The Spotlight Winter '22 -Startup CPG

LETTER DEAR STARTUP CPG COMMUNITY,

EDITOR'S

If the 10,000-person Startup CPG community is any indication, our industry is incredibly collaborative. Behind each brand is a human or group of humans with a deep passion for something, fueling their every day and driving them to connect with others. As I explain to friends and family, “every consumer product that needs to exist already does. So those starting new ones are working towards something much larger than the product itself.” We are a peoplecentric industry in every sense – and in this issue of The Spotlight, we unpack what that really means.

This issue explores the most important, yet often neglected aspect of running a startup CPG business: the humans running it. Behind each successful CPG brand is a driven solopreneur, a perfect puzzle of full-time + freelancers, or a well-oiled, built-out internal team — and throughout this magazine, we get to know each. Whether you’re curious about hiring a freelancer, figuring out when it’s time to “hire yourself” (aka finally take a salary) or learning how to build the oh-so elusive “company culture,” this edition has something for you.

We hope you enjoy this edition, and cannot wait to share more resources with you in 2023!

Jenna Managing Editor, The Spotlight

Jenna is the Editor of The Spotlight magazine and works on Startup CPG’s marketing team. She is passionate about emerging CPG, also working as a publicist for Knack PR and a freelance copywriter for several CPG brands.

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1 TELL US ABOUT YOUR BACKGROUND IN 3 SENTENCES. My passion for food & beverage began while I was working in restaurants to pay my way through college. My expertise was in developing culinary cocktails, so I was constantly on the search for new flavors to incorporate into drinks. That's really where my love for discovering new brands started. I really appreciate products that can be enjoyed by everyone (no matter dietary restrictions) and those which incorporate obscure fruits, herbs, and ethnic flavors.

I graduated college with a degree in Digital Marketing & Entrepreneurship, and that's what led me to find a career in CPG.

WHAT ARE YOU PASSIONATE ABOUT (IN 5 WORDS OR FEWER)? Being a lifelong student.

WHAT’S BEEN THE MOST REWARDING PART OF BEING PART OF THE STARTUP CPG COMMUNITY?

The wisdom that has been bestowed upon me by other marketers and entrepreneurs. You learn quickly that no one knows exactly what they are doing - it's a lot of trial and error. You have to be able to roll with the punches and be resilient in this industry. I really admire the passion and the grit people in this space have.

Jenna

Annie

Grace Kennedy Staff Writer

Tamara Romcevic Designer

By Grace Kennedy

THE STORY OF LEXINGTON BAKES

Lex jokes that LEXINGTON BAKES (LXB) is “the business I never wanted to start.” Baking was, for the last seven years, merely one of his hobbies as he worked a demanding design job. He baked nearly every weekend, teaching himself how to make macaroons, eclairs, and all manner of pastry delights. But when he began to receive requests to cater or sell his baked good, he always responded with a firm “No thank you.” He had seen firsthand how hard it is to be a professional baker: his stepdad was a pastry chef at restaurants his entire life, working grueling hours and missing holidays to fulfill the needs of others. Lex never wanted to turn something he loved into something he hated. Baking was his escape — a way to express himself creatively and connect with loved ones — not a business.

Not a business, at least, until November 2021. One day, Lex shared a picture of his homemade brownies with his few hundred Instagram followers. Within an hour, his direct messages were flooded with requests to purchase a brownie. Lex was about to dismiss these requests yet again, but then, a lightbulb went off. Brownies can’t break in transit, they’re square and easy to package, and they last much longer than other pastries — maybe he could sell baked goods without sacrificing his sanity.

After crunching the numbers, he realized he’d have to price his brownies around $10 a pop to account for the cost of his high-quality ingredients and shipping. “No one’s going to pay that,” he thought but pushed forward with his experiment.

Within a week, he had $5,000 in his Venmo account.

Lex has a background in CPG manufacturing, and he has founded start-ups in the past (although none have been in the CPG space), so he is no stranger to the process of getting a product into the hands of consumers. This time, however, he had an imminently looming deadline: Christmas. Over the span of six weeks, Lex formed a legal business, ordered ingredients, scaled his recipe to match

Lex Evan, Founder & Chief LEXINGTON BAKES

demand, designed a shipping box, got labels printed, found a commercial kitchen, and shipped out 500 brownies for his customers to unwrap on Christmas day.

Lex is the definition of a solopreneur (and no, he admits, he does not have much of a social life). Since his first run at the end of 2021, Lex has single-handedly cut, packaged, and labeled 14,000 units, and he is close to hitting $100,000 in sales in 2022. He has launched limited edition flavors like Raspberry Velvet and now has six permanent offerings: original Fleur del Sel brownie, Choc Chip No 5 Cookie, Walnut Chip No 7 Cookie, Bday Confetti Blondie, and two gluten-free options. He also expanded into retail, sold his products at pop-ups and farmers markets, and is planning to begin fundraising efforts in the new year. All of this, while holding down his full-time job as a design manager at Johnson and Johnson.

So how did Lex turn his serendipitous Instagram success into a fully-fledged, thriving business — solo?

possible product — without using any artificial ingredients. He also designed his brownies to be freezer-stable, meaning they can be shipped directly from the freezer without an ice pack, which keeps the brownies fresh and is more sustainable. Everything — from the meticulously tested recipes to the marble box the brownies come packaged in — is done with thought for his mission and care for his customers.

MANAGING GROWING PAINS

LXB’s thoughtful mission and exceptional product have garnered the attention of major partners — a success that comes with its own set of growing pains. One of LXB’s biggest breaks this year came when they partnered with the retailer Foxtrot. LXB first connected with Foxtrot by entering their Up & Comers competition. When the team tried LXB’s product, they immediately decided to stock it. Lex has already acquired another LA-based retail location and hopes to

MORE THAN JUST A “GOOD PRODUCT”

In a crowded market where “plenty of people are making great brownies,” Lex knew there had to be more to his brownie than mere taste. For Lex, this meant creating a luxurious and decadent product that is also good for people and the planet. LXB invests in companies that offer ethically sourced ingredients, is B-corp certified, and is investing back into the communities from which they harvest. LXB also practices Radical Ingredient Transparency™, so consumers know exactly what they are putting into their bodies and where it came from.

Nothing about LEXINGTON BAKES has been done haphazardly. LXB is no Betty Crocker Boxed Mix; Lex has iterated his recipes up to ten times to ensure his customers are getting the best

continue to expand in the new year.

For this growth to be possible, however, Lex realized he could not continue to run a one-man show — he simply does not have the time to make enough brownies to keep up with the growing demand.

This fall, Lex began working with Partner Slate to find a co-manufacturer and co-packer and quickly learned that finding external partners came with its own unique challenges. He needed someone who would be able to duplicate the unique way in which he makes his luxury treats. But he also was not ready to work with a manufacturer who would expect to do a million SKUs per run. With the help of Partner Slate, LXB found the right co-packer and conducted their first pilot run in October. If all goes smoothly, they will have their first production run this coming January.

While Lex begins to offload some of his work to external partners, he is also thinking strategically about the systems required for a future full-time employee. When he started his business, he created a server that contained folders for each of the different functions of his company. Every process he builds, whether it is in operations, design, or marketing, is organized into its appropriate folder. When the time comes to bring on help in any one department, these folders will contain everything the new employee will need to know to get the job done. This system is not only helpful for the future, but also allows Lex to stay organized in the present. Solopreneurs have to keep track of countless channels at a time; if you don’t compartmental-

“My interactions with people, whether they're within the company or outside of the company, are an extension of the culture that I want to build through LEXINGTON BAKES.”

ize, “you will get lost trying to do everything at the same time,” he says. “Having a repository to dump information into allows you to get it out of your head and focus on the task at hand.”

