ARTICLE 14 OF 52
Two weeks ago, my secondary business made $3,000 in three days. Not too shabby, right? That’s $1,000 per day. This might sound legit, and money’s money, but I want to break down what went into making this chunk of change and how hard it truly was. As with any money-making endeavor, this question has to arise: Was the time and energy spent for this money worth it?
All too often we get caught up in the raw revenue and pure numbers of startups. We praise this type of information. Rarely do I actually see posts about the truth of how difficult it was to get the next round of funding, or finally land those first few sales, or what the business cash-flow actually looks like. These tend to be pain-points for most startups—and something we don’t typically praise because, well, because it’s hard to brag about challenges and failures.
I debated about writing this post. In reality, this post isn’t about how great my secondary business is or how much money we made last week. It’s actually about the opposite—the mistakes we’re making as a business, the challenges we’re facing and how hard it’s been for us to maintain profit (although we’ve ALWAYS maintained a profit). This is the unmasked truth about a small startup trying to grow.
Please note: This post isn’t to brag or boast. My intention is to share real aspects and concerns about a side business that might be taking more work than I have time for. It’s the raw honest truth about a startup with shaky cash-flow that has a brilliant business model.
Context About My Secondary Business
Every business I’ve ever been part of has always been a partnership LLC, bootstrapped and 100% profitable from day one. I’m fortunate in this sense for multiple reasons: One, I’m thankful to say I’ve always had great partners. I’ve done business with GOOD people, which is a major key to my success. Second, I’m also grateful that I’ve never had to go into debt via bank or investor assistance for my businesses. Most founders have a different story.
My second business is selling cannabis oil. Two years ago, I had the opportunity to partner with one of the biggest cannabis oil (CBD) manufacturers in the United States. As of today we’re the only private label selling cannabis oil for our manufacturer, a fact which we are infinitely proud of.
My partners and I got involved with cannabis oil for a few different reasons. We couldn’t deny the opportunity as entrepreneurs, but more so because we saw firsthand the impact CBD had on our loved ones. Personally, I witnessed how impactful CBD was for my stepfather during the course of his terminal illness.
Long story short, this business was started with the intent to scale. Our mission is to provide quality educational CBD content while selling our product online and giving people an alternative solution to pharmaceutical drugs. We have the best private label on the market, and we have one hell of a content system. This has been our business model and one that we believe is setting us up for real success.
Our Business Revenue YTD
As I mentioned, this business is a secondary side hustle for everyone involved. That being said, I believe all of us have hopes of this potentially becoming a good recurring business model that could potentially become more than just a side hustle.
We’ve now been around for 14 months and our top-line revenue is just over $15,000. Most of our sales YTD have been from word-of-month, lackluster marketing efforts and a small organic presence. It wasn’t until two months ago that we were able to get our CBD product online for selling. It was a crazy effort trying to get payment processors to accept a cannabis product.
Our revenue and growth has been slow, no doubt. And thus far, we have invested every penny back INTO the business. We know what it takes to drive a successful enterprise, and we’re nowhere near close to thinking we’ve made close to enough money to take any for our own pockets.
In the next few minutes I’m going to tell you how we essentially made 20 percent of our business revenue in three days and describe all that went into it. I’ll also openly analyze the question of whether or not it’s been worth our time, and answer some questions about my long term business goals when it comes to this business.
How We Made $3,000 in Three Days
We’re in the cannabis realm, a landscape where you have to get creative about how you market the business. We’re very restricted on how we can publicly market/advertise our product, another challenge within itself. One avenue we identified was the opportunity to market our product at local events. After all, we live in Colorado, a very cannabis-friendly state.
We registered for the Denver Metaphysical Fair after a last-minute decision to enter. This is a BIG event that attracts an array of different people. There are a TON of vendors at this event (287 in total), with heavy foot traffic. We correctly assumed that this crowd would be very fond of our CBD products.
Never in a million years did I think I would be working a cannabis booth at a local metaphysical fair selling CBD. A few short years ago, I would have laughed at this image. Fast-forward three years and activate the serial entrepreneur in me and voilà! Here we are selling CBD at the Denver Merchandise Mart!
