I don't have much time, but I wanted to hit on a couple of things...
The Colorado Springs Hot Air Balloon Classic is this weekend, with mass launches of 150+ hot air balloons Saturday, Sunday, and Monday mornings at 7:00am. This is one of the largest events in the Colorado and surrounding states each year. It takes place two blocks west of us at Memorial Park. We are setting up a tent and giving out free coffee, as well as fliers and coupons. Thousands of people walk to Memorial Park from the surrounding neighborhoods, and we will be in place to put our coffee in their hands all three mornings. It should be a good thing for us to reach some of the local residents that do not know we are here...
I booked several senior photo sessions, a family portrait session, and I just completed a three day video event. I documented owner training for the commissioning of six buildings at Fort Carson. The training covered system overview, operation, and maintenance of all building systems (HVAC, Domestic Water, Hydronic, Digital Controls, etc). Several of the sessions were in depth training courses on specific equipment such as boilers, make-up air units, rooftop HVAC units, exhaust fans, split system air conditioning equipment, hydronic heating equipment, pumps, building management systems, etc. I now have to convert the hours of footage into DVD's... I also created an agreement with a local establishment to be their house photographer. They have about eight weddings a year at their facility.
I tried to watch a little of the DNC Convention the other night, but Hillary Clinton's speech was more than I could take. I think she is a very smart woman and has many talents, but her speaking voice gets to near maniacal levels at times. Her speaking voice might be the most annoying sound on the planet! I noticed on the TV Guide channel that "The World's Funniest Commercials" was on the next channel. I really tried to listen, just to have first hand knowledge of what she had to say, but I couldn't take it. I watched funny commercials for a half hour instead.
However, I did watch Obama's speech last night. I admit that he is a very charismatic speaker, and he draws you in with his personality. However, if you try to listen for substance, there just isn't anything there. His speech was thematic and based on high level ideas, with no details on how he plans to accomplish any of it. Anyone can get up and promise the moon, but if you can't deliver, then what? I would suspect that after both conventions are over, many TV and radio ads will come out that will factualize Obama's ties to far left radical people and ideas. People who think for themselves will evaluate the info, and maybe do some research of their own to validate it. I think those people will choose not to support Obama. Others will discount the information as character assassination politics. It will be interesting to see how things turn out...
I think it is quite intriguing that McCain chose a woman to be his running mate. I'm sure Hillary is fuming somewhere right now... A Republican woman has stolen her thunder. Interesting...
Gotta run.
JD
Friday, August 29, 2008
Tuesday, August 26, 2008
Democratic National Convention in Denver
If you read my blog, I’m sure you have figured out I am a conservative, Christian Republican… Right now, the leadership of the Democratic Party is very liberal, and they align with the extreme left. If you don’t know what that means and why it matters, read a book by Michael Savage called “Liberalism is a Mental Disorder.”
I’m not going to go into anything about the DNC being in Denver, except how it has directly affected me. I dropped my sister off at the Denver airport Sunday morning. The city is struggling with revenue to support the convention, and I was the proud winner of one speeding ticket at the airport. I drove into the terminals on a road about six lanes wide, going the same speed as everyone else. A cop pulled up behind me at the terminal and gave me a ticket for $130 for speeding. I never saw him anywhere, nor did I see any signs noting a 35mph limit. I hate to waste $130 for anything, but I especially hate to see my hard earned money go up in smoke to pay for a bunch of Denver decorations, signs, and banners strung all over the city to welcome the DNC. I have ordered banners for Nemo’s before, so I know how much they cost. I literally saw tens of thousands of dollars worth of “DNC Welcome to Denver” banners. It really bugs me to think that my $130 is going to pay for that… Or, maybe my $130 paid for some of the homeless population’s free haircuts or movie tickets. The city provided free haircuts to the homeless in an attempt to ‘disguise’ them during the convention. The city also offered them free tickets to the Denver Zoo, area museums, and area movie theaters, as well as free bus tokens, just to get them off the streets and away from the convention area. Maybe I helped pay to send a group of meth addict, unemployed vagrants to the zoo. I hope they are having a good time.
We had plans to go to Elitches Gardens (an amusement park in Denver) after taking JoRenda to the airport. Unfortunately, Elitches is right next to the convention center. I called in advance to insure they would be open, and they were (I had pre-purchased tickets early when I was still at Intel, so changing dates was not feasible). I also checked on road closures, since they will be closing I-25 and the major streets around the convention this week. I was told that no street closures were to occur on Sunday. We arrived at Elitches around 8:30am, only to find out they do not open until 10:00am. We left and found a bagel place and hung out there for an hour, then went back to Elitches. The police were out in force, and there was a sign stating that the left lane was closed on Speers Blvd. No problem… the entry into Elitches is a right turn anyway. Lots of traffic slowly merged into one lane, the right lane, and when I got one block from the Elitches entrance, I was shocked to see road cones closing Speers! The cones were forcing everyone onto I-25 North to Ft Collins, Colorado. We had no plans to go to Ft Collins. I stopped, rolled down my window, and asked one of the officers how I can get to Elitches. He said it was closed and for me to go home. I told him it is open, and that we had already been there once this morning, and my turn is just one block ahead. He said to go home. I told him we live in the Springs (1 ½ hour drive) and that we had pre-purchased Elitches tickets. He said if I didn’t like it to call the mayor. Well, the mayor of Denver is a total idiot, so I have no desire to talk to him (he formally requested a one week waiver on marijuana laws during the week of the DNC convention--- can you believe that? ---don’t forget, Liberalism is a Mental Disorder). By this time, I had approximately 150 cars backed up behind me honking. I told the officer I was not going home, that I’m not familiar with Denver streets, and that I just need some simple directions on how to go another way to get to the street I needed. He said to go home and forget about Elitches. By now Josh, Jonah, and Ethan were getting very worried that we were not going to the amusement park. We had been planning this for over a month, and we could see the roller coasters from where we sat. We could also see hundreds of cars streaming into Elitches from the north. The officer came over to my car, reached into his pocket, and gave me all of his money. He said that was to offset the cost of the tickets, and for me to just go home. He wouldn’t take his money back, and he told me to move and stop blocking traffic. I got on the Interstate, then got back off again right away and found a place to park. Me and the kids had a 30 minute walk to get to Elitches. On the way, we went by the same intersection, and the same officer was there. I tried to give him is money ($39) and he still would not take it. I ended up leaving it on top of an orange traffic cone for him. I hope he got it…
While waiting in line for our first ride at Elitches, a girl in front of us was really upset and talking about how her and 400 others in an organization were going to protest Obama’s acceptance speech at Invesco Field (where the Denver Broncos play). This caught my attention, because she was young, and most young people I know support Obama. I listened to her story and she and 400 other people were promised tickets to the speech if they help with the campaign. After logging over 2500 hours of campaign work in their group, they were denied tickets to the speech. When they reminded Obama’s campaign people of their promise, they still did not provide the tickets. Apparently, they are angry enough to protest at his speech, and I am assuming they are no longer going to vote for Obama. There was a story on the local AM radio station recently about how 80,000 people in Colorado registered for tickets for Obama’s speech. They were all told that if they campaign for Obama, they would get tickets. When it came time to distribute tickets, only 30,000 were allotted to locals. That means there are 50,000 people out there who got stiffed by the Obama people, after volunteering hours for the campaign. Interesting…
I haven’t been affected anymore since we left Denver that day. I don’t really expect any more direct impacts from the convention.