CREATING YOUR OWN “CO-WORKERS”

Though Lex has grand plans for the expansion of LXB over the coming years, he is still, at the moment, his only co-worker. To establish a sense of community in the meantime, he creates his own (unofficial) co-workers through social media, fellow-business owners, and podcasts.

He frequently checks in with his Instagram following — the same people

who urged him to sell his brownies in the first place — for advice and feedback on anything from flavors to the color of the tissue paper placed inside each box. He has built his brand alongside his Instagram community and has since sold nearly $20,000 to the same 200 original customers.

He also heavily relies on the other makers in his incubator commercial kitchen space. When he shows up to bake on the weekends, he is greeted by an impressive array of culinary co-workers. They have helped him build confidence over the last year as taste testers and provided invaluable intel on farmers markets, pop-ups, and more.

Finally, Lex takes advantage of the wealth of information available to CPG

brands via podcasts and articles — some of his favorites being Food Chained by Vasa Martinez (Perfy), In the Sauce by Alison Cayne (Haven’s Kitchen) and Startup CPG’s podcast by Jessi Freitag. He may not be able to walk down the hall or text a co-worker about a specific question, but he passionately believes “all the advice you need to win is available to you” if you’re willing to listen.

BUILDING A PEOPLE-FIRST CULTURE

In wake of the pandemic, building a positive, happy, and healthy company culture has been at top of mind for many businesses. But how does one build company culture as a one-man show?

First, Lex says, “My interactions with people, whether they're within the company or outside of the company, are an extension of the culture that I want to build through LEXINGTON BAKES.” He wants his customers to know that he cares about the person behind the order, not just the order itself. He hopes to mimic acts of care such as those exampled by Chewy.com, a pet-food business that sends flowers to customers whose pets have passed away. And perhaps most importantly, by respecting his own needs and boundaries as a solopreneur, he is putting into practice the culture he plans to extend to future employees.

As LXB continues on their path of growth in 2023, Lex remains committed to creating a company that will be future-forward on every angle: sustainability, climate change, people, and the workplace. He plans to offer employees a four-day workweek with full salaries, provide work-from-home flexibility, and, perhaps most importantly, create a company that is “not going to run the people who run the business insane.”

“Food brings people together,” Lex says. And as a food business, LXB’s culture will always prioritize  “people, connection, and compassion.” No matter if they are a company of one person or one hundred — LXB will put people, and the world we inhabit, first. As Lex says, “This is a company that is going to change the world for the better.”

By Annie Wang

HIRING Lessons

It’s an exciting prospect to bring on a new team member when growing your business. Here is a new, fresh face that’s pledging to join you in the journey of making this dream you’ve carefully curated into a reality that you can both share. But somewhere along the way, you may realize that the person you’ve brought on may not be as good a fit for the company as you’d imagined. For every new founder, this is the stark reality of learning how to hire — learning when it’s working and when it’s not. And what to do when it’s not a good fit. We spoke with CPG founders who shared their experiences — good and bad — on some of their most memorable hiring experiences and what they learned from each instance.

CAROLINE COTTO, COO AT RENEWAL MILL

“Renewal Mill’s first full-time hire was our Director of Operations, Aaron Brown. I was doing all of the sales, marketing, and operations at that time. I knew that if I was going to continue making sales, we needed someone who could be back-of-house, making all the trains run on time. I'd previously hired a lot of interns and taken lots of informational interviews — you never know when you might be looking for someone and it's always great to network. Aaron had reached out to me for an informational interview, and I told him we weren't hiring, but that I'd be happy to make introductions to anyone in my network. But then the next day, our Operations Manager put in her notice. I called Aaron back and said we'd love to have him if he was interested. He's been an incredible asset to the team over the last 2 years.”

“I once hired a brand ambassador to do demos for us at grocery stores all over our home territory of Northern California. This individual had been let go from her previous employer, but we decided to give her a shot. Unfortunately, she was not the right person to put in front of customers as the

face of the brand and she caused our other brand ambassador to leave. I learned that even part-time hires need more vetting than I'd anticipated, and that it's always important to call people's references, which I did not do when assessing this hire. I also should have let this hire go months before I officially did. The lesson learned was if something isn't working, trust your gut and part ways sooner than later.”

KAITLIN MOGENTALE, CEO AT PULP PANTRY

“I hired someone with great experience in finance, figuring I could train them into an operations role and leverage their financial acumen to build our capitalization strategy. I knew that my strengths and interests were in sales & marketing, and wanted to find someone to balance my ideas with a more practical viewpoint. They were great and getting things done that were challenging for me, and it was helpful to have someone heads-down in operations to support growth while being a thought partner in other elements of the business.

“In the end, things didn't work out mainly due to a lack of culture fit. I didn't realize how much that would impact me over the long term, especially because this was a remote employee; I had assumed that culture wouldn't be as great of a factor. But I quickly realized that fit does matter. Sharing in the values of the company and brand, living those values independently, and communicating with partners in a way that's on-brand are all critical to success. The lack of this fit was the biggest issue for this specific hire, and would ultimately limit the candidate's potential growth in the company.

I learned that it's really important to build in a trial period in for any new employee, testing out a 3-6 month period if possible before transitioning into full-time. In our case, we had a year-long ‘services agreement’ before we would

engage in an employment contract, which made it easy for both parties to walk away when it was no longer a fit. It's something I would look to utilize moving forward.”

SADIE SCHEFFER, CEO AT BREAD SRSLY

“My first hire was a production baker who interned for me for a few weeks before I offered them the position. I was exhausted from working in the kitchen, and needed help making bread so that I could work on the business (and, you know, sleep). This was my first time as a manager, and the learning curve was painful for everyone. I am very grateful to my early employees for riding the waves with me as I learned how to be a good leader!”

“Not all hires have worked out for us, however we have tried to refine our hiring processes constantly to incorporate our learnings. Sometimes, that was learning that we had not set clear expectations about the role. Sometimes it was learning that we did not ask for the right experience or skillset. Sometimes buy-in to the company and mission were missing. We try to assess all of these in our hiring process, but of course, we're not perfect, and are always learning.”

CARLEY SHEEHY, FOUNDER & CEO AT GLOBAL GRUB

“Last year, I hired a ‘jack of all trades’ with a go-getter attitude for a specific need. While I appreciated that she was willing to learn anything, this ultimately took longer than hiring someone that had specific experience in what needed to be done. Ultimately, our skillsets were too similar and moving forward, I am focused on hiring teammates that have expertise in specific areas that are different than mine.”

BLAKE GODLOVE, FOUNDER & CEO AT ETERA FOODS

“The first W-2 employee I hired has been my right-hand-woman since I moved to Los Angeles to pursue building The After Bar. This was at a time when I couldn't handle the influx of emails and communications with my contractors as we revved up to launch After Bar. We quickly became close friends, and while it made for a fun work environment, boundaries became blurred, and our productivity lessened. It was uncomfortable but necessary to reset those boundaries. It's much easier to establish professional boundaries from the beginning of the working relationship rather than have to make the correction down the road.”

“Last year, I hired an individual to join the team to manage operations, including maintaining inventory and demand

planning. After visiting our warehouse and discovering that we had no inventory for our best-selling flavor, I found that they not only effectively failed to fulfill any of their responsibilities but had been working for another company in the same industry for nearly the entirety of their year and a half tenure here. While it was a massive blow to my trust in others. The lesson learned is that there must be checks and balances across your organization, no matter the seniority, so there is never too much power in the hands of one individual.”

MARIA PALACIO,

CEO

& CO-FOUNDER AT PROGENY COFFEE

“The first person we hired was our Sales Manager. At the moment, I was a full-time mom and entrepreneur in a new city. My only ecosystem was other moms. I found an incredible mom of two girls who had an outstanding resume, but had been at home for a couple of years raising her girls. She was more than qualified for the job, but she was passionate about being part of something impactful while having the flexibility to raise her family.”

