How does a company that sells snacks reach $380K in sales in its second year in business?
I invited Jeremy here to tell us how he went from such a simple startup (making the midnight deliveries himself, on his bike, in the snow) to finally figuring out how to turn this great idea into a successful operation.
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Andrew: Hey everyone, it’s Andrew Warner, founder of Mixergy.com, home of the ambitious up- up-, what am I saying? I’m doing a double take on just the intro here! Jeremy, there will be no third take, I’m sticking with this double take, mistakes and everything.
Jeremy: I believe in you.
Andrew: Thank you! I got a guy who believes in me, I can keep on going. How does a company that sells snacks reach $380,000 in sales in its second year of business? Joining me is the man who you just heard from. Jeremy Neren is the founder of Madtown Munchies, a delivery service that uses bicycles to get nighttime snacks to hungry customers. I wish this existed in Washington, D.C. where I happen to be. I want to know where else you are. Where are you in the country, by the way, I want to move to a city that has you, because I want to be able to get Ben and Jerry’s in the middle of the night when I feel like it.
Jeremy: We actually are located in Madison, Wisconsin. We are serving the U.W. Madison population and residents of downtown Madison.
Andrew: OK. 380,000 in sales, second year in business…how much money did you invest in the company to get to that?
Jeremy: Well, it’s funny, actually. When we first started we had just $1,500, so we truly had to bootstrap the business. We basically had no costs. We ran the business out of my apartment for the first year. I made all the deliveries and we had to do everything on our own because we had no capital, essentially.
Andrew: So the first year, if I were to call you up and say “I’d like to get some potato chips, I’d like to get some candy, I want some soda, and some Ben and Jerry’s,” you’d go get all that stuff out of your fridge, you’d hop on your bike, you’d come over to my place, drop it off, or make me sign my credit card receipt, and that would be the transaction?
Jeremy: That was it, yeah. You just ran through everything that happened.
Andrew: What kind of hours were you working?
Jeremy: As far as hours in a week, or the actual…
Andrew: I mean back then! Because I imagine, I’m looking at the kind of snacks you have on here, I didn’t even get into the fact that you sell hookahs. Not hookers, but hookahs. I’m looking at the type of things you have. You’ve got stuff that appeals to people who are drunk, or high, or just hanging out at home. This is the kind of stuff people want late at night. So I imagine 11 at night, midnight, people are calling you and saying, or coming on your website and saying “Deliver this stuff to me!”
Andrew: So what kind of hours were you working back then?
Jeremy: Well back then we were only open four nights a week, so that helped out quite a bit.
Andrew: Thursday, Friday, Saturday…
Jeremy: And Sunday, yeah. Exactly. So that helped out quite a bit. I would restock on Monday, Tuesday, and Wednesday, and then be up all night, essentially, Thursday, Friday, Saturday, Sunday, and that was my life for the first year. I was probably, even with only being open four days a week, probably putting in 70, 80 hours a week at that time. Whatever it takes.
Andrew: You said when we talked before the interview that you did $380,000 in your second year of business. What are you doing now? What size of revenue?
Jeremy: We’re still in that ballpark.
Jeremy: I think we’ve come probably close to hitting our ceiling in Madison. There’s always room for growth, but it’s just a matter of [??].
Andrew: Gotcha. And what size margins do you have in that kind of business? I mean, net margins after you pay for storage and facilities and the candy that you send out?
Jeremy: Sure. It’s pretty high. It’s actually around 20%.
Andrew: 20%? So, 20% comes out to roughly $80,000 comes to your bottom line, something like that?
Jeremy: On revenue of roughly $380,000, it would be that.
Andrew: That’s pretty impressive.
Andrew: Even supermarkets don’t have that.
Jeremy: Well, yeah, so we’re a very different model than a supermarket. Obviously, we’re not charging the exact same price, and we don’t have quite the same costs. We still really run a tight ship.
Andrew: Impressive business. All right. I want to find out how you built up this business, how you got started and got here. Let’s go back to where the idea came from. Where did this idea for MadtownMunchies come from?
Jeremy: Sure. Well, actually it’s funny you brought up Washington D.C. when we first started talking because I was actually visiting a friend out there, and there was a very similar business at the time. It was called DC Snacks.
Jeremy: I’m not sure if you’re familiar with it, but they were servicing Georgetown and George Washington. Me and my friend got home late one night from the bar, and we had had a few drinks, and he said, “You want a pint of ice cream?” I said, “Yeah, sure, why not?” He picks up the phone, orders a pint of ice cream, and I thought he was messing with me or something. Twenty minutes later, sure enough, a bike courier shows up with a pint of ice cream.