As for Nemo’s, we had strong sales last week, and we beat our break even budget by $500. I would be incredibly happy to continue doing that week in and week out. I hear one report that the housing industry fallout is only beginning, and then I see another report that the worst is over. I see a report about consumer confidence rising with recent drops in gas prices, but common sense tells me energy prices are still a huge problem. Going from $4 a gallon to $3.60 a gallon is not a resolution to the problem. It is still very bad. The OPEC nations, Russia, China, and Venezuela have all positioned themselves to control oil in the future, and Western Civilizations are and will continue to be at their mercy. Iran has stated that they will cut off oil flow in their gulf if they are attacked by us or Israel over their nuclear ambitions. That would push oil prices up to $200 per barrel. Meanwhile, we have a bunch of politicians arguing over a major power grab, and pushing a socialist agenda. Why don’t we have ANY politicians working on a plan to alleviate energy prices, which are benefiting all of our enemies? Russia is big trouble coming in the near future. They invaded Georgia over what they call support for two independent states that are pro-Russia. The real truth is that the two rogue states are part of Georgia and it was none of Russia’s business. Russia has now fortified their positions in the very important Georgian port city. There are also deep dredge operations going on in Syria, which would allow the porting and operation of large Russian naval vessels there. The Russia military has just realigned their naval fleet commands to reorganize their operating structure in the Mediterranean and Middle East areas. The Chinese have just completed secret bases that are built into the side of a mountain (underground) that can support a number of aircraft carriers and nuclear submarines. The North Koreans have announced today that they are no longer suspending their nuclear weapons programs and intend to start them up again (just weeks after we lifted sanctions for this very reason). Russia is speaking of installing missile systems again in Cuba, in retaliation of our missile defense deal with Poland. There are two main differences, though. The missile defense system in Poland is to protect Western Europe from missile launches from aggressive Middle Eastern countries like Iran and Syria. The Russians intend to put missiles intended for an offensive strike in Cuba. Syria is in talks to purchase modern armaments from Russia, which is very unnerving to Israel. There are so many things going on in the world, and each individual thing doesn’t seem like that big of a deal. It is not as big of a deal to the average American as getting a big screen TV, or a new car, or a Harley, or whatever else… But, if you look at what is going on and put it all together, our enemies are aligning themselves with each other, and bad things are coming. We need a government that is on top of it, that recognizes the threat, and has a plan of action to respond. The few things that I know about are just the tip of the iceberg, I’m sure. How many things are going on in the world that our government knows about that is not common knowledge??? I have had a feeling for about a year or more that things on the world stage are moving in a direction that is very bad for us… Everyday I see bits and pieces of news that supports those thoughts. Hopefully, I am wrong, but I know that is not the case. We need strong leadership in our country now more than ever. Let’s hope enough of America recognizes that need and votes accordingly in November…
Well, that is probably enough mindless rambling about mostly non-coffee related topics. Welcome to the whirlwind of my mind…
Take care,
JD
I’m not going to go into anything about the DNC being in Denver, except how it has directly affected me. I dropped my sister off at the Denver airport Sunday morning. The city is struggling with revenue to support the convention, and I was the proud winner of one speeding ticket at the airport. I drove into the terminals on a road about six lanes wide, going the same speed as everyone else. A cop pulled up behind me at the terminal and gave me a ticket for $130 for speeding. I never saw him anywhere, nor did I see any signs noting a 35mph limit. I hate to waste $130 for anything, but I especially hate to see my hard earned money go up in smoke to pay for a bunch of Denver decorations, signs, and banners strung all over the city to welcome the DNC. I have ordered banners for Nemo’s before, so I know how much they cost. I literally saw tens of thousands of dollars worth of “DNC Welcome to Denver” banners. It really bugs me to think that my $130 is going to pay for that… Or, maybe my $130 paid for some of the homeless population’s free haircuts or movie tickets. The city provided free haircuts to the homeless in an attempt to ‘disguise’ them during the convention. The city also offered them free tickets to the Denver Zoo, area museums, and area movie theaters, as well as free bus tokens, just to get them off the streets and away from the convention area. Maybe I helped pay to send a group of meth addict, unemployed vagrants to the zoo. I hope they are having a good time.