“Being a startup, there are many hats that need to be worn, and not everyone is ready to work outside of their job description. We learned to be more clear during hiring, letting people know that their job goes beyond their description. We also learned never to hire too fast out of need and disregard the employee’s fit with the culture of respect we want to build at Progeny Coffee. Now, we are more intentional on hiring based on our values.”

DREW LEDERMAN, CEO AT RESIST NUTRITION

“At the very start of our business, we were advised to focus on SEO, so we hired an SEO agency. When we didn't see results after the first 3 months, we were told SEO takes a while to turn into sales. We waited another 2 months and eventually let them go in favor of doing our SEO ourselves and focusing on the marketing tactics that converted to sales quickly. When the cost doesn't justify the result, cut your losses early!”

ERICA RANKIN, CEO AT BRO DOUGH

“I hired our first full-time employee this past summer. After 9 weeks, they ended up leaving to work at a large CPG company. I learned to hire an employee based on their goals, values and drive rather than their skills. That employee wasn't fit for a startup environment - which is totally okay, but my goal is to have someone join the team and stick throughout the whole journey.”

By Jenna Movsowitz

THE VALUE OF FREELANCERS (AND HOW TO WORK WITH THEM)

The past few years have seen a major shift in what it means to work. We’ve transformed office desks into at-home desktops and conference rooms to Zooms. We’ve ditched water cooler chatter for Slack pings and unmuted mishaps. We’ve witnessed incredible change. But the silent reformer of the workplace has less to do with physical space and interactions, and much more to do with the culture of work: the social contract surrounding traditional employee-employer relations is changing.

Newer generations entering the workforce are looking for flexibility; we saw it with the shift to and gradual return from remote work, and we’re seeing it with higher-than-ever turnover rates. In search of autonomy and in response to economic recession, the modern day employee isn’t necessarily seeing “full-time” as synonymous with “security.” As Hayden Brown of Upwork (the freelance work marketplace) says in a New York Times piece, “being tethered to a single employer actually feels more risky to them.”

Modern day workers are becoming more interested in building their portfolio and honing in on specific skillsets — running businesses of their own as freelancers, fractional employees, or consultants*. And startup brands looking for top talent should be following their lead. In this article, we’ll explore why brands should consider bringing on freelancers, how to hire them, and how to get the most buy-in for your buck.

* in this article, we’ll be using the term

“freelancer” in reference to all contracting positions, including fractional employees and consultants

THE VALUE OF FREELANCERS

Freelancers offer so much more than just a cost-saving opportunity (because yes, saving on benefits and health insurance does indeed add up). In many cases, freelancers may actually be the better fit for your brand than a full-time employee or agency. Let’s explore why:

Risk Avoidance + Flexibility

In the same way that individuals are starting to see freelance work as the risk-averse option, startup brands should, too. Freelancers can offer a high level of flexibility, as they are often able to work on a project-by-project or as-needed basis. This can be particularly helpful for a startup brand that may have fluctuating workloads or may need to respond to changing market conditions.

Startups are quickly-shifting by nature, and hiring a “permanent” solution to a problem can put both the company *and* the “traditional” employee at risk: “You might realize down the road that e-commerce, for instance, isn’t the right track, and you should focus more on retail,” says Kun Yang, CEO of Pricklee Water. “Now you have a high-expense headcount who wants to contribute and be part of something, but they may no longer feel fulfilled.”

Honed-In Skillset

Beyond risk avoidance, brands may quickly discover that a large percentage of the industry’s top talent is no longer sitting pretty in an in-house role, waiting to be poached. Rather, these ambitious individuals are building their own autonomous careers. “The people gravitating towards freelancing are inherently more adaptable, agile and entrepreneurial,” notes Yang. This makes them well-suited to thrive in the ever-changing landscape of a startup — they are, in many ways, running their own startups as well.

These are individuals who are honing into their unique skillset, and practicing that skillset across different clients constantly. “You can’t just hire a marketing person, for example, and expect them to be good at everything from community management to email marketing. These are incredibly diverse skillsets. I don’t see a situation where hiring a generalist that’s good at some of these things would ever replace the level of expertise of skill-specific freelancers,” says Yang. “The competition in today’s startup world is so strong. If you don’t have some of the best talent operating every aspect of your brand, it’s hard to break through the noise.”

Widened Perspective + Relevant Experiences

Freelancers and consultants bring the added perk of working with other clients simultaneously — meaning they bring the best practices from other perspectives.

Freelancers aren’t judging how your brand is performing in isolation, they’re

benchmarking against the industry average of the portfolio they are managing.

Kendall Dickieson, social media consultant for brands like Graza and Canopy, emphasizes how critical her other consulting experiences are to her work: “You’re working with someone who has already lived through the mistakes a brand may be making. They already know how to fix it, versus treading water trying to figure it out.” A full-time employee may have 15 years of industry experience in their back pocket, but the problems that need to be solved today are often far different than those 15 years ago. A freelancer who is actively solving the same problems for different brands may have fewer years of experience, but carries perhaps the most relevant experience for the role.

Tackling Big-Picture Projects

While founders or full-timers constantly have to put out fires or plan for the future, freelancers can offer the opportunity to tackle projects that improve the overall

health of the company. “In a short amount of time, I can conduct something like a social audit that will help a brand uncover solutions to the problems they’ve been facing. It also offers an unbiased opinion on their business — something a founder or full-time employee could never provide,” says Dickieson.

FREELANCERS VERSUS AGENCIES

While well-funded companies may find agencies to be the choice option for executing in specific areas (mostly for their greater manpower and resources), startup brands may find the most bang for their scrappy buck with a freelancer. Freelancers typically offer a lower price point than agencies for similar services, and can offer clearer communication: “When you work with agencies, oftentimes the person interacting with the client is not the person doing the day-to-day work,” says Delaney Vetter, a PR and copywriting freelancer who started her career in an

agency. “Hypothetically, you could have great rapport with your account manager, but the person actually doing the day-today work for you may not have as much of a grasp on your brand. It can be easier for things to call through the cracks when you’re not directly communicating with the individual actually executing the tasks.” This also means that freelancers move faster than a typical agency. Their work doesn’t need to go through a ladder of people before it finally gets to the client — there is no bottleneck.

Put simply, a freelancer also chooses to work with you. At an agency, the lower-level employee who is actually executing the work likely had no say in the client they were assigned to. The mutual selection process encourages buy-in and an overall shared passion for your brand.

At the same time, Vetter emphasizes that there are instances in which an agency team may be best for your brand, “especially if you don’t have the manpower to manage many freelancers. Agencies are great if you’re looking to have one point of contact for all of your creative pieces, for instance.”

HIRING A FREELANCER

“The process of hiring a freelancer shouldn’t be that different from that of hiring an employee,” says Vetter. “You should find someone who isn’t just a great skill fit, but is passionate about your brand and mission.” So what should this process look like in practice?

1. KNOW YOUR NEED. This may sound simple, but is often the most overlooked aspect of hiring a freelancer. Because freelancers are highly skilled in specific areas, the hiring brand needs to know in which specific areas they need help. “Go beyond the buzzwords and niche down,” advises Vetter. “Either know the exact tactical skills you need, or be upfront about not knowing quite what you need yet, and open to learning from the prospective freelancer.”

Example: “Social Media”

One of the areas that is most commonly outsourced to freelancers is social

Delaney Vetter and client Soom

media. Founders typically don’t have the bandwidth to maintain a regular posting schedule or the platform expertise to create compelling content. But founders often rely on, as Vetter phrases, the “buzzword” of “social media management.” Patricia Menegoto, Content Creation Expert, says “I see so many brands thinking that if they hire a freelancer in ‘social media management’, they’ll provide the pictures and videos. In reality, social media management and content creation are often two entirely separate jobs.”