I thought to myself, oh my God, this would be an unbelievable business in Madison. At the time I was a college student, and I was actually a history major in college. I was getting ready to become a teacher. And so, I actually did teach for a short while after I graduated and decided to come back to the idea after about six months of doing that and kind of wanting to try something new. And so, that’s what led to the business. I worked off of that framework that I knew worked in D.C.
Andrew: What about the idea that like, how do you know how profitable it’s going to be? How do you figure out if it’s going to be profitable enough at all? Do you do any calculation on the number of orders that you need in order to make this work? I understand the idea makes sense, and you want to bring it back because I can imagine a lot of other people would want to order a pint of ice cream in the middle of the night.
Andrew: What kind of math are you doing in preparation?
Jeremy: The math early on was what can I buy a product for at Sam’s Club, and what could I hypothetically sell this for? How much am I making in between because, like I said, at that point there were essentially no costs beyond, obviously, my own time. But early on, I’m not even paying myself. It was just, what can I buy it for, what can I sell it for, and truly ignorance is bliss because I had no idea what I was doing in the beginning. It was just as simple as that.
Andrew: Were you trying to say, if you could sell a certain number, then you’d be happy. You’d be able to afford an apartment and a nice life. Was there anything like that, or were you thinking about that at all?
Jeremy: Oh sure. There were calculations as far as, if I make 20 deliveries at X amount of dollars and I’m spending X amount on product with a roughly 100% markup which is typically what we try to shoot for, how much money am I going to make? But at the same time I wanted the experience. Like I said, I was a history major. I knew nothing about business. I wanted to learn more about business, and I thought, what better way than to operate my own business?
Jeremy: That was part of the experience, too. I think it was kind of a 50-50 combination of how can I make a little money to support myself, and how can I learn a thing or two in the process?
Andrew: Jeremy, I grew up in New York, and I remember when Cosmo.com came to Manhattan. I could order Ben & Jerry’s. I happen to be looking at Ben & Jerry’s on your home screen right now, on your home page. That’s why I keep coming back to that. That’s something that I used to have delivered from Cosmo all the time. It was great service and, of course, we all know they went out of business. The financials didn’t make sense.
Andrew: Were you thinking of them at all when you were came in? What were you thinking of?
Jeremy: I know a huge amount about them. I’m actually glad you brought that up because that was something I had forgotten about that’s very relevant. There was actually a documentary about them, and I’m blanking on the name of it, but I watched it, maybe a dozen times.
Andrew: I’ve got to see it. Oh, that would be fantastic.
Jeremy: If I can find it, I’ll definitely shoot it to you.
Andrew: You’re not talking about dot bomb, are you?
Andrew: That’s about a different set of guys.
Jeremy: This was just about Cosmo. It was amazing, but they touched on that quite a bit, how they had all this funding. I think it was like $450 million or something like that, and they couldn’t create a sustainable business because they were doing a lot of things that were impractical. We learned a huge amount from that early on.
Andrew: What did you learn from them?
Jeremy: For instance, someone could order a Snickers bar, and they’d have to go 45 minutes across town to make whatever they make off of a Snickers bar — maybe $0.50.
We learned quickly, “OK, one thing we need to think about is, there needs to be some kind of order minimum, because you have to be making X amount of dollars per delivery.” It has to be that way. Otherwise, you’re going to have customers taking advantage of the service. That was the biggest thing.
Another takeaway was, you’ve got to stay on top of what you’re offering. You need to offer products that are practical to keep in stock; that are low cost, so you don’t have a huge amount of inventory that’s moving slowly on your hands.
I mean, those were the two huge takeaways. But literally, in the first year we were in business I probably watched that movie a dozen times. I would take notes, and I would seek that little takeaway.
Jeremy: Oh, yeah.
Andrew: Do you still have those notes, by any chance?
Jeremy: Oh, yeah. Yep. I do.
Jeremy: Yeah. I keep all the notes I take. It’s funny… The first year we were in business, people always used to joke about it. I had a little notebook; it was maybe like note card size. I would always keep it in my back pocket. Whenever anyone said anything that related somehow back to the business, I’d always write it down.
Andrew: Like what? What kind of stuff would you write down in the notebook?
Jeremy: Someone would have a product idea. Or I would be shopping at the grocery store and I’d say, “Hey, we have to stock that product.” Or I’d see a business running a promotion that I thought would somehow be intertwined with the promotion we’re running. Anything like that that could benefit the business.