We had plans to go to Elitches Gardens (an amusement park in Denver) after taking JoRenda to the airport. Unfortunately, Elitches is right next to the convention center. I called in advance to insure they would be open, and they were (I had pre-purchased tickets early when I was still at Intel, so changing dates was not feasible). I also checked on road closures, since they will be closing I-25 and the major streets around the convention this week. I was told that no street closures were to occur on Sunday. We arrived at Elitches around 8:30am, only to find out they do not open until 10:00am. We left and found a bagel place and hung out there for an hour, then went back to Elitches. The police were out in force, and there was a sign stating that the left lane was closed on Speers Blvd. No problem… the entry into Elitches is a right turn anyway. Lots of traffic slowly merged into one lane, the right lane, and when I got one block from the Elitches entrance, I was shocked to see road cones closing Speers! The cones were forcing everyone onto I-25 North to Ft Collins, Colorado. We had no plans to go to Ft Collins. I stopped, rolled down my window, and asked one of the officers how I can get to Elitches. He said it was closed and for me to go home. I told him it is open, and that we had already been there once this morning, and my turn is just one block ahead. He said to go home. I told him we live in the Springs (1 ½ hour drive) and that we had pre-purchased Elitches tickets. He said if I didn’t like it to call the mayor. Well, the mayor of Denver is a total idiot, so I have no desire to talk to him (he formally requested a one week waiver on marijuana laws during the week of the DNC convention--- can you believe that? ---don’t forget, Liberalism is a Mental Disorder). By this time, I had approximately 150 cars backed up behind me honking. I told the officer I was not going home, that I’m not familiar with Denver streets, and that I just need some simple directions on how to go another way to get to the street I needed. He said to go home and forget about Elitches. By now Josh, Jonah, and Ethan were getting very worried that we were not going to the amusement park. We had been planning this for over a month, and we could see the roller coasters from where we sat. We could also see hundreds of cars streaming into Elitches from the north. The officer came over to my car, reached into his pocket, and gave me all of his money. He said that was to offset the cost of the tickets, and for me to just go home. He wouldn’t take his money back, and he told me to move and stop blocking traffic. I got on the Interstate, then got back off again right away and found a place to park. Me and the kids had a 30 minute walk to get to Elitches. On the way, we went by the same intersection, and the same officer was there. I tried to give him is money ($39) and he still would not take it. I ended up leaving it on top of an orange traffic cone for him. I hope he got it…
While waiting in line for our first ride at Elitches, a girl in front of us was really upset and talking about how her and 400 others in an organization were going to protest Obama’s acceptance speech at Invesco Field (where the Denver Broncos play). This caught my attention, because she was young, and most young people I know support Obama. I listened to her story and she and 400 other people were promised tickets to the speech if they help with the campaign. After logging over 2500 hours of campaign work in their group, they were denied tickets to the speech. When they reminded Obama’s campaign people of their promise, they still did not provide the tickets. Apparently, they are angry enough to protest at his speech, and I am assuming they are no longer going to vote for Obama. There was a story on the local AM radio station recently about how 80,000 people in Colorado registered for tickets for Obama’s speech. They were all told that if they campaign for Obama, they would get tickets. When it came time to distribute tickets, only 30,000 were allotted to locals. That means there are 50,000 people out there who got stiffed by the Obama people, after volunteering hours for the campaign. Interesting…
I haven’t been affected anymore since we left Denver that day. I don’t really expect any more direct impacts from the convention.
As for Nemo’s, we had strong sales last week, and we beat our break even budget by $500. I would be incredibly happy to continue doing that week in and week out. I hear one report that the housing industry fallout is only beginning, and then I see another report that the worst is over. I see a report about consumer confidence rising with recent drops in gas prices, but common sense tells me energy prices are still a huge problem. Going from $4 a gallon to $3.60 a gallon is not a resolution to the problem. It is still very bad. The OPEC nations, Russia, China, and Venezuela have all positioned themselves to control oil in the future, and Western Civilizations are and will continue to be at their mercy. Iran has stated that they will cut off oil flow in their gulf if they are attacked by us or Israel over their nuclear ambitions. That would push oil prices up to $200 per barrel. Meanwhile, we have a bunch of politicians arguing over a major power grab, and pushing a socialist agenda. Why don’t we have ANY politicians working on a plan to alleviate energy prices, which are benefiting all of our enemies? Russia is big trouble coming in the near future. They invaded Georgia over what they call support for two independent states that are pro-Russia. The real truth is that the two rogue states are part of Georgia and it was none of Russia’s business. Russia has now fortified their positions in the very important Georgian port city. There are also deep dredge operations going on in Syria, which would allow the porting and operation of large Russian naval vessels there. The Russia military has just realigned their naval fleet commands to reorganize their operating structure in the Mediterranean and Middle East areas. The Chinese have just completed secret bases that are built into the side of a mountain (underground) that can support a number of aircraft carriers and nuclear submarines. The North Koreans have announced today that they are no longer suspending their nuclear weapons programs and intend to start them up again (just weeks after we lifted sanctions for this very reason). Russia is speaking of installing missile systems again in Cuba, in retaliation of our missile defense deal with Poland. There are two main differences, though. The missile defense system in Poland is to protect Western Europe from missile launches from aggressive Middle Eastern countries like Iran and Syria. The Russians intend to put missiles intended for an offensive strike in Cuba. Syria is in talks to purchase modern armaments from Russia, which is very unnerving to Israel. There are so many things going on in the world, and each individual thing doesn’t seem like that big of a deal. It is not as big of a deal to the average American as getting a big screen TV, or a new car, or a Harley, or whatever else… But, if you look at what is going on and put it all together, our enemies are aligning themselves with each other, and bad things are coming. We need a government that is on top of it, that recognizes the threat, and has a plan of action to respond. The few things that I know about are just the tip of the iceberg, I’m sure. How many things are going on in the world that our government knows about that is not common knowledge??? I have had a feeling for about a year or more that things on the world stage are moving in a direction that is very bad for us… Everyday I see bits and pieces of news that supports those thoughts. Hopefully, I am wrong, but I know that is not the case. We need strong leadership in our country now more than ever. Let’s hope enough of America recognizes that need and votes accordingly in November…
Well, that is probably enough mindless rambling about mostly non-coffee related topics. Welcome to the whirlwind of my mind…
Take care,
JD
Thursday, August 14, 2008
Reply to KJ Comments!
KJ posted the following, and my comments follow...