Social media managers/consultants are typically experts in the strategy side They create the brand’s social strategy, content calendar, and typically offer social copy for existing content, explains Menegoto. Some social media managers and consultants will also manage influencer relations or affiliate, but influencer marketing and affiliate consultants are also often their own separate option. Content creators, on the other hand, are actually filming or photographing the content. Most content creators will require that the brand or another freelancer provide them with the strategy, inspiration, script and copy and they will deliver the photos or videos.

Prior to bringing on a social media freelancer, ensure you know where their capabilities lie, and if they are expecting support on the strategy or content creation side.

2. ASK FOR REFERENCES. We’re well-programmed to ask a full-time candidate for references — but this should equally apply to freelancers. These individuals have often worked with a variety of clients, and the best way to get a sense of their work style and the quality of their work is by speaking with past or current clients.

3. LOOK AT THEIR PORTFOLIO (AND SOCIAL FEEDS, IF RELEVANT). Menegoto encourages you to pay attention to the quality of their work: “ask yourself if you like their style and if the style matches your brand voice. Understand what tools and technology they use and where they gather their inspiration.”

4. ACTUALLY CONDUCT AN INTERVIEW.* Hiring freelancers who are a great culture fit is equally as important as hiring

full-timers that are a great culture fit — especially if they are in a consumer-facing role, like community management. Take the time to conduct an interview and get a sense of their understanding of your brand, value-alignment, and their professional goals.

5. BE OPEN TO THEIR MENU OF OFFERINGS. As important as it is to know your need (see point 1), it’s equally important to be open when engaging with freelancers. “If you go to someone with a designated scope in mind and they don’t have the bandwidth for it, it doesn't mean they can't help you in another way,” says Dickieson. “Skilled consultants can always help you move the needle. Be open to their suggestions instead of quickly moving onto the next option — sometimes you may end up wasting time searching for something you don’t need instead of making the most of the talent in front of you.” Dickieson also notes that sometimes, these individuals may be the best suited to find someone else who will fit your needs.

6. CLARIFY RATES UPFRONT. Don’t let this be a later conversation. Flat fees are great when you don't want any surprises.

7. RUN A TEST PERIOD. Some freelancers will want to lock in a months-long contract upfront. Judi Prugger, a talented email marketing freelancer, suggests running a test period with all freelancers first. While you cannot measure true performance from a short test period, you can get a great sense of their culture fit and working style.

8. CLEARLY SET SCOPE + DEADLINES FOR DELIVERABLES. Because freelancers often work on a project basis, it is especially crucial to set clear scope and deadlines.

9. SET + RESPECT. Once you’ve set the scope of work, “respect the scope of work,” says Kim Biddle, Founder of Clutch Affiliate consultancy. “Be realistic that they’re not a full-time employee. If you see yourself doing a scope creep, be mindful and adjust.”

10. REJECT KINDLY. In the freelance world, there is no “one-click apply.” Freelancers often spend hours working on proposals for brands they are excited to work with — and never hear back. “There’s so much ghosting,” reports Vetter.

“It would be so helpful if the brand could send a rejection and potential feedback.” Remember, freelancers also have wide networks. Burning bridges could risk future partnerships or opportunities.

GETTING THE MOST BUY-IN FROM FREELANCERS

Importantly, Vetter notes that some company cultures just aren’t built for freelancers. “You can’t just hire someone expecting to throw money at the problem, and they’ll fix it. There’s a bit of work that the brand has to do to make sure the person is set up for success.”

“If your freelancers are entirely compartmentalized into one task they’re doing, they’ll have a much harder time buying in,” she says. “We can’t just jump in and do the work without knowing the goals and background.” While freelancers don’t have to go through a traditional onboarding process of a full-time job, founders should still take the time to familiarize the freelancer with the brand’s voice, mission, and brand book. All of the freelancers interviewed for this piece agreed on the same thing: the biggest hiccups occur when they aren’t looped into the business at large.

“Freelancers are inherently autonomous, and relationships with freelancers are built on trust. But at the same time, too much autonomy can lead to a disconnect,” says Dickieson. “Invite freelancers to key meetings and team bonding experiences. Schedule regular one-on-ones. We still want to hear that we did a good job, that our work is useful and contributing to the larger vision of the company.”

CONCLUSION

For many startup brands, working with freelancers is the best way to access top talent without the risks that come with full-time employees. With their honed-in skillset, relevant experience, wide networks and direct line of communication, freelancers are a great solution for scrappy, growing companies — companies who are willing to put in the work to make freelancers part of the team.

DATABASE Broker

Startup CPG, the national community for emerging food and beverage entrepreneurs, has released a crowdsourced list of top CPG brokers specifically for food and beverage brands, with sortable data on their coverage areas, specialties, and contact info. This first-of-a-kind resource is brought to you with the help of our partners at Spacestation CPG, one of the leading brokers for early-stage brands with especially strong relationships in the natural channel (the founders’ backgrounds are former Harmon’s buyers!)

Corey Jensen the Co-Founder at Spacestation CPG, believes the database is a “huge value add. CPG brands now have a onestop shop to find and research brokers, and it gives them the info to make an informed decision with confidence! This is clutch.”

Do you know a great broker that you’d like to see added to our list? To provide additional submissions to the database, please click here.

What is a CPG Broker?

CPG brokers are the intermediaries between brands and retailers. They often have relationships with retail buyers to get you meetings, stay on top of the category review calendars, and help you pitch, negotiate, plan promos, and chase down chargebacks with retail partners.

WHAT SHOULD YOU ASK A POTENTIAL CPG BROKER?

• Make sure your hearts and interests are aligned

Your brand has a voice, a story. Nobody else can narrate it better than you. So, before you set out on a hunt to get the best brokers for you, check their area of specialty, and see how passionate they are about your product.

• Ask for stats, not promises: Ask whether they’ve worked with your direct competitors or similar-stage businesses, and ask for stats or references. What are their goals for your brand?

• Understand their business: Understand how they are resourced - who are the members of their team, and what do they focus on? What will the first 90 days look like? Who are the retailers with whom they have the strongest relationships?

How much do they charge? There are varying models that can be straight commission (e.g., 5%), or for smaller brands, you may face a retainer of a few thousand dollars (or even up to 15k) per month. Make sure to explore your alternatives (including hiring your own team or planning to do that down the road.)

CPG Brokers: What not to expect:

Hiring a CPG broker doesn’t simply mean that your sales are going to skyrocket overnight. It’s more like organic growth, and it should be because you want sustainable progress. They do have relationships, but they still rely on your presence and partnerships when selling your brand to retailers.

How to access the database?

The list is available for free, along with Startup CPG's other resource lists on the official website. To access, sign up for our email list at startupcpg.com, and you'll receive a welcome email within 24 hours with a link to our rich resource folder. We highly encourage you to also join the Startup CPG Slack, to be a part of a community of 10K food and beverage entrepreneurs eager to connect and share resources.

An Expo West party to network, discover new CPG brands and bowl. Come celebrate the Startup CPG community of emerging brands! EVENT HIGHLIGHTS n 41 lanes of blacklight bowling

3 hours Open bar

10 backpack brands

Pool tables

Nachos. So many nachos. n NielsenIQ station (brands can get data to make decisions & help their sales efforts!)

WE ARE BACK! In 2022, Startup CPG threw the bowling party of the century (or so we heard). This year, we’re returning to Expo West with yet another Alley Rally – but even bigger.

Last year, we welcomed 800 Startup CPGers to our first party in Anaheim (watch the Alley Rally ‘22 video here). With the capacity to host 1,200 people, we rented Anaheim Bowlero one more time – only a 10 minute walk from the conference – for a fun-filled soiree & networking event.

STARTUP

‘Tis the season to support small brands. This list, curated by our wonderful LinkedIn following, checks off a box for every person in your life. Check out some of the wonderful holiday offerings in our Startup CPG community and share with your friends + family!