Andrew: That’s inspiring, actually. I used to do that. Now that I’m hearing you talk about that, I’m feeling like I’ve got to do that again. If nothing else, I should just open up another notebook within Evernote and keep track of ideas that relate to Mixergy.
Andrew: All right. You’re watching them. You’re learning from them. It’s time to get started. What’s the first thing that you do?
Jeremy: At the time, my focus was, “Let’s come up with a name, and let’s design a logo.” Which, looking back at it now, those things, I think a lot of people have a tendency to focus on those things first; but they’re, in the end, somewhat meaningless.
Obviously, you want to have a name that people hear and they’re attracted to it, and you want to have a decent looking logo. But not such important things. I should have focused more on the actual operation of the business, which I did [??].
Andrew: Like what? What did you miss when you were coming up with the — and it’s beautiful — logo for Madtown Munchies?
Jeremy: I think that the things I would have liked to focus on more is just the actual process. Like you mentioned, someone when we were first open, they would pick up a phone and call and order. Now we’re exclusively online.
I wish we would’ve just started that way. It’s a million times more efficient. It would have been just as easy to set up initially. Those are the kinds of things you wish in retrospect. We could have gotten off the ground a little quicker if we would have just started that way.
Andrew: And the menu — were they looking at the menu online, but making phone calls to place the order?
Jeremy: Exactly. Yes. That was the way people saw what we had to offer, but you run into all sorts of problems there with people ordering things that we don’t actually have in stock; whereas now, with doing online ordering, people know immediately what we have in stock. There’s little things like that that really trip up business.
Andrew: Sometimes though, when you talk to customers the way that you must have, you get ideas that you wouldn’t get if you were just getting their orders online. Did you learn anything from those conversations? What did you learn?
Jeremy: Yeah. That was a big thing. You’d have people requesting specific products. They aren’t necessarily going to reach out through email now, which that is one downside to moving to online only.
Andrew: Specific products. I see. They might call you up and say, “Do you have the light ice cream?” and you go, “No, I hadn’t even thought of that. Who wants light ice cream?” Well, you get enough phone calls like that, you know that you need to bring it in.
Jeremy: Exactly. Yeah. Very specific product requests. Even positive reinforcement. That kind of kept me going. You know: “Hey, man, this service is awesome. I’m so glad you started it. I had the same idea myself.”
I’d hear that all the time over the phone the first year. Those things were helpful, because it keeps you going on nights where you’re maybe not getting a lot of business, or it’s snowing outside and you don’t want to bike around.
Andrew: What happens when you are out in the snow, on your bike making a delivery, and an order comes in. Do you take the phone call while you’re riding?
Jeremy: Early on, there was some help. Occasionally, I would have someone helping out with the phones, but it was always my girlfriend or a friend; not necessarily people that were entirely indebted to the business. A lot of times, like you said, I would literally bring a cell phone with, which the business land-line for it too, and I would take the order while I was out on delivery. And I would say, hey I’m out on delivery now so it might be an extra five or ten minutes, cuz I got to get back to the warehouse. So…
Andrew: What’s the thing that, how do you keep your people when it’s just a few friends who are helping out. How do you keep them engaged in the business? How do you keep them working and caring about it?
Jeremy: Well, you know, my girlfriend was the one helping out the most. And she kind of had inspired me to move back to Madison and started the business. I was living in the Twin cities. And it was her idea for me to come back and start it, so. I mean, she cared about the business just as much as I did. So, she had somewhat of a stake in it I guess.
Andrew: I see. OK. That makes sense. And your friends? It sounds to me like they’re just, if you got a buddy over you just ask them help out by taking the orders over the phone, I see. It’s not anyone who you need to…
Jeremy: Pretty casual. Pretty casual. Yeah.
Jeremy: And you know, it was the kind of thing, hey I’ll take you out to dinner or something if you can help me out for a few hours tonight
Andrew: I kind of admire how simply you launched the site. I could see why the costs were so low. Where did the $1500 go?
Jeremy: You know, we had to just buy initial inventory. We did buy one chest freezer from Sam’s Club to stock extra ice cream and things like that. Because just the fridge and freezer we had that came with the apartment wasn’t enough to stock all that stuff, so. And then, you know, just licenses that we needed, you know. Things like that.
Andrew: This is pretty cool. All right. Who built the website?
Jeremy: Well actually, I did most of the website work. We use an ecommerce software called Delusions, and then we kind of tailored that to the needs of the business. And then we did have a graphic designer that helped out with a lot of the look and feel kind of stuff.