KayJay has left a new comment on your post "Long time, no updates…":
Hi JD!
Your blog has been tremendously educational... I just spent six hours reading it from the very beginning.
I've been researching the coffee business for the last three years, and have several years' experience in food service management (I love it, actually) -- and although I've yet to own my own place, a few things jumped out at me as I covered the last 18+ months of your life in a short span of time. Keep in mind, I have no experience at running a coffee house, obviously, so YMMV.
1) You listed your COGS as 40% for your first year of operation, and were satisfied with it. Every forum, book, or website I've read recommends 30-32% COGS, maybe 35% maximum. Cuts can be made in sourcing product, or prices can be raised. As you said earlier, food costs have skyrocketed; no one expects a business to absorb it all, and raising prices once or twice a year may be scary (for you) but regular customers will bounce back. Are your prices in line with your competition's?
2) You stated several times you have yet to do "advertising." Again, that's something that could have made a difference in the past months, and can definitely have an impact now. If you have 80K cars passing by your shop every day (one way? are you on the morning commute side?), but getting less than 200(?) in the door, then there's work to be done. I think the term is "work smarter, not harder". Getting Nemo's name and product in front of eyes at least half a dozen times gets it remembered. One-time flyers won't do it. I think it's pretty standard for folks to build in a 3-5% advertising/marketing budget in their figures. Again, so I read. (In practice it's MUCH harder, I know!)
3) You're breaking even -- but are you really? You and Tracy, God bless you both, have been working for free...? Is Tracy drawing a salary at all, as a manager? If not... then everything I've seen says that's not breaking even at all. Your labor is not covered. If something happened where either one or both of you were not able to cover the store for a period of time, what would happen to your labor costs? Looks like you've been running 22-26% labor -- industry standard for fast food is about that, but I worked in a family-style restaurant (pizza) and their goal was 18%. Difficult, yes. But doable.
All told, you have done phenomenally well and I am awed by the incredible work you both have put into your shop and your lives. I certainly couldn't have done all that you have. I would be remiss, however, if I didn't speak up and point you in the direction of the Small Business Development Center in your area -- they have FREE services for people like you, and can help pinpoint areas where you can improve performance and change the way things are done, to get you into the black.
I've always lived by the three ways to improve your bottom line: lower COGS, decrease labor, or increase sales. As far as I know, there are no other options.
I want to see you continue to succeed... because then, maybe I can too if I ever take the plunge! God is in the details.
Good luck!
KJ
First of all, I think it is amazing that you spent six hours reading the entire thing!! I had no idea that this blog was that entertaining, or maybe you were just really bored! Either way, I appreciate that you spent some time taking a look at what we have done, and took even more time to offer some advice. Thanks!
In reply, we set a goal to maintain our Cost of Goods Sold at 40% maximum, even with the dramatic increase in product costs. One task I have been working on recently is to build a spreadsheet that allows me to enter the current cost of various products. The spreadsheet will then calculate our COGS for each retail product we sell. For example, the spreadsheet knows how much egg, sausage, cheese, potato, tortilla, salsa, salsa portion cup and lid, and aluminum foil wrap goes into each breakfast burrito. It then adds up our product cost based upon the main list of overall costs, and compares it to our retail prices. Our breakfast burrito is currently at 30% for COGS, right where we want to be. I am slowly adding all of our products to the spreadsheet. Once complete, I can calculate an average COGS based upon quantities of items sold. If one item has a COGS of 31% and we sell 225 of them a month and another item has a COGS of 42% but we only sell 10 a month, the overall calculation will be weighted for quantities sold. I imagine our Quickbooks Pro software could do all of this for us if I took the time to enter all of our inventory items and build each product sold as an ‘assembly’ in Quickbooks. I am much more comfortable using Excel than Quickboooks.
Anyway, I set up a “rough” break even budget using 40% as a worst case scenario. Based on the items I have entered so far, I think we are going to land in the 34 to 35% range for overall COGS. We also recently tweaked our prices a little. We did not do a dramatic, across the board increase, but we did bump a few prices up by 10 cents on some drinks, and by 25 to 35 cents on some food items. Our demographics are a little strange. We have doctors, nurses, lawyers, stockbrokers and other well paid professionals as customers, but we also have a large number of middle class and lower earners in surrounding businesses. The neighborhood itself has a high number of elderly on fixed incomes (homes are approximately 30-45 years old in this area, with many elderly residents that have been in their homes for 30+ years), and some lower income demographics. Our decision to choose this location was based upon the quantity of daytime workers that commute into the area and work in surrounding buildings and complexes. The neighborhood demographics would not make for a successful shop alone. The 80,000 cars a day are very important. They are additional workers heading to and from downtown (the downtown business district is about 1.5 miles to the west of us). Pikes Peak Ave is a four lane two way street, not one way, which is good. We have discussed having people stand out by the street with a sign during morning rush hours to attract attention to our shop. I am sure that most commuters that travel Pikes Peak Ave do not know we are there. We have also considered advertising $1 coffee for awhile to commuters to get some people in the door to try our product and learn that we are here!
As for advertising, I know we have been slow to proceed with any major marketing ideas. The center is 40+ years old and looked very “tired” and unattractive. Part of our lease negotiations included discussions that the owners would complete a major renovation of the building façade and parking lot. It includes demolishing 100’ linear feet of the west end of the facility, and rebuilding it to accommodate Intellitec’s automotive campus (an 18 month technical college). This renovation and construction was supposed to happen quickly after our opening, but contract negotiations, design approval, and implementation took a year longer than expected. We really wanted to wait until the center was renovated before we marketed to the masses, but we didn’t expect for it to take so long. I agree with you about getting our name out in front of people 4-6 times, but I’m not sure we have the money for that kind of a campaign right now. We have researched print media and it costs about $1200 to $1800 per advertising event. To do so four to six times would definitely help us to grow sales, but I don’t know that we can afford to do so right now. In the meantime, our goal is to get our name out to the high density office and medical spaces close to us 4-6 times through flier distribution, face to face time including taking product samples to their offices, etc. If we can capture the local business/professional crowd to grow sales, it will get us over the hump and we can do more widespread advertising via print media once we are self sustaining. It is a difficult decision to make to spend remaining capital dollars on advertising. It makes sense to do so, but the cost is huge and cash flow is vital. Once I have liquidated some additional assets and get our operating capital back up to $15,000 or so, I should proceed with some print media advertising. There is a long running radio show here that broadcasts from local restaurants on KVOR 740. We are considering doing a live broadcast lunch special soon. The cost is $600 and we will have to provide lunch for two for $7.40. We could provide two sandwiches and sides for this cost and break even for the day. The show has a huge following and gets lots of response. Unfortunately, the live broadcasts are always on Saturday, and the majority of our customers are Monday-Friday daytime workers in the area. I will have to see if they will do a live broadcast on a Friday.