FOR THE TEA LOVER

FOR THE GOURMANDS

for Vegans

Buoy’s Hydrating Wellness Drops

FOR THE GUT HEALTH GURUS

Bonny’s Fancy Prebiotic Fiber

Tiny Sprouts Sampler Pack

FOR THE SUSTAINABLE SAINTS

(ALL VEGAN FRIENDLY)

Planet Bake’s Vegan + Gluten Free Holiday Donuts

Dam Good’s Vegan Sourdough

FOR THE COFFEE SNOBS

Flavorist’s Variety Pack

Tuyyo Foods’ Gourmet Instant Coffee

Savorista’s Caffeine Conscious Coffee

Oaza’s Cold Brew + Electrolytes Variety Pack

Jibby Coffee’s CBD Coffee

FOR THE FLAVOR-AMBITIOUS

ELAVI’s Ginger Spice Cashew Butter

Maazah Chutney’s 3-Pack

AubSauce Small-Batch Barbecue Sauce

FOR THE SNACK SAVVY

OMG Pretzels Variety Pack

Popadelic’s Crunchy Mushroom Chip Variety Pack

FOR THE BEVERAGE AFICIONADO

Machu Picchu’s Craft Box

Sarilla’s Sparkling Tea

Halmi’s Cinnamon, Ginger, Jujube,

Persimmon

Sparkling Beverage NEOPOP’s Clean Classic Sodas

FOR THE BREAKFAST DIEHARDS

For Good’s No-Oat Buckwheat Granola Shelfie Winner!

Oat of the Ordinary Blueberry Cinnamon Oatmeal PremOla’s Granola Chocolate Bark

FOR THE AT-HOME CHEFS

Yolele’s West African Spice Rub + Dip Mixes

Haven’s Kitchen Cook Happy Pack

Vermont Tortilla Company

FOR THE SOMMELIERS

Sipwell’s Sustainable Sparkling Wine Gift Pack

FOR THE SUPPLEMENT JUNKIES

All Phenoms Sparkling Functional Beverages

RYT’s Supervitamin CBD Gummies Terraseed’s Complete Multivitamin

English Muffin Breakfast Box

Moku Foods’ Korean BBQ

Flavored Mushroom Jerky

AWSM Sauce’s World Saver Bundle Shelfie Winner!

Akua’s “Surf & Turf” Kelp Burger and Krab Cake Bundle

Petaluma x Renewal Mill’s “Treat For You, Treat For Them” Gift Set

FIRST HIRES + WHY COMPANY CULTURE MATTERS Culture Shock

Sweet Nothings Team

I’ve worn a cactus suit in Times Square,” Kun Yang, Co-Founder and CEO of Pricklee, laughs. He is cheekily responding to the question "when does a startup know they’re ready to hire", conveying the philosophy shared by most successful CPG business owners: founders will do basically anything to stay as lean as possible for as long as they can. These scrappy, ambitious individuals are protective over their business-babies — after all, the only thing scarier than starting a business is bringing someone else on board. Despite their greatest efforts, though, there comes a day in their growth when the metaphorical cactus suit must be passed off to someone else. In this article, we’ll explore when to hire, what to look for in your first sales hire, and the importance of company culture throughout the hiring process and beyond.

KNOWING WHEN TO HIRE

If the cactus suit anecdote is any indication, Yang believes that founders can only be ready to hire after they’ve (literally) tried on every role themselves. “Our founding team was doing everything under the sun. We learned about the different functions required to be successful and became self-aware of our strengths and what we were realistically able to complete,” he says. No matter how menial a task, Yang believes that founders need to gain the firsthand experience of running their business to determine where their core competencies lie, and where there are holes to be filled. “Ultimately, hiring fills for a competency that would take a really long time or effort to build, or one that you simply don’t have a desire to build.”

Jake Kneller, CEO and co-founder of Sweet Nothings, believes that it’s time to hire when the founder(s) are no longer thinking strategically. “I’ll look back and reflect on a month and realize that most of it was tactical and operational,” he says. “But leaders need a vision, and a clear path to that vision for the next few years. If you’re at a point where you’re operating constantly and don’t have any time left to think strategically about executing 18 months out, you need to hire. That way, you can spend time being strategic and not just putting out fires.”

Deep Dive: First Hires in Sales

While many brands hire freelancers or consultants for marketing and outsource operations and finance, many of the brands we spoke to were making their first in-house full-time hire in sales. And when it comes to finding the right salesper-

son for your team, there are few watchouts to keep in mind.

“One mistake I often hear is that people rely on specific category experience to determine fit. In reality, stage is more important,” says Kneller. For example, a long-time CPGer may have great experience continuing to build existing relationships with a major conventional retailer — but they may have never had to sell-in for the first time. They may have never supported a retail launch where they only got two SKUs into 20% of the stores. These instances require unique stamina and scrappiness. “Be more thoughtful about the skills you need today versus the sexy company on their resume,” says Kneller.

Prabal Chaudhri, CEO and founder of Brave Good Kind, further emphasizes that traditionally experienced salesmen are not necessarily the best fit for a startup brand’s first hire. While he was looking for a salesperson with CPG expertise — a firm understanding of cost structure, margins, etc.— Chaudhri also knew that he wanted someone with a startup attitude. “Your first sales hire cannot be individualistic Old-school, snake oil salesmen don’t work anymore,” he says. “If your salesperson is solely focused on hitting their quota, they will accept all opportunities, even if they aren’t a great fit or would be risky for your brand.” Chaudhri’s first sales director, for instance, knew to turn down a $500,000 sale for the benefit of the brand. This individual also knew to take his ego out of the pitching process: “he does a great job of setting everything up, and then unleashing me as a strategic resource to close the deal. He knows I bring the soul of the brand as the founder. Ultimately, you don’t need a ‘great salesperson.’ You need a collaborator.”

It was also important to Chaudhri that this individual exhibit flexibility. “A great salesperson at a startup has to be comfortable with everything from building pallets to high-level strategy work and pitching confidently pitching to buyers at massive retailers,” he notes. “You need someone with horsepower, but at the same time, the right attitude to accept eight ‘no’s out of ten.”

COMPANY CULTURE 101

Finding these superstar individuals, though, presents its own unique challenges for startup brands. “When you’re pre-revenue, nobody is joining you for money — they can get a higher salary elsewhere,” says Chaudhri. So where do you have leverage? The oh-so elusive company culture “Prospective hires will be excited by the opportunity for greater

purpose, legacy, culture and growth. You have to authentically sell on these things.” There are several components that can contribute to a company's culture — each of which should be thoughtfully communicated to prospective hires:

1. MISSION AND VALUES. For many CPG brands, the concept of “mission” starts and stops at product. “In the beginning, we were proud to just have a product that checked off so many boxes functionally and from a social good perspective. We knew we had what consumers were looking for,” says Yang. “But we always felt that we were missing seeing authenticity in terms of moving away from selling your product, and moving towards expressing a brand.” This, Yang believes, is the crux of “company culture.”

While it is crucial to live out the mission statement of your company, it is equally important to have firm values in place, displayed through everyday interactions. “As a quickly-moving startup, we carry out the value that ‘a speeding ticket is better than a parking ticket.’ There’s a high cost of doing nothing,” says Chaudhri. “We do things, we fail, but then we learn from it and can fine tune.” Living out this value, though, also means that employees must feel that they are given a license to fail. This is one of Brave Good Kind’s most important values, and one that Chaudhri instills in each team member. Similarly, Shae Whitney and Brady Becker of DRAM Apothecary demonstrate and live out their value of mental wellness through their implementation of a four-day work week.