Andrew: But the initial website, the one that didn’t have any of the shopping cart stuff built into it, that was…
Jeremy: Sure. That was a graphic designer friend of ours.
Andrew: Graphic designer friend of yours? So you know what he built it in? Was it, or, what she built it in? Was it Word Press, was it…?
Jeremy: That’s actually a good question. I don’t know the answer.
Andrew: You don’t know? Well, just cuz it was pretty much a static page, or static site with all the images on it. No action, just hyper-links, right? They couldn’t order, they couldn’t do anything on there.
Jeremy: Yeah. It was very simple. I know that we were hosting through GoDaddy at the time. And it might have even been one of their kind of templates. It was very simple.
Andrew: That’s pretty cool. All right. And when it’s time for you to add a shopping cart, I see here at the very bottom of your set. It says here shopping cart software, Biblevision. Who adds that? You add it or you get someone else to do it?
Jeremy: Well I actually, I did a ton of research after the first, I believe it was the first semester we were open. And just decided I got to move over to online ordering. It’s just not efficient to do phones only. So, did a ton of research and found that you needed essentially no knowledge of HTML or anything like that to implement something like this. So, that’s, and many shopping cart softwares are that way these days. Where as long as you know how to use, you know, Microsoft Word, essentially you can figure out how to use the software. So, it was pretty simple.
Andrew: I’m on the site right now and I see at the very bottom it says, start your own munchie delivery service. I’m going to ask you about that in a little bit. And I’m hoping somebody who happens to be in Washington, DC, listen and starts their own delivery service here. I’d like to buy that. I’d like to buy from them. But, I now understand the infrastructure. I understand the website. I understand how you were making deliveries. What I’m wondering is, who even knew you existed? How did you get anybody to come on and order from you or to find your phone number and place an order?
Jeremy: Sure. Well my girlfriend was actually an RA in a private residence hall. And I actually was spending a lot of time over there and so developed relationships with some of the management in the building and was allowed to put up advertisements and stuff throughout the building. And also just a lot of grass roots stuff. I would literally print out fliers and post them around campus. You know, community bulletin boards. We did a lot of wacky promotional stuff to spread the word.
Jeremy: The coolest one we did the first year was we developed a good relationship with our Vitamin water rep. And this was back when they were independent before coke owned them. So they were into working with small businesses like us. And they gave us like 400 bottles of vitamin water to distribute. And I wore a Gorilla costume with a bright orange Madtown G’s [??] t-shirt on it. And I ran around campus distributing free bottles of vitamin water that had like a little sticker on top of it. It just saying Madtownmunchies.com. And we got huge feedback from that. And, you know, it kind of framed the personality of the business. It’s a late night delivery service that you order when you’re having fun with friends. We developed a positive association through that marketing [??].
Andrew: What was the most effective marketing that you did?
Jeremy: Early on, I think it was just sending out press releases to local papers, student run newspapers and the citywide papers, just getting them to write an article about us. That was fairly easy. Literally just, “Hey, here’s the business we’re doing,” and style it in a formal press release format.
Andrew: Kind of like you did with me. You reached out to me and you said, “Andrew, I think I’ve got a story that your audience is going to want to hear.” I understand why my audience might be interested, but why would you reach out to me? I can’t get enough people to order from you.
Jeremy: Sure. First of all, I admire your website quite a bit and what you’ve done, so I appreciate the opportunity to talk with you and be a part of an interview that I’ve watched you do with other businesspeople a million times. That was a big part of it.
Also, just to let people know about our experience, a pay it forward kind of thing, and see if anyone else could take away anything from what we learned, and potentially maybe even start a business of their own like ours.
Andrew: Something happened… Actually, in the first year, how much revenue do you think you brought in? Do you remember?
Jeremy: First year was probably like $90,000. It was definitely under $100,000.
Andrew: $90,000. Then the second year, you almost tripled that.
Jeremy: Yep. Actually, more than quadrupled that.
Andrew: I’m sorry. Almost quadrupled. Excuse me.
Jeremy: Yeah, because we were at about $380,000 in the second year.
Andrew: More than quadrupled. Excuse me. My math is totally off here. What happened that second year that you suddenly took off and hit so much revenue?
Jeremy: There were a few things. Started to take the business a lot more as, “OK, this is a real business. This isn’t just something I’m doing to learn from it.” I saw so much potential in it after the first year. I rented warehouse space, increased our product offering from about 150 to about 800 products. We were offering a significant amount more.