As far as ‘break even’ goes, you are right… Neither of us has taken a salary from the business, and that does not meet the widely accepted definition of break even. Since I am working full time, we can operate the shop indefinitely without an income. Obviously, that is not our long term goal. We want this business to provide an income, not just be our hobby. In the short term, though, we want to achieve our ‘break even’ definition during this time of high gas prices, mortgage industry meltdown, high inflation and skyrocketing food costs, etc. I do not believe these problems will last much past the November elections, and I just want to be able to operate the shop until things rebound without running out of operating capital. Right now we consider success to be able to operate without having to input additional capital, even if it means not paying ourselves. As things improve, we will change our definition of success. You are right, though. If Tracy and I were not able to run the shop due to illness or injury, our labor costs would hurt us. I just did a quick calculation and our labor costs (including payroll withholding taxes) for July 2008 were 19.5% of our gross sales. Not too bad… If we were to take a salary, that number would go up… We probably need to look at our schedule and see if we can trim some labor.
You are right to point us to the Small Business Administration. I researched their website some time ago and saw lots of valuable information. I have not had the time to meet with them to be mentored on small business ownership. I need to make time for that, as it would be very valuable to us.
And finally, you mentioned that God is in the details. I totally believe in this. If tough times are God’s way of growing and refining us, then so be it. We will stick it out, put in the effort, and mature and grow as people, disciples, and as business owners. If it is not God’s will for us to have a shop, then our efforts are against the grain anyway. Success in business does not equal success in life, nor does failure in business equal failure in life. Our life’s success is based upon relationships with each other, and by living a solid Christian life. The business side of things is irrelevant in the big picture. Our needs are food, shelter, clothing, and strong relationships in our family. Anything above and beyond that is a blessing. The poorest in our nation are rich compared to many places around the globe. Keeping that perspective is important, and a little humility goes a long way, whether successful or not…
Thanks for your comments!
JD
KayJay has left a new comment on your post "Long time, no updates…":
Hi JD!
Your blog has been tremendously educational... I just spent six hours reading it from the very beginning.
I've been researching the coffee business for the last three years, and have several years' experience in food service management (I love it, actually) -- and although I've yet to own my own place, a few things jumped out at me as I covered the last 18+ months of your life in a short span of time. Keep in mind, I have no experience at running a coffee house, obviously, so YMMV.
1) You listed your COGS as 40% for your first year of operation, and were satisfied with it. Every forum, book, or website I've read recommends 30-32% COGS, maybe 35% maximum. Cuts can be made in sourcing product, or prices can be raised. As you said earlier, food costs have skyrocketed; no one expects a business to absorb it all, and raising prices once or twice a year may be scary (for you) but regular customers will bounce back. Are your prices in line with your competition's?
2) You stated several times you have yet to do "advertising." Again, that's something that could have made a difference in the past months, and can definitely have an impact now. If you have 80K cars passing by your shop every day (one way? are you on the morning commute side?), but getting less than 200(?) in the door, then there's work to be done. I think the term is "work smarter, not harder". Getting Nemo's name and product in front of eyes at least half a dozen times gets it remembered. One-time flyers won't do it. I think it's pretty standard for folks to build in a 3-5% advertising/marketing budget in their figures. Again, so I read. (In practice it's MUCH harder, I know!)
3) You're breaking even -- but are you really? You and Tracy, God bless you both, have been working for free...? Is Tracy drawing a salary at all, as a manager? If not... then everything I've seen says that's not breaking even at all. Your labor is not covered. If something happened where either one or both of you were not able to cover the store for a period of time, what would happen to your labor costs? Looks like you've been running 22-26% labor -- industry standard for fast food is about that, but I worked in a family-style restaurant (pizza) and their goal was 18%. Difficult, yes. But doable.
All told, you have done phenomenally well and I am awed by the incredible work you both have put into your shop and your lives. I certainly couldn't have done all that you have. I would be remiss, however, if I didn't speak up and point you in the direction of the Small Business Development Center in your area -- they have FREE services for people like you, and can help pinpoint areas where you can improve performance and change the way things are done, to get you into the black.
I've always lived by the three ways to improve your bottom line: lower COGS, decrease labor, or increase sales. As far as I know, there are no other options.
I want to see you continue to succeed... because then, maybe I can too if I ever take the plunge! God is in the details.
Good luck!
KJ
First of all, I think it is amazing that you spent six hours reading the entire thing!! I had no idea that this blog was that entertaining, or maybe you were just really bored! Either way, I appreciate that you spent some time taking a look at what we have done, and took even more time to offer some advice. Thanks!
In reply, we set a goal to maintain our Cost of Goods Sold at 40% maximum, even with the dramatic increase in product costs. One task I have been working on recently is to build a spreadsheet that allows me to enter the current cost of various products. The spreadsheet will then calculate our COGS for each retail product we sell. For example, the spreadsheet knows how much egg, sausage, cheese, potato, tortilla, salsa, salsa portion cup and lid, and aluminum foil wrap goes into each breakfast burrito. It then adds up our product cost based upon the main list of overall costs, and compares it to our retail prices. Our breakfast burrito is currently at 30% for COGS, right where we want to be. I am slowly adding all of our products to the spreadsheet. Once complete, I can calculate an average COGS based upon quantities of items sold. If one item has a COGS of 31% and we sell 225 of them a month and another item has a COGS of 42% but we only sell 10 a month, the overall calculation will be weighted for quantities sold. I imagine our Quickbooks Pro software could do all of this for us if I took the time to enter all of our inventory items and build each product sold as an ‘assembly’ in Quickbooks. I am much more comfortable using Excel than Quickboooks.
