How the granola company that fed Google weathered the pandemic
The pandemic has forced the founder of gr8nola to branch out from her formerly reliable business-to-business channel.
As a solo operator, Erica Liu-Williams knows what it means to crunch. Thankfully, her business is granola.
After four-and-a-half years, the former operations and marketing manager’s side hustle, making and selling granola, matured into a full-time business called gr8nola (pronounced great-nola) once workers at tech companies such as Google, Facebook, and Twitter embraced her crunchy snack and demanded it in their offices’ pantries.
“That enabled me to outsource and scale manufacturing and build a high-volume, self-sustaining business,” Liu-Williams tells Inverse. “I took the leap to pursue gr8nola full-time in late 2017 and have been bootstrapped since inception.”
This is NiMBLE, a series where business owners open up their books and lives to Inverse, with helpful tips on how to keep going.
Along with her B2B operations, gr8nola is also sold directly on its website, on Amazon, and at more than 100 stores. Available in unique flavors such as Golden Spice, Cinnamon Chai, and Matcha Vibes, gr8nola is one of the top-ranked “healthy granola” products on Amazon and counts famous fans like Halle Berry.
Most recently, Liu-Williams launched a peanut butter flavor featuring ashwagandha, a medicinal herb that is said to reduce stress, in partnership with United Nation’s foundation Girl Up and celebrity photographer Nigel Barker.
But with a global pandemic, many businesses have had to suddenly shift the way they operate. What happens to a business whose primary customer was office workers during a shift to remote work? Liu-Williams talks about her finances and her recent business shifts in the Q&A below.
This Q&A has been edited for length and clarity.
Can you give us a rough overview of your revenues versus typical business operating expenses?
Because I'm a startup and invest everything back into growing the business, I don't guardrail, optimize, or even track this ratio. However, I do run leanly and don't have full-time employees, which keeps my operating expenses-to-revenue ratio in the 25 to 33 percent range.
How do you track your money?
Everything is captured in Quickbooks online. While I typically look at my business on an accrual basis, I’m always tracking my balance in my business bank account to see cash on hand.
What number do you look at to determine whether your business is doing well?
Gross revenue and total sales by channel (direct-to-consumer, Amazon, retail, business-to-business), projected annual run rate based on monthly sales, and how it is trending versus last year's revenue. My goal is to grow each year, and calculating my run-rate tells me if I’m on pace to hit my goals.
In what situations do you dial back spending or increase it?
As many businesses did, I dialed back on spending during Covid. Because the majority of my business and cash flow was from supplying gr8nola to tech offices including Google, 2020 was really tough — and it was the first year I didn’t grow my revenue. The moment Covid hit, this channel disappeared when employees shifted to remote work, as this meant no more office snacks! In reaction, I cut any expense that wasn’t absolutely critical to preserving cash.
Conversely and to my benefit, Covid has driven an organic, sustained increase in direct-to-consumer and Amazon sales, which are channels I’m leaning into much more today. As I’m trying to find ways to scale these channels in a profitable manner, I’m increasing spend and resources toward digital marketing (design, development, email marketing, media spend/management) to appropriately “test” and optimize this channel.
In tough times, what’s the first expense you reduce or eliminate?
Anything that is a “nice-to-have” such as extra online content or resources toward retail sales. On the content side, I do a lot of blogs and recipes for my community. However, it’s not mission-critical and my online sales will not significantly decrease if I cut back the frequency on these.
On the retail sales side, something people don’t realize is how expensive it is to get into grocery stores — many brands aren’t profitable to start because there are a lot of upfront costs like slotting fees (paying to be in the store), free fills (where you literally have to give the first order to the store for free) and promos (discounts) every time you get a new door. Therefore, the more stores, the more money is required, and if times are tough, I’m willing to cut retailer door count growth to preserve money.
What’s an expense you can’t spare?
Inventory and other basic operational things that are essential to “running” or maintaining the business that I can't or won't do myself: monthly bookkeeping services and basic help for managing my social media.
Since my products are a physical good, I need to produce them to sell — there’s no getting around that. I don’t have any knowledge of bookkeeping, so someone else has to do it for me. With social media, it’s critical to have a consistent presence since direct-to-consumer is a critical piece of my business and much of it is driven by social media.
Where do you draw the line between business expenses and investing in your business?
If there are expenditures that could be used toward “testing” and potentially unlocking a new sales channel, I look at that as an investment, and I always start with the least amount of money required to get data to learn whether it's a go or no-go. I also look at branding/packaging design and innovation (new products) as investments, too.
These aren’t necessarily critical in the moment, but if successful, they would pay off in dividends over the long run. Otherwise, I view most other business expenses as critical.
What’s an unusual expense that you believe adds value to your company?
I can't say any of my expenses are “unusual,” as I run pretty leanly and only spend on the most needed things. However, investing in design/packaging — while it doesn't feel like it's "mission-critical" — can make all the difference in the business and has intangible value that compounds over time.
For example, the last version of my packaging design wasn’t broken or bad by any means, but when I invested the time and money into packaging design changes, it’s definitely helped the product and flavors stand out more on the retail shelf, which ultimately increases consumer sales and builds brand equity.
Why do you believe this expense is so valuable?
Brand is an intangible asset that builds slowly over time, so it's important to have the right foundation in place, even when you're a young and scrappy company. Even if you can’t afford the best talent, at a minimum, you can still put a lot of your own time and thought into it.
What was the biggest expense that ended up paying the biggest dividends?
This is going to sound so cliché, but it's the multiple contractors who help me manage the business — be it my controller, social media marketer, or third party logistics (like the fulfillment warehouse that fulfills my online orders).
As a founder, I am constantly juggling so many tasks, and even though I hate spending money, it's not worth my time to do my own bookkeeping, plan every Instagram post, or pack and ship my own online orders. The time I get back from not having to do these things is invaluable.
What's a line item on your budget that makes your business uniquely your business?
My manufacturing costs, specifically the frequency and low production quantity per purchase order. I outsource the production of my granola to a co-manufacturer (aka co-packer), and while using a co-packer is quite common in food and beverage, I have a unique relationship with mine where I can produce in low minimums, which is rare. I’m talking 300 orders of a flavor, versus a typical co-packer that might require 2,000 units per flavor run.
This allows me to be more flexible with cash and always have fresh products on hand. Most importantly, it enables me to launch and test new flavors very quickly with little inventory commitment.
What personal sacrifices have you made on behalf of your business?
I left my 10-year tech career (and the salary, benefits, and career trajectory that came with it) to pursue my granola business full time, which to any outsider — and even my family — may have been judged as crazy, random, and just plain silly.
Because I’m a first-time entrepreneur with no experience in the food industry, I moonlit my business for the first 4.5 years as I built my knowledge, network, and confidence from ground zero.
During this time, I also made sure to save as much money as possible because even to this day, three years later after taking the “leap,” I still don’t pay myself since I invest everything back into the business.
At some point in the near future, I know I will need to raise capital since building a brand online and in retail takes a lot of money — so giving up equity in the company will be the next big sacrifice I’ll have to face, especially since I’ve lasted this long as a bootstrapped business.
Inverse analysis — Business owners shouldn't just rely on one sales channel. They should build a diverse foundation so one channel can pick up the slack if sales are down in the other. And like Liu-Williams said, brand is a vital thing for every company to invest in.