Then, that relationship with the private residence hall actually became more of a formal relationship where they brought us on as part of their meal plan. Kids who lived in those dorms were able to use their meal points to order from us.
Andrew: Get out!
Jeremy: Yeah. We still have that agreement today. That really helped us out early on.
Andrew: Why would they do that? I went to NYU and I know they had this, but I wasn’t using any of the meal cards or any of it, so I don’t fully understand it. Isn’t it parents who are paying for meals? Or maybe it’s the school or something that pays for the meals. Who pays for the meals?
Jeremy: The parents were required to buy a meal plan along with the lease to live in these residence halls.
Andrew: I see.
Jeremy: It’s 2,500 or 3,000 bucks, however much it is. Then they get X number of points that they can use through the dining hall, or at that time, through us. They’ve expanded a little bit, so there’s a few other restaurants in town they can use it at. But early on, it was just us, so we really benefited from them.
Andrew: I see. I guess they get a cut of the sales that they make through you.
Jeremy: Early on, they actually weren’t. They were paying us dollar for dollar. They viewed it as, “This is an amenity that we’re offering our residents. While we maybe aren’t necessarily making money off of it, it might contribute to leases we get for the following year.”
Andrew: How’d you convince them to do that?
Jeremy: I just said, “Hey, listen. This is a service that I started last year. A huge amount of the kids that live in your dorm are ordering from us. I think if you’re serious about continuing to fully occupy your building, you ought to offer an amenity of some kind where they don’t have to eat in the dining hall.”
Because I personally had eaten in the dining hall, and I’ve heard what a lot of kids would say. It’s not the greatest food. I think most dining halls aren’t. It was something additional to offer the residents. That was enough for them. They thought it was a great idea.
Andrew: I want to talk in a little bit about how you actually are following a lot of Tim Ferris’s ideas, with the number of hours that you work, and where you’re working from. I’ll get to that in a moment.
But first, I see that you went beyond munchies. Right now, I’m on the website and I see Tobasco. I mentioned earlier there were hookahs and shisha. I guess shisha is the stuff you put in the hookah to smoke.
Jeremy: Yeah, that’s the actual tobacco.
Andrew: That’s the actual tobacco. Pharmacy, organic, kosher products, gift packages, stuff for parents and relatives. Of all of this, what’s the part that you make the most sales of?
Jeremy: The Ben and Jerry’s ice cream. What you see right now is what we currently have in stock and summer’s a fairly slow time for us, but during the school year we actually stock every single Ben & Jerry’s flavor available.
Andrew: That’s a number one seller?
Jeremy: That’s the number one seller by far and we actually, at one point — I don’t know we still are, but we were the number one retailer of Ben & Jerry’s ice cream in Madison, so we were selling more than the local grocery store, which that was something we were pretty excited about.
Andrew: What’s the most profits, where are the most profits coming from, are they coming from tobacco?
Jeremy: No. Tobacco is a very low mark-up there’s almost no profit off tobacco. Drinks are where you get the most mark-up.
Andrew: You mean, you don’t have alcohol right, no beer?
Jeremy: No. We have no alcohol, but like bottled water, soda, juices and things like that.
Andrew: It looks like the business pretty much fell into place a year two, and at some point you say, ‘I’m going to move out,’ tell me about that decision.
Jeremy: Yes. So after the third year, I decided I wanted to move back to the Twin Cities, which is where I’m originally from at this point my girlfriend is a 50/50 business partner and her and I both just started to figure out ways that we could move on from our day-to-day rolls that needed to be performed on site. Like you alluded to, we kind of started to adopt a lot of Tim Ferriss principals. I had just read the book, Four Hour Work Week, and similar to the way I did with the Cosmo movie, I had taken extensive notes and just said let’s do this, we can run this business from another city and so much of what we’re doing other people can do or we can figure out ways to run it more efficiently.
Andrew: Isn’t there a fear though that your now suddenly starting to hit your stride, you’re bringing in revenue, you’re bringing in profits, profits aren’t even that high though especially if you split them between two people, why take a risk by leaving the business, getting out of town, and looking to work fewer hours and live in an environment that you prefer instead of focusing on the business even more and making sure you don’t lose anything and maybe even doubling it up?
Jeremy: The decision for us was all about lifestyle we just decided, listen we’re going to be happier living in the Twin Cities, we have more friends and family there and if we can make it work, yea maybe we make a little less money and we’ll deal with it though and our life is going to be a million times better living there than it is living in Madison. We both were several years out of school at that point, we didn’t have any friends there anymore. Madison, it’s essentially a college town, we fell out of place living there and it felt like it would be worthwhile to live somewhere where we’re happier and make a few sacrifices.