2. LEADERSHIP AND COMMUNICATION STYLE: The leadership style of the founders and top executives can have a significant impact on the culture of a startup. A leader who values transparency and open communication, for example, may foster a culture of collaboration and trust. At Sweet Nothings, leadership constantly prioritizes one-on-ones with all employees to keep an open stream of communication. “It can be time-consuming, but the face-to-face aspect matters. We treat everyone as strategic partners – there aren't secrets at Sweet Nothings,” says Kneller. “Everyone knows how we are tracking towards goals, what our pain points are, where we failed. In the instance where smaller groups are making a big decision, I present it to the full team on our weekly call to explain the reasoning behind it.”

Great leadership, according to Chaudhri, comes from a place of “authentic confidence,” rooted in “rolling up your sleeves and being the first one in the fire.” This also means being especially brave in tougher moments. “You need to have grace in delivering bad news, and help people understand that there is a reason for your decisions.”

physical workplace now looks a bit different for most startups, mostly existing on the screen instead of the office. But this intangible “environment” holds equal importance in crafting a culture.

“Our Slack channel is really active, and not just with work stuff,” says Kneller. “We have Slack channel called ‘in the kitchen’ where people post what they've been cooking and recipes. People chat about what they're going to make this weekend or what they’re eating on their vacation. It keeps things active and fun.”

The team at Sweet Nothings has also made a point to cultivate company culture in-person through quarterly team offsites. “Our offsites save us from hours of things lost in translation. Leaving opportunities for people to genuinely get to know each other in-person translates to not only more productive work, but much more rewarding work for each of our team members.” These offsites are also an opportunity to make up for the lost “water cooler” time — casual side conversations that have led to some of the best ideas and innovations at Sweet Nothings.

4. EMPLOYEE ENGAGEMENT: The level of employee engagement and involvement in decision-making can also contribute to the culture — a foundational culture of employee empowerment may be more likely to foster innovation and creativity. At DRAM Apothecary, for instance, Whitney and Becker encourage their manufacturing team to make their own decisions around work. “We have a policy that if you don't want to be at work, you need to go home,” says Whitney. “We all have those days where we just can't find it in our souls to do our work, and when we're working on a manufacturing floor, that vibe can really weigh down the entire team. Our employees know they can say, ‘I need to not be here today,’ and they have an option to fill in the the hours on Fridays if they want the pay. We've only had one employee in our history ever abuse this policy. It's really helped maintain a positive atmosphere.”

Communicating Culture to Prospective Hires

“When you’re trying to offload some of your work, it can be easy to avoid the nagging feeling that someone might just not be the right fit,” says Whitney. But taking the time to ensure culture fit can make or break your hiring process.

3.

WORKPLACE ENVIRONMENT:

The physical environment in which employees work can also contribute to the culture of a startup. Of course, the

Kneller carefully crafts the interview process to ensure that the candidate comes away with a solid understanding of Sweet Nothings’ culture. “We try to have them spend considerable time with their prospective manager, and then conduct short interviews with most of the rest of the team,” he says. Meeting the whole team, rather than just one individual, gives the candidate a great sense of the culture. “We also ask candidate’s perspective on how they would approach things during the process. It’s important to demonstrate that we respect their opinion and expect a decent level of autonomy/ownership from day one.”

CONCLUSION

When growing your team, company culture should be at the forefront of every decision you make. “It can be challenging to focus on building culture when you’re putting out fires every day,” says Yang. “But if you don’t get it right in the beginning, you're not going to get it right later — it's really hard to correct for that as as initial founding group. Until we

built authenticity into our brand, we knew we weren’t going to get into scale mode.”

Once the founder understands and clearly defines the culture that they are trying to build, notes Chaudhri, “every decision must help push the culture forward. Ruthless prioritization has to be done to protect the culture and founders must lead from the front by ensuring everyone has to be accountable. Don’t let culture be the reason you fail.”

by Jenna Movsowitz

AN INSIDE LOOK INTO MONDELEZ SNACKFUTURES

CoLab with Moonshot

SnackFutures, Mondelez International’s innovation and venture hub, has kicked off applications for CoLab 2023. The company is focusing the third class of its start-up engagement program on disruptively delicious snack brands

Selected brands will participate in a 12-week program in the spring of 2023 that includes virtual sessions, in-person workshops, 1:1 mentorship and access to Mondelez International’s experts, resources and ecosystem of partners. In addition, each participating brand also receives a $20,000 grant.*

CoLab was deliberately built to be a collaborative effort between ‘big and small’ – each gaining learnings, insights and capabilities from each other to accelerate growth. Participants in last year’s program were Bunny James, Every Body Eat, GoNanas, Moonshot, Nunbelievable, Oat Haus, Pan’s, Popcorn for the People, Wonder Monday and Yolélé. To hear about their experience firsthand, click here

If you’re an emerging brands that is creating delicious snacks by doing something disruptive, please apply at www.applycolab.com.

We interviewed Julia Collins of Moonshot, the innovative snack brand that’s leveraging food to fight climate change, on her experience in the 2022 CoLab.

Startup CPG DESCRIBE YOUR EXPERIENCE WITH COLAB. WHERE WAS MOONSHOT PRE-COLAB, AND WHERE WERE YOU AFTER?

Julia Collins Our experience with CoLab was invaluable in so

many ways. At the time we applied for the program, Moonshot was building regional distribution. We came into the program with a set of business priorities we wanted to accomplish during our time at CoLab. These priorities ranged from macro-level business questions, like “how do we win at Target”, down to specific projects we were looking for guidance on, like “what materials should we use for sustainable sample size packaging?” Other priorities included ways to amplify Moonshot’s brand story and community building as we scale from a regional brand into a national brand.

What we learned throughout CoLab and the relationships we built led us to a lot of big wins this year, including: a successful Target launch, resources for alternative packaging material suppliers, our first-ever Ibotta campaign, refined brand messaging and taglines, leveraged insights from SPINS and Highlight, and friendships with other growing brands in the space—which may one day turn into collaborations. This year was a major growth year for our business, and CoLab was pivotal to a lot of our success.

SCPG WHAT OPPORTUNITIES WERE PRESENTED TO YOU DURING COLAB?

JC CoLab granted us access to Mondelez's expertise across innovation, packaging, shopper marketing, and more. We gained a lot of invaluable insights and resources through CoLab that we would not otherwise have access to as an emerging brand.

During our time in CoLab, we had the opportunity to connect with leading CPG partners across sales, marketing, and consumer research. Working with these partners was incredibly exciting for us. We had subject matter experts at our fingertips who could help us work through sticky issues and unlock invaluable insights.

In addition to the partnership opportunities, the final brand showcase was a fun and exciting experience for our team. During

the showcase, we had the opportunity to pitch Moonshot to investors, buyers, and influencers in the space. This door opening allowed us to build strong relationships with current and future partners.

SCPG WHAT ADVICE DO YOU HAVE FOR SOMEONE WHO IS ON THE FENCE ABOUT APPLYING?

JC Definitely apply! Beyond the tactical and measurable benefits of the program (of which there are many), the connections you make with other founders in the Food & Bev industry is an intangible benefit that will last far beyond the 10 weeks you are in the program. I was blown away by the other founders in the program and I feel we all learned so much from one another. You will build a support system of people who understand your journey as a founder and that is hard to come by!

In addition to the amazing classmates, the access you get to the knowledge and expertise of the various departments within Mondelez is far beyond what you would ever get normally as an emerging brand.

SCPG WHAT ADVICE WOULD YOU HAVE FOR A BRAND TO MAKE THE MOST OF THE PROGRAM?

JC Be present: The program is a big time commitment but it’s worth it! You will get out as much as you put in, so do your best to stay present during the workshops and ask as many questions as you can during each session (and don’t forget to take notes!).

• Leverage the expertise of your CoLab mentors: CoLab pairs you with mentors within Mondelez, each equipped with their own arsenal of knowledge and expertise. Make sure you take advantage of this! The mentors are absolutely incredible people and so eager to connect you to others within the Mondelez network to get you what you need. We met with our two mentors weekly and ticked through a priority list we made with them at the program's onset. Each session was incredibly fruitful. Be honest about what you need and open to the help they can provide.