Anyway, I set up a “rough” break even budget using 40% as a worst case scenario. Based on the items I have entered so far, I think we are going to land in the 34 to 35% range for overall COGS. We also recently tweaked our prices a little. We did not do a dramatic, across the board increase, but we did bump a few prices up by 10 cents on some drinks, and by 25 to 35 cents on some food items. Our demographics are a little strange. We have doctors, nurses, lawyers, stockbrokers and other well paid professionals as customers, but we also have a large number of middle class and lower earners in surrounding businesses. The neighborhood itself has a high number of elderly on fixed incomes (homes are approximately 30-45 years old in this area, with many elderly residents that have been in their homes for 30+ years), and some lower income demographics. Our decision to choose this location was based upon the quantity of daytime workers that commute into the area and work in surrounding buildings and complexes. The neighborhood demographics would not make for a successful shop alone. The 80,000 cars a day are very important. They are additional workers heading to and from downtown (the downtown business district is about 1.5 miles to the west of us). Pikes Peak Ave is a four lane two way street, not one way, which is good. We have discussed having people stand out by the street with a sign during morning rush hours to attract attention to our shop. I am sure that most commuters that travel Pikes Peak Ave do not know we are there. We have also considered advertising $1 coffee for awhile to commuters to get some people in the door to try our product and learn that we are here!
As for advertising, I know we have been slow to proceed with any major marketing ideas. The center is 40+ years old and looked very “tired” and unattractive. Part of our lease negotiations included discussions that the owners would complete a major renovation of the building façade and parking lot. It includes demolishing 100’ linear feet of the west end of the facility, and rebuilding it to accommodate Intellitec’s automotive campus (an 18 month technical college). This renovation and construction was supposed to happen quickly after our opening, but contract negotiations, design approval, and implementation took a year longer than expected. We really wanted to wait until the center was renovated before we marketed to the masses, but we didn’t expect for it to take so long. I agree with you about getting our name out in front of people 4-6 times, but I’m not sure we have the money for that kind of a campaign right now. We have researched print media and it costs about $1200 to $1800 per advertising event. To do so four to six times would definitely help us to grow sales, but I don’t know that we can afford to do so right now. In the meantime, our goal is to get our name out to the high density office and medical spaces close to us 4-6 times through flier distribution, face to face time including taking product samples to their offices, etc. If we can capture the local business/professional crowd to grow sales, it will get us over the hump and we can do more widespread advertising via print media once we are self sustaining. It is a difficult decision to make to spend remaining capital dollars on advertising. It makes sense to do so, but the cost is huge and cash flow is vital. Once I have liquidated some additional assets and get our operating capital back up to $15,000 or so, I should proceed with some print media advertising. There is a long running radio show here that broadcasts from local restaurants on KVOR 740. We are considering doing a live broadcast lunch special soon. The cost is $600 and we will have to provide lunch for two for $7.40. We could provide two sandwiches and sides for this cost and break even for the day. The show has a huge following and gets lots of response. Unfortunately, the live broadcasts are always on Saturday, and the majority of our customers are Monday-Friday daytime workers in the area. I will have to see if they will do a live broadcast on a Friday.
As far as ‘break even’ goes, you are right… Neither of us has taken a salary from the business, and that does not meet the widely accepted definition of break even. Since I am working full time, we can operate the shop indefinitely without an income. Obviously, that is not our long term goal. We want this business to provide an income, not just be our hobby. In the short term, though, we want to achieve our ‘break even’ definition during this time of high gas prices, mortgage industry meltdown, high inflation and skyrocketing food costs, etc. I do not believe these problems will last much past the November elections, and I just want to be able to operate the shop until things rebound without running out of operating capital. Right now we consider success to be able to operate without having to input additional capital, even if it means not paying ourselves. As things improve, we will change our definition of success. You are right, though. If Tracy and I were not able to run the shop due to illness or injury, our labor costs would hurt us. I just did a quick calculation and our labor costs (including payroll withholding taxes) for July 2008 were 19.5% of our gross sales. Not too bad… If we were to take a salary, that number would go up… We probably need to look at our schedule and see if we can trim some labor.
You are right to point us to the Small Business Administration. I researched their website some time ago and saw lots of valuable information. I have not had the time to meet with them to be mentored on small business ownership. I need to make time for that, as it would be very valuable to us.
And finally, you mentioned that God is in the details. I totally believe in this. If tough times are God’s way of growing and refining us, then so be it. We will stick it out, put in the effort, and mature and grow as people, disciples, and as business owners. If it is not God’s will for us to have a shop, then our efforts are against the grain anyway. Success in business does not equal success in life, nor does failure in business equal failure in life. Our life’s success is based upon relationships with each other, and by living a solid Christian life. The business side of things is irrelevant in the big picture. Our needs are food, shelter, clothing, and strong relationships in our family. Anything above and beyond that is a blessing. The poorest in our nation are rich compared to many places around the globe. Keeping that perspective is important, and a little humility goes a long way, whether successful or not…
Thanks for your comments!
JD
Tuesday, August 12, 2008
Long time, no updates…
Sorry for letting so many days (or has it been weeks?) go by since my last post.
I’ve been incredibly busy for the last five or six weeks. Since I have not been working at Intel at night, I’ve been trying to get caught up on some projects around the shop, at home, and spending time with Tracy and the boys.