Andrew: Who manages the people while you’re away?
Jeremy: So my girlfriend at that time started doing that stuff and she’s actually now my wife and she still goes back to Madison and hires new people and kind of oversees employees, but so much of what needs to be done for that is infrequent enough that she can just occasionally go back there.
Andrew: How many people do you have?
Jeremy: During the school year, we have about 15 part-time employees.
Andrew: 15 part-time employees and who manages them while you guys are away?
Jeremy: [??] my wife, she does that remotely.
Andrew: Remotely, there’s nobody local who makes sure that no one’s stealing the ice cream and no one’s shirking responsibility?
Jeremy: No. you know we’ve developed a lot of systems to oversee that.
Andrew: Like what?
Jeremy: I do play a roll in that as well, so everything is online now and so we can manage all of our inventory online. I can reference our sales each week and go back to what was our inventory at the beginning of the week, what is it now to ensure that people aren’t marking down our inventory levels or anything like that. We have cameras installed, which we can view remotely from anywhere so I can be traveling in Europe or anywhere in the world and pull up my laptop and see what’s going on in the office and I think that’s huge for a couple of reasons; I mean one, I can see if there’s anything going on but two, people are probably going to be hesitant to steal something or do something bad with the camera watching them.
Andrew: Now you’re a guy who didn’t know how to develop your first website, you didn’t even know what platform it was developed on, you’re using off the shelf software to manage your shop and cart, how are you building a system or how do you have a system that enables you to keep track of inventory, make sure everything’s where it’s supposed to be and that no one’s taking anything and that everyone’s getting the job done?
Jeremy: I mean a lot of it was trial and error, some of that functionality as far as inventory control and stuff that’s built into the software we use. So literally you just enter in your inventory levels and the software will track that based on sales, but a lot of it was just running the business day-to-day and seeing what kind of systems we could develop to oversee things. For instance, like I mentioned, I can export our inventory Sunday at midnight every week and then track our sales from midnight Sunday to the next midnight on Sunday and see does that correlate with the inventory level at the beginning of the week and the end of the week. It’s just kind of common sense thinking that we could manage inventory like this.
Andrew: You said trial and error. Could you tell me about one of the errors along the way? The biggest.
Jeremy: The biggest error along the way as far as systems we developed, at first we didn’t even keep track of inventory so I think that was probably the biggest thing. We would literally order products and what we had on site, we had on site and if someone ordered something we were out of, ‘Hey, sorry, we’re out of that.’
That was a huge error, caused a lot of customer service issues and prevented us from really having a good feel for the numbers game.
Andrew: All right. How about biggest error in general? What’s the biggest set-back, biggest mistake you made?
Jeremy: The biggest mistake in general, was probably starting off without the online ordering functionality. It made things such a headache early on and there were a number of times where I thought about, ‘I can’t do this anymore.’
To have thought that I could’ve potentially shut down the business because of something that…
Andrew: Just because you had the wrong shopping cart software?
Jeremy: Well we didn’t have any shopping cart…
Andrew: Just because you didn’t have it? Just because you had the wrong software, the wrong tool, it just didn’t make sense to continue? You get the right tool, everything turns around?
Jeremy: Oh, yeah. It makes the business a million times more efficient. To have someone out of the office and still be able to have orders coming in, it benefits our employees, it makes life easier for them, it makes the business run more smoothly and that in turn benefits the customer. It’s a better service.
Andrew: I know Tim Ferriss told me a lot about systems. I think every time we talk, we talk about systems and I’m wondering what other systems you put into place. How else did you systemize the business? How else did you organize it after reading his stuff?
Jeremy: Sure. Well, what we did is we took a look at everything we were doing and we decided of what we’re doing, what can we eliminate entirely and then for what we can’t eliminate entirely, what can we automate?
The big switch was, now, not only are we going to do online ordering, we’re only going to take orders online.
His big thing is fire your high maintenance customers so we started telling people ‘No phone orders, period. We’re only going to take orders online.’ That allowed us to not have to have someone answering phone calls.
We said, ‘if you have a problem with an order, send an email.’ We figured customers that order from us, they’re all college students. How many of them don’t have internet access and how many customers are we really going to lose? Part of it was firing your high maintenance customers and then he references that 80/20 rule…
Andrew: What else did you eliminate or automate?
Jeremy: We started using a website called Odesk to outsource a lot of our graphic design kind of work and administrative tasks. Great site, by the way, if you haven’t checked it out.