• Make meaningful connections with your cohort: By far one of the most satisfying parts of CoLab was meeting and sharing experiences with the other founders. We are all going through similar experiences as we scale our businesses. Our CoLab class became very close with one another and many of us still chat today! We share resources, swap stories, and give each other advice when faced with roadblocks. In the long run, these relationships will help propel your business forward. I can’t overemphasize the importance of building a supportive community.

SCPG WHAT WERE MOONSHOT’S KEY LEARNINGS

FROM COLAB?

JC We had so many learnings throughout the program that it’s hard to choose just a few!

Some of the biggest learnings we took away include:

1. Consumer Insights: We confirmed that our product over-delivers on taste, texture, and appearance through a blind consumer taste test run by a third-party consumer insights company!

2. Brand Insights: Through CoLab we had the privilege of working with creative agency, Fortnight, who helped us unlock a new tagline, and additional headlines that we’re

already using in point-of-sales materials, as well as a brand manifesto that we will be adding to our eCommerce site.

3. Packaging Insights: We were able to pressure test our packaging versus other brands in the set and how it delivers against our objectives, working with Sell Check to run a third-party test.

4. Category Insights: The CoLab x SPINS session provided consumption data and Category trends we have never seen before. This data has already proven vital as we have utilized it for sell decks, shopper marketing strategies, and more. For example, we learned that we were significantly over-indexing on category growth contribution for a brand of our size. Buyers love to hear that small brands are pulling more than their fair share of weight when driving category growth. This was a big unlock, supercharging our insights!

SCPG WHAT KIND OF SUPPORT DID YOU HAVE THROUGHOUT THE PROGRAM FROM THE MONDELEZ TEAM?

JC The Mondelez team puts so much work into this program and it shows. We were treated with the utmost respect and kindness throughout the entire program and everyone we met on the Mondelez side voiced how willing they were to help with any ask, at any time. They made us feel so comfortable, even about emailing them with even the smallest questions, and that comfortable environment that they created contributed to how much we were able to walk away with.

"We met with our two mentors weekly and ticked through a priority list we made with them at the program's onset. Each session was incredibly fruitful."

By Annie Wang

HOW AND WHEN FOUNDERS SHOULD PAY THEMSELVES Hiring Yourself

Love might not cost a thing, but for CPG founders with limited cash and big dreams, the costs are sky high. Founders often forgo paying themselves for years to make ends meet. So when and how should founders hire themselves? In this piece, though we lay out the three major ways to fund a business and the pros and cons of each, we will mainly focus on stories and strategies from the perspective of bootstrapped and/or debt financed businesses.

BOOTSTRAPPING VS DEBT FINANCING VS EQUITY INVESTING

ness alongside her own skills and product. “When I was starting out, I didn’t have the experience, network or proven-concept to feel comfortable asking anyone for money,” says Sheehy. “I used a small amount of personal savings to launch Global Grub and then bootstrapped my way for years, putting profits right back into the business. This forced me to be scrappy, in a good way.”

BOOTSTRAPPING

Bootstrapping, which gets its name from the saying to “pull oneself up by their own bootstraps'', is a form of funding where founders rely on “personal savings, sweat equity, lean operations, quick inventory turnover, and a cash runway” to get their businesses off the ground. Instead of taking on major loans or taking money from investors after their initial investment, bootstrapped businesses rely on revenue generated from sales to continue growing their business.

• PRO 1: CONTROL. Bootstrapping allows founders to maintain complete ownership over their company instead of giving equity to investors.

• PRO 2: A SOLID BUSINESS MODEL. It can force founders to come up with a business model that actually works since every dollar must count.

• CON 1: SLOW GROWTH. Starting out with less money and growing with only your initial investment and future revenues will likely mean slower growth.

• CON 2: PERSONAL RISK. Since founders are often using their own money in the beginning stages of bootstrapping, founders are assuming the entirety of the financial risk instead of spreading that risk by using capital from investors and other sources.

For Carley Sheehy, founder of international food kits company, Global Grub, bootstrapping was a way for her to grow her busi-

DEBT Debt financing is taking a loan from an outside institution and repaying that debt plus interest over an allotted period of time. Borrowers will also put up something in the form of collateral that can be used as repayment in the event the founder defaults on the loan. Some examples of collateral include equipment, real estate, and accounts receivable.

• PRO 1: DECISION MAKING. Lenders don’t have control over how founders spend the money they borrow, allowing founders continued control over their business. Also, since founders know how much they must pay in principal and interest each month, they can more easily make financial plans.

• PRO 2: TAX BENEFITS. Interest payments on loans are tax deductible.

• CON 1: YOU MUST QUALIFY. New businesses with limited to no financial history, may not qualify for loans.

• CON 2: RISK AND REPAYMENT. Securing a loan requires that you (a) use something as collateral and that you (b) repay your principal and interest each month. This means that if you default on your loan you may lose your collateral and have a mark on your credit score which could negatively impact your ability to secure a loan or investment in the future.

INVESTORS AND EQUITY FUNDING When bringing on investors, founders sell off part ownership of their company in exchange for a financial investment.

• PRO 1: FASTER GROWTH. You’ll likely raise more through equity funding over bootstrapping or crowdfunding. As such, you’ll be less cash-strapped and more able to

•

fund high growth activities such as hiring, streamlining production, paying yourself so you can focus on the business, and more

PRO 2: ACCESS TO A NETWORK. The right investor will not only take the best interest of the company in mind when providing mentorship, they will also be able to connect you with the right people and resources that can help your business grow.

•

expectations and your own align.

CON 2: SHARING DECISION MAKING. Some investors may want to have more involvement in company decisions. In these cases, founders may need to compromise. In the worst case, when investors’ interests do not align with company interests, conflict or greater compromise from the founders’ part may ensue.

•

PRO 3: REDUCED LIABILITY. When using capital from investors, company founders take on less financial risk themselves. Instead, financial risks from investments lie with the shareholders rather than founders.

•

CON 1: DILUTION IN COMPANY OWNERSHIP. Taking money from investors means giving away a portion of your ownership. In some extreme cases, founders may have to answer to investors that do not have the best interests of the company in mind. When taking on investors, be sure that it’s a good mutual fit and that investor

When considering investment, Maria Palacio, Co-Founder and CEO of Progeny Coffee bootstrapped her business to the highest valuation her team could manage before inviting investors into the fold. “Being a mission-driven company, we knew from the beginning that our capital journey was going to be different.” says Palacio. “The moment you bring in investors, you’re selling part of your company. We wanted to make sure that when that day came, we had scaled Progeny to the point that we would still hold a majority of the company, ensuring that our mission would continue.”

WHEN TO PAY YOURSELF (AND HOW MUCH)

For new businesses with limited funds, budgeting to pay yourself can feel like a luxury you can’t afford. Unless you’ve somehow hit the business goldmine, you’ll likely not be paying yourself much (if anything at all) at the start of your business. Sadie Scheffer, founder of gluten-free sourdough company Bread SRSLY, didn’t pay herself until three years into her business. When she did pay herself, it was a salary of only $10,000 — definitely not the rate of a typical CEO. But for Scheffer, it’s all about planning and achieving long-term goals. “I highly recommend for people who are on the fence about whether to pay themselves early on, that they should build their salary into their financial plan so that they can budget for themselves.”

Part of the struggle for Scheffer was making the mental shift from a place of “not deserving pay” to recognizing the need to pay herself. “It was really hard to pay myself that first $10,000 because, in my mind, I was making $0. Suddenly making $10,000 was a huge raise. Build your salary into your business’ overall budget so you have something to refer back to and take some of that stress off your shoulders.” It’s important to start paying yourself so that you can sustain your own life while building your businesses. Paying yourself will also give you a real picture of your business’ financial performance.