We have had a good summer, mixed with some fun with the boys and lots of hard work with the shop. We went to Disneyland in June, we went to the Renaissance Festival, we’ve been to some baseball games, the boys played baseball in little league, we’ve been swimming quite a bit at the YMCA, Jonah and Ethan both got new bikes (we are a family of five and we have 11 bikes!!), Jo Renda (my little sister) is coming to visit next week, and we are going to Elitch’s (an amusement park in Denver) in two weeks. The kids start school again on August 18th and we have been getting ready for that. I finished building loft beds for all three boys, and we moved their dressers under them. That included emptying their dressers and getting rid of worn-out and out-grown things. We have a 30 yard dumpster in front of our house right now. We are getting rid of lots of landscaping debris, trees, and other junk we have accumulated over the last 13 years (Tracy and I are both pack rats). We also ordered new windows for the front of the house and they will be installed in the next several weeks (including a really cool bay window in the living room). We plan to install new windows in the back of the house next year. We had planned to repaint the outside of the house this summer, but that is not looking very likely…
As for the shop, the construction has proceeded with the building remodel and our end of the building is finished! The framing is complete, it has been skinned, and the stucco is done. It really does look great. It took 10 weeks longer than promised, and those construction impacts have translated to no growth at the shop. Fortunately, we have not really seen an overall drop in sales on a monthly basis, but we have seen definite impacts on certain days. When the entire front of the building was covered with scaffold, it looked like we were not open. We had some really slow days during that time. Other strong days made up for it overall, but we should have seen growth this summer and did not.
Currently, the façade work is finished, but we do not have any signage. The owners have obtained quotes for new signs and they want to charge us for 50% of the cost. We are fighting that. We had an operational lighted sign, which they took down and threw away. I feel it is their responsibility to replace it. I need to set up an appointment with the property manager and review the lease with regard to signage. That will be the deciding factor… In the mean time, the new sign will cost $4000, and we just don’t have that kind of cash to spare right now.
The $4 gas and the doom and gloom reporting on the economy have not helped either. Once again, we have not seen a slide in sales, but the vital growth we are looking for to get us over the hump has not happened. We have been operating most of this year right under the break even point. If we miss breaking even by $200 to $400 a week, it does not seem like a huge deficit. Over six months, though, it has a huge impact on our operating capital budget.
The bottom line is that we are finding ourselves to be a little cash strapped. We have some assets we can liquidate and come up with another $15,000 for operating capital pretty quickly. We can also sell our remaining rental house and come up with another $15,000 to $20,000 in operating income. Now comes the time for tough decisions. Do we expect for the gas prices to go down and for news on the economy to get better? If so, it makes sense for us to invest additional $$ and ride out the undeclared recession. If we do so, and things don’t get better, then we will find ourselves in a situation where we are nearly out of money again, without additional reserves, and still not be making a profit at the shop.
We have decided to invest some additional money, but not sell the rental house, and keep going. There is no way to predict what has happened with gas prices, and the resulting increases in raw product costs, not to mention tighter budgets of our regular customers. Some say oil could hit $200 a barrel, which would be devastating to our entire economy and to every individual. Nemo’s would not be the only casualty of such an event. Things could also stabilize after the elections in November and everything could go back to normal (as normal as things get, anyway) for another four years. I have always been interested in politics and how they affect world events. As a business owner, I am much more tuned into what is going on and what impacts things can have. As a result, I am very concerned about the upcoming elections. I am a conservative Republican, and McCain is not my first choice for a presidential candidate by any means. However, all the Democrats have to offer this year are borderline Socialists in Obama and H Clinton. They have stated they intend to provide national health care, to increase government spending through various programs, and both will result in a major increase in taxes. They also oppose any oil exploration or drilling, which will prevent America from becoming energy independent, which is important for both our economy and our national security. When you look at the increased consumption by China and India, and the way that Russia has reinvented itself to be the OPEC of the next century, we could be in real trouble. Does any of this concern our politicians? A few I suppose, but the Speaker of the House is off on a book signing tour while her approval rating with the American people hovers at about 9%. Unbelievable… I’m not a political activist by any means, but these issues play a part into whether or not our business survives. If you are concerned about gas prices, I would suggest calling your elected officials (Senators and Congress members) and tell them you are concerned. Better yet, state your opinion with your vote in November. If you want your tax dollars to pay for medical coverage for millions of welfare recipients and illegal immigrants, then vote for Obama. If you want gas prices to continue to increase, then vote for Obama. If you want the existing tax breaks (put in place by G Bush) to expire, vote for Obama. If you want our country to ignore rising threats in Russia, China, Iran, North Korea, Venezuela, and elsewhere, then vote for Obama. An out-pouring of concern by the People is the only thing that will get our politicians to address our problems with real and effective solutions, instead of working for self preservation and self-wealth… If you want for Nemo’s Coffee to survive, then vote for McCain and call your elected officials and tell them you want lower gas prices.
If you are a conservative by nature, then I’m sure this post makes sense to you. If you are an Obama supporter and this post has offended you, then I suggest you research the issues I’ve mentioned above. Do some honest research into where Obama stands on these very important topics, how they will affect your taxes and your lives, and then decide who to vote for.
Regardless of the economy, world events, presidential elections, and the cost of oil tracy and I need to increase our sales just a little to allow us to operate above the break even point. Once the kids start school next week, Tracy and her mom are going to distribute fliers to surrounding medical complexes, office buildings, the Olympic Training Center, Memorial Hospital, and other high density areas close by. We have been waiting for the building remodel work to be completed prior to doing so, and we expect to get a boost in sales from this effort. We had 5000 fliers professionally printed, and they are ready to go! We considered hiring someone to distribute them, but we would have no way of knowing if they really did it, or just put them in a dumpster and went to the movies instead. Tracy wants to be the one to interact with office staff personnel, especially at all of the medical complexes close to us.
We are basically at the breaking point. If our efforts work and we invest a little more cash, we will make it through this tough time. If our efforts have no impact and the economy continues to decline, we will not make it. Small deficits will eventually bleed us dry. Any prayers you have to offer would be greatly appreciated!
Gotta run,
JD
I’ve been incredibly busy for the last five or six weeks. Since I have not been working at Intel at night, I’ve been trying to get caught up on some projects around the shop, at home, and spending time with Tracy and the boys.
