profitability and sustainability.

And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Consultant With Tablet

Business Model Insights

  • What to Consider When a Young Business Grows Quickly (Investors Community Bank) – “The costs of running a new business can be difficult to manage, especially coming on the heels of any cash spent to open the business. At this early stage, the company may be relying heavily on credit as they try to grow revenue and manage expenses. Rapid growth is encouraging but requires more supplies and more labor. These important expenses require more cash, often during a time when the company does not yet have excess cash on hand. If everything goes according to the business plan, this isn’t an unmanageable problem; however, rarely do things go according to plan.”
  • 6 red flags when vetting contract manufacturers (New Hope Network)
  • 7 tips to plan for better financials (New Hope Network)

Raising CapitalRaising Capital

National Wholesale Brands

CPG/National Brands

Grocery Store Produce Section

Market Trends

Regenerative AgricultureFarming and AgTech

Mergers And AcquisitionsDeals/M&A

EventsIndustry Events