Other experts have advised that you don’t pay yourself before your business is profitable. Otherwise, you’ll be hampering your growth. If you pay yourself when you’ve reached breakeven, your business will be plunged back below breakeven, as paying yourself will increase your overhead. However, if you’re profitable with a steady revenue flow and positive revenue projections, it’s likely the right time to start budgeting to pay yourself.

But how do you figure out how much to pay yourself? If you’ve just begun to be profitable, you won’t be paying yourself much. The rest of this section provides one method for calculating pay. Each business and its founders' needs vary.

After calculating how much in profit you’ve made over the year, budget out 10% from profit to reinvest in the business, making sure you have at least six months of expenses saved at all times outside of this 10%. Then, save 30% for tax payments. Some tax professionals also recommend having a set percentage of profits set aside for retirement savings. Of the remaining profits, determine how much you are able to pay yourself. There are two basic methods for determining how much to pay yourself: (1) how much you need to cover your expenses or (2) your perceived value based on market comparisons. Regardless of the number you come up with, don’t worry if you aren’t able to fully meet your determined salary right away. You can always build your desired salary into future financial plans and revenue goals.

Once you’ve determined how much to pay yourself, you can peg any raises or bonuses to the business’ performance. If the business has a 10% revenue increase, add 10% to your salary. On the flipside, you should also ensure that your overall overhead expenses aren’t growing so rapidly that you’re put back

into the red. Track your overhead expenses separately from your own compensation to get a clearer picture of what money is being spent where.

WAYS TO PAY YOURSELF

When it comes time to actually pay yourself, how you do so depends on your business entity. We’ll focus on compensation payment methods for three types of entities: Sole Proprietor / LLC, S Corporation, and C Corporation.

SOLE PROPRIETOR / LLC

When paying yourself as a sole proprietor or a single- or multi-member LLC, owners pay themselves through an owner’s draw. An owner's draw is when an owner takes money out of the business to pay themselves. You can take an owner's draw by writing yourself a check from the business or via an ACH transfer from your business to your personal bank account. LLCs can also file to be treated as an S-Corp or C-Corp when paying taxes.-

S-CORP & C-CORP

In both S-Corps and C-Corps, an owner is called a shareholder and is treated as a W-2 employee. In an S-Corp, owners can pay themselves through a salary of “reasonable compensation”, shareholder distributions, or a combination of both. Owners of S Corps that are not as involved in the day-to-day operations of their business would pay themselves via distributions of profits. Owners that offer services to the business like an employee will pay themselves a salary. Owners that act as employees in their businesses can also elect to take a salary plus distributions.

Owners of C-Corps that are involved in the daily operations of their businesses also receive a salary as a W-2 employee. These owners also receive dividends from the business as a return from the profits of the business.

The major differences between S Corps and C Corps are in how they are taxed and limits on their formation and structure. S Corps are pass-through entities, meaning individual owners of the company are given their profit shares and pay on their own income taxes. There is also a limit of 100 owners per S Corp and S Corps must be U.S. based where all owners are citizens or permanent U.S. residents. In C Corps, there is no limit on the number of owners and taxes are taken from the C Corp itself while shareholders income taxes are kept separate when filing. C Corp owners can hold either domestic or international citizenship. S Corps are the most common business formation throughout the U.S. Small businesses usually form S Corps as C Corps usually incur higher taxes that are less beneficial to smaller businesses.

Founders have also discovered alternative methods to ensure a return on their investments. In addition to simply putting money into the business, Scheffer wrote a loan contract between herself and her business with a five-year repayment plan. “I made a loan to the business from my personal savings and use that for working capital.” says Scheffer. “I repay the loan on a monthly basis. I gave myself a five-year term with 10%

interest. It’s not the end of the world if I pause the payments for a month or two if I don't have the cash. I also report the interest income at the end of year on my personal taxes.”

ADVICE

Business finances can be complicated. Regardless of whether you decide to form an LLC or S Corp or whether you bootstrap, take on debt, or invite in investors, it’s crucial for the longevity of an owner’s business and well-being to budget in their own salary.

To end this piece, we wanted to share some advice from a few founders that have bootstrapped / debt financed their business for the better part of a decade and have found their own ways to grow their businesses while paying themselves livable wages.

CARLEY SHEEHY, CEO & FOUNDER OF GLOBAL GRUB (EST. 2012)

“Be scrappy and patient! There are so many things you can learn and do yourself. Be creative with how you do things and how you can save money. Know that it’s going to take longer if you don’t have funding and if your time is divided with another job, and that’s okay!”

SADIE SHEFFER, CEO & FOUNDER OF BREAD SRSLY (EST. 2011)

“Do a little soul searching and know what burnout looks like for you and what the warning signs are. Burnout is so hard to recover from and it takes so long. It's a very expensive thing for your business if you burn out. I had a two year burnout period where I just checked out, and I wasn't really able to muster any inspiration or any energy to run the business. Bootstrapping definitely has a time and a place. But it also comes with the territory of potentially undervaluing yourself and running yourself into the ground; our businesses can't afford for us to be burned out.”

BRADY BECKER, CO-FOUNDER OF DRAM (EST. 2011)

“First, I’d say start with a lean business mentality. This means identifying the core component of what you want to make, while minimizing costs as much as possible. Validate it with minimal cost. Be authentic, never just copy what is out there. Second, you’ll need some hard skills. In our case, we do all our own design, formulation, marketing, and finances. We’ve now hired specialists to help us – but as a bootstrapped founder you need to be a capable generalist that can get things functioning without getting out your checkbook.”

Global Grub international DIY cooking kits can be found on their website.

Bread SRSLY’s gluten free breads can be purchased on their website and in stores around the country

Progeny Coffee’s coffees can be purchased on their website and in stores around the country.

DRAM’s CBD infused sparkling beverages, drops, bitters, and more can be found on their website and in stores throughout Denver.

"BOOTSTRAPPING DEFINITELY HAS A TIME AND A PLACE. BUT IT ALSO COMES WITH THE TERRITORY OF POTENTIALLY UNDERVALUING YOURSELF AND RUNNING YOURSELF INTO THE GROUND; OUR BUSINESSES CAN'T AFFORD FOR US TO BE BURNED OUT."

Global Grub

DRAM Apothecary

COMMUNITY_CANADA BRAND FEATURE

MEET CC

Catherine

Chen, known to many as CC, started her business at home during the pandemic as a side hustle while running her startup MyShoperon. Before joining the startup world, CC was in the legal world winning the Financial Times Innovative Lawyers 2016.

CC wanted to create a simple, natural, addictively delicious spicy sauce with ingredients people could actually pronounce – so she looked to her roots. Using an old family recipe passed down from generations, CC put a modern twist on her secret family recipe to make the ultimate culinary complement. CC's products are keto and vegan friendly, free of gluten, salt, sugar, MSG, sodium – and no refrigeration is required after opening. Made with only simple and clean ingredients and a base of olive & avocado oils, CC’s challenges the traditional chili oil products made with sunflower, canola, vegetable or soybean oil.

CC’s has sold over 3,500 jars since the very first commercial production run late April, 2022, the majority of which were sold direct-to-consumer. CC’s has made its way onto 33 different countries on 6 continents. Their Garlic Chili Oil was a winning product in Grocery Innovations Canada’s Top 10 in Grocery 2020.

CC is grateful to Startup CPG for helping her expand since launch. “In May 2022, Startup CPG had their first Toronto event. My brand was the youngest brand there – and won a competition for retail space at a local store,” says CC. “The community helped me navigate my Amazon launch and continues to help me navigate new challenges as a solo founder. The help I’ve received is tremendous. Everyone is here to share information and to help each other grow.”

Today, CC’s is sold across channels: Shopify, Amazon, retailers, and Toronto Designers Market.