We have had a good summer, mixed with some fun with the boys and lots of hard work with the shop. We went to Disneyland in June, we went to the Renaissance Festival, we’ve been to some baseball games, the boys played baseball in little league, we’ve been swimming quite a bit at the YMCA, Jonah and Ethan both got new bikes (we are a family of five and we have 11 bikes!!), Jo Renda (my little sister) is coming to visit next week, and we are going to Elitch’s (an amusement park in Denver) in two weeks. The kids start school again on August 18th and we have been getting ready for that. I finished building loft beds for all three boys, and we moved their dressers under them. That included emptying their dressers and getting rid of worn-out and out-grown things. We have a 30 yard dumpster in front of our house right now. We are getting rid of lots of landscaping debris, trees, and other junk we have accumulated over the last 13 years (Tracy and I are both pack rats). We also ordered new windows for the front of the house and they will be installed in the next several weeks (including a really cool bay window in the living room). We plan to install new windows in the back of the house next year. We had planned to repaint the outside of the house this summer, but that is not looking very likely…
As for the shop, the construction has proceeded with the building remodel and our end of the building is finished! The framing is complete, it has been skinned, and the stucco is done. It really does look great. It took 10 weeks longer than promised, and those construction impacts have translated to no growth at the shop. Fortunately, we have not really seen an overall drop in sales on a monthly basis, but we have seen definite impacts on certain days. When the entire front of the building was covered with scaffold, it looked like we were not open. We had some really slow days during that time. Other strong days made up for it overall, but we should have seen growth this summer and did not.
Currently, the façade work is finished, but we do not have any signage. The owners have obtained quotes for new signs and they want to charge us for 50% of the cost. We are fighting that. We had an operational lighted sign, which they took down and threw away. I feel it is their responsibility to replace it. I need to set up an appointment with the property manager and review the lease with regard to signage. That will be the deciding factor… In the mean time, the new sign will cost $4000, and we just don’t have that kind of cash to spare right now.
The $4 gas and the doom and gloom reporting on the economy have not helped either. Once again, we have not seen a slide in sales, but the vital growth we are looking for to get us over the hump has not happened. We have been operating most of this year right under the break even point. If we miss breaking even by $200 to $400 a week, it does not seem like a huge deficit. Over six months, though, it has a huge impact on our operating capital budget.
The bottom line is that we are finding ourselves to be a little cash strapped. We have some assets we can liquidate and come up with another $15,000 for operating capital pretty quickly. We can also sell our remaining rental house and come up with another $15,000 to $20,000 in operating income. Now comes the time for tough decisions. Do we expect for the gas prices to go down and for news on the economy to get better? If so, it makes sense for us to invest additional $$ and ride out the undeclared recession. If we do so, and things don’t get better, then we will find ourselves in a situation where we are nearly out of money again, without additional reserves, and still not be making a profit at the shop.
We have decided to invest some additional money, but not sell the rental house, and keep going. There is no way to predict what has happened with gas prices, and the resulting increases in raw product costs, not to mention tighter budgets of our regular customers. Some say oil could hit $200 a barrel, which would be devastating to our entire economy and to every individual. Nemo’s would not be the only casualty of such an event. Things could also stabilize after the elections in November and everything could go back to normal (as normal as things get, anyway) for another four years. I have always been interested in politics and how they affect world events. As a business owner, I am much more tuned into what is going on and what impacts things can have. As a result, I am very concerned about the upcoming elections. I am a conservative Republican, and McCain is not my first choice for a presidential candidate by any means. However, all the Democrats have to offer this year are borderline Socialists in Obama and H Clinton. They have stated they intend to provide national health care, to increase government spending through various programs, and both will result in a major increase in taxes. They also oppose any oil exploration or drilling, which will prevent America from becoming energy independent, which is important for both our economy and our national security. When you look at the increased consumption by China and India, and the way that Russia has reinvented itself to be the OPEC of the next century, we could be in real trouble. Does any of this concern our politicians? A few I suppose, but the Speaker of the House is off on a book signing tour while her approval rating with the American people hovers at about 9%. Unbelievable… I’m not a political activist by any means, but these issues play a part into whether or not our business survives. If you are concerned about gas prices, I would suggest calling your elected officials (Senators and Congress members) and tell them you are concerned. Better yet, state your opinion with your vote in November. If you want your tax dollars to pay for medical coverage for millions of welfare recipients and illegal immigrants, then vote for Obama. If you want gas prices to continue to increase, then vote for Obama. If you want the existing tax breaks (put in place by G Bush) to expire, vote for Obama. If you want our country to ignore rising threats in Russia, China, Iran, North Korea, Venezuela, and elsewhere, then vote for Obama. An out-pouring of concern by the People is the only thing that will get our politicians to address our problems with real and effective solutions, instead of working for self preservation and self-wealth… If you want for Nemo’s Coffee to survive, then vote for McCain and call your elected officials and tell them you want lower gas prices.
If you are a conservative by nature, then I’m sure this post makes sense to you. If you are an Obama supporter and this post has offended you, then I suggest you research the issues I’ve mentioned above. Do some honest research into where Obama stands on these very important topics, how they will affect your taxes and your lives, and then decide who to vote for.
Regardless of the economy, world events, presidential elections, and the cost of oil tracy and I need to increase our sales just a little to allow us to operate above the break even point. Once the kids start school next week, Tracy and her mom are going to distribute fliers to surrounding medical complexes, office buildings, the Olympic Training Center, Memorial Hospital, and other high density areas close by. We have been waiting for the building remodel work to be completed prior to doing so, and we expect to get a boost in sales from this effort. We had 5000 fliers professionally printed, and they are ready to go! We considered hiring someone to distribute them, but we would have no way of knowing if they really did it, or just put them in a dumpster and went to the movies instead. Tracy wants to be the one to interact with office staff personnel, especially at all of the medical complexes close to us.
We are basically at the breaking point. If our efforts work and we invest a little more cash, we will make it through this tough time. If our efforts have no impact and the economy continues to decline, we will not make it. Small deficits will eventually bleed us dry. Any prayers you have to offer would be greatly appreciated!
Gotta run,
JD
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