Andrew: What kind of administrative tasks did you have to automate, to outsource?
Jeremy: On a daily basis we need to do little things, such as make sure that cash brought in from the previous night was deposited in the bank appropriately and if not, where was the error made by our employee?
Then, there are things I like to see, like how many orders did we bring in? How are employees doing tip-wise?
Andrew: You have someone from Odesk go into your bank account statement and find out whether the right amount of money was deposited? You trust them with that?
Jeremy: We don’t actually have them go into the bank account, but we do have them report back to us ‘here’s what you should have brought in,’ and then I can check to just confirm.
Andrew: I see. Where do they look to see what should’ve been brought in?
Jeremy: How do they identify that?
Andrew: Yeah, I would imagine they would just have to go into the shopping cart software and see what…
Andrew: … that’s pretty much it.
Jeremy: Yeah, it’s a simple export feature in the shopping cart.
Andrew: Ah, you’ve got to export it? They don’t have a dashboard?
Jeremy: No, they have to actually export it, but it’s somewhat automated, even for them. It’s essentially a click of a button for them in that it’s in an Excel document.
Andrew: What else did you kill or automate? By the way, I see that your lighting goes dark and bright, and I’m trying to figure out why. I thought maybe you had an overhead fan, and maybe that’s doing it? Is it something else?
Jeremy: I am sitting on the side of the room by a window so it could just be, some…
Andrew: Ah, as it gets a little bit brighter out, and darker, maybe the sun’s going behind the clouds, and it gets darker in the room.
Jeremy: Yeah, sorry about that.
Andrew: No, it’s cool.
Jeremy: Anyhow, what did you just ask?
Andrew: What else did you automate or eliminate?
Jeremy: Oh, sure. Eliminating, that played a big role too. Any marketing component we had in place that couldn’t be tracked, that’s another thing he talks about quite a bit, we just eliminated it entirely. We were doing a lot of print advertising, which we found there’s no way for us to know what kind of effect this is really having. I just said “Let’s try a year without doing it completely,” and so it saved us a huge amount of money, so it actually increased our margin quite a bit and in the process decreased how much work we had to put into our marketing initiatives. We kind of crossed over to easier marketing campaigns, to implement email marketing and things like that.
Andrew: What’s been the best form of marketing?
Jeremy: Email marketing is huge.
Jeremy: People are ordering online. Most people who order elect to provide us with their email address, so we can say “Hey, we’re running a promotion this week-”
Andrew: Email marketing to your current customers?
Jeremy: But then, in addition to that, we actually are able to get the database for the entire school. U. W. Madison, I would think, is one of few schools that actually will sell the information I think.
Andrew: They sell you an email database of their students?
Andrew: That’s pretty powerful!
Jeremy: Yeah, it’s kind of amazing that they’re willing to do that, but we’re not going to complain about it.
Andrew: What’s something like that cost?
Jeremy: It’s actually only 90 dollars.
Andrew: That’s it?
Jeremy: Yeah, they charge you for one hour labor, is what they-
Andrew: Because that’s what it takes them to pull up the information?
Jeremy: I’m guessing it’s, you know, I don’t even know why-
Andrew: How do you find-how do you even know that that exists?
Jeremy: I think I found out from a friend of mine early on that had started a T-shirt business on campus, and he knew about it.
Andrew: So they give you the emails, and what kind of email system do you have? I was just talking to a guy from Mindvalley Hispano, and he’s really thought through his whole email drip campaign, and the marketing that he sends out. How much of that have you thought through, and what’s your process?
Jeremy: I’ve thought about that a ton, and how we can apply that to our business. Unfortunately I’m still trying to figure out a good way to get that kind of automated email marketing down. Ours is more hands-on. We have something built in through the shopping cart software, where we can go in and create newsletters. It’s a little bit more generic. We’re not super savvy. I know there’s a lot of pretty amazing email marketing software out there, and I’d like to eventually get into that, but for right now it’s just…it’s easy enough that we-
Andrew: Is it all about what discounts that are available?
Jeremy: What’s that?
Andrew: Is it all about the discounts that are available?
Jeremy: It’s mostly about discounts that are available. Sometimes we’ll just do silly marketing campaigns that people cal follow along with. One time I, for an entire month, only ate food that we offered, to promote that although you might think we’re an unhealthy food delivery service only, we actually did have a lot of healthy food products.
Andrew: This is 2009, I want to hear about this. This is the Munchie Public Challenge.
Jeremy: Yeah, 28 days on Munchies, we called it. Yeah.