The event was a hit. From Friday to Sunday, from 10am - 7pm, we didn’t stop moving. Over the course of these three days, my team really hit our stride. We talked to hundreds of people, collected email addresses and sold a ton of product. By the time Sunday afternoon hit we had completely sold out. Sure, the weekend was a major success in terms of product moved… but now let’s break down the time and effort involved and see if we’re really coming out on top.
Revenue Breakdown vs. Time and Effort
Sweat equity is a very important metric to track. It’s also a metric most startups fail to look at. I’ve been in business long enough to know time put in versus money put out has to be counted.
Here’s the breakdown of how we spent our time
Company members involved the event: 4
Total hours spent at event: 31
Total revenue VS sweat equity formula
Total revenue: $3,000
Total revenue divided by number of hours spent at event = 96.7
Divide that sum by four = 24.19
When you look at the numbers, it appears that every one of us made roughly about $24 per hour. Some might find this advantageous, or not. Personally, this is well below everyone on my team’s hourly rate, so for the sake of our reality, we chock this up as a loss.
Also, we’re looking just at TOP LINE revenue here. This doesn’t account for the total cost of the event ($665) and credit card processing fees ($130). So when we look at GROSS revenue, the hourly rate per member drops even further. This also doesn’t account for the fact we ran out of product, requiring us to buy more. (We did invest every penny back into product and marketing efforts.)
At the end of the day, $3,000 in three days sounds great, but it’s also a “look-good number” that doesn't paint the entire picture. It was a hard-earned $3,000, and as a team we had to discuss if it was really worth our time and effort. After all, having a business should also make you money, too, right?
Why We’re Not Done With This Business
So far, I’ve stripped my side hustle bare. I’ve told you about the low revenue we’ve made since our inception, I’ve touched on the time and sweat-equity put in, and I’ve also told you about how our greatest three days in terms of revenue just kept us operating (and technically wasn’t profitable for any team member).
Next I’d like to pose the question, Why should we continue this business? It seems like a loss when we look at revenue and time invested. It’s been a challenge to keep consistent business, and when we do hit a rush of new business, it all comes in waves and we invest it right back into product.
Our answer is simple: For us, this business means more than just business and money.
It serves a purpose much deeper. The recurring customers we have loyally follow our brand and benefit from our product. Our mission has never been about money, but rather about educating the general public about the great benefits of CBD oil. We also wanted to follow up our educational approach with a great product, which we have delivered on.
From a pure business standpoint, we’re also honest enough to understand that our business will take a few years to get traction. Most startups have unrealistic expectations right off the bat. They have hopes and goals that they will be profitable in the first 12 to 24 months. Every goal we’ve set we believe is realistic.
Our current 2018 revenue goals as a product-based cannabis startup:
$50,000 top-line revenue goal
$15,000 of our revenue needs to come from events
$10,000 of our revenue needs to come from small retailers
$25,000 of our revenue needs to come from e-commerce
I’m not afraid to put our goals out there. They are what they are. Maybe they look achievable to you, maybe they don’t. The point here is, we as a team believe if we hit these goals, all while impacting people's lives, this business is totally worth it. We get it, we’re trying to TRIPLE our revenue in 12 months—crazy, we know. But goals should be that. Doable, but challenging.
A Few Startup Takeaways for YOU
If you’re involved in a startup, I’d love to hear from you. Not only am I involved in one directly, I also work with a handful of software startups on a marketing/sales level. And their goals are much higher and they have much more on the line than we do. We’ve set our sights on taking a side hustle to a legit business. It’s low risk, high reward for us, and I’m aware that this is not the case for most startups.
A few takeaways for other startup founders:
Have a team in place that will pivot with you. People truly make a business.
Don’t be afraid to revisit your business model consistently.
Always make sure you have a strong operating cash-flow. Most businesses fail here.
Having strong systems in place is key, right behind having a good team in place.
Set annual goals and work backwards. Have an annual goal, but don’t fail to put an actionable roadmap in place to get there.
Track all you can. It’s critical to understand what works, what doesn’t and where you can improve.
Don’t fall in love with your business or business model. You could fail. You could get heartbroken. You might need to move on. It’s okay to be obsessed, but don’t fall in love.
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