Andrew: 28 days, nothing but your food, and how did your weight do, as a result?
Jeremy: I can’t remember the exact weight loss, but I remember it being significant, and I don’t know, maybe you were even able to find it if you looked.
Andrew: Yeah, according to our research here you lost ten pounds.
Jeremy: Yeah. What I was doing, it was somewhat strategic, obviously, and like I said, the point was to prove that we offer healthy food. I was focusing on the healthier stuff that we offered like Cliff and Luna bars, Sabra hummus, Naked Juice, things like that.
Andrew: You lost ten pounds in a month?
Jeremy: Yeah, and I actually wasn’t overweight or anything.
Andrew: And you got to eat Hummus?
Jeremy: Exactly, yeah. It was a good life, it was a good month.
Andrew: How much press did you get for doing that?
Jeremy: We had a huge amount. We had a few people blog about it locally, a student newspaper ran an article both before and after. We set up a Facebook, and at the time we got up to maybe 500 or 600 people. We had a lot of people following along. I would send out updates on how I was doing.
Andrew: Speaking of the research, I see here that, according to our research, most additions to the menu are driven by customer requests. How do you take in customer requests? I’d like to get everything that I do to be more based on what people are demanding than on just what I think they want. How do you do it?
Jeremy: Well there’s a feature on the website where people can request specific items but in addition to that we can see what people are searching for through our shopping cart software so I can see, for instance, the first year we were open we had a couple of hundred searches for milk and we didn’t offer milk. So I can look at the most searched items and say, “Hey, a couple hundred people for milk. We should probably be selling milk.”
Andrew: Got you.
Jeremy: So things like that.
Andrew: All right, you at some point decide that it’s time to expand. Why not expand by personally building each new city that you wand to get into? Why are you doing it the way that I mentioned earlier where you say on your website click here on the left side of the screen to start your own munchie delivery service?
Jeremy: There’s a couple of reasons behind that. The first one being, like I said, our number one thing is we do think about lifestyle. How does this fit the lifestyle that we want?
Andrew: What do you mean by lifestyle? You get all of this extra time. I’ll come back to this story but you get all this extra time. What do you do with it? I wouldn’t even know what to do with myself. What are you doing?
Jeremy: Sure. I love to exercise. I love to cook. The biggest thing is I love to travel. Any chance I have to hop in a car and take a long road trip or go see a country I haven’t explored before.
Andrew: So while you’re running this business you’re traveling and driving and visiting new countries. Where have you been?
Jeremy: We’ve taken a couple of road trips out to Los Angeles. My wife is actually from there and I have family there myself so we’ve taken a few cross country road trips. I’ve been to Israel. I’ve been to Sri Lanka, Hawaii, a lot of amazing places that I wouldn’t have been able to explore if we were continuing to open up new businesses on our own.
Andrew: When you’re in Sri Lanka or in Israel or in Hawaii and pull up a laptop and see what’s going inside your office and check out the numbers and really be on top of things?
Jeremy: Oh, yeah. Yeah, during the busy times of the school year we each have a daily regimen and some days it’s more than others if there’s a specific problem going on but it really just requires an internet connection. So if we have internet connection we can operate the business from anywhere.
Andrew: What kinds of problems are harder to deal with remotely?
Jeremy: If an employee doesn’t show up. We don’t have a huge amount of control over that. We have to get on the phone and see if we can get someone else in there quickly.
Andrew: So you’re just getting on Skype, making phone calls to all your guys saying, “Hey, Steve didn’t come in. Can you make it?” No? All right. Go to the next person?
Jeremy: Yeah, we try to have people know that in advance that hey, we might call you if for some reason someone’s not available or someone gets a flat tire on their bike and can’t finish up their shift. So our employees are usually pretty helpful in that regard.
Andrew: I wonder if you could even automate that. That every day people have to hit a button at a certain time to let you know that they’re in and if the button doesn’t go then text messages go out to all your other people saying, “Can you make it?”
Jeremy: I like that idea. You know what, it’s probably possible. I’m sure there’s a way to do that.
Andrew: All right, so what’s the routine that you have when you’re out of the country? You’re in Sri Lanka, you’re enjoying this new country, what do you have to do? What kind of work?
Jeremy: Every morning I have to make sure that, like I said, all the numbers match up from the previous days work. Personally I manage our inventory so checking inventory levels, seeing what items are on low stock, and communicating with vendors. Most of that is online as well where you just go through their website and place an order. I communicate with the employee that we have in charge to actually receive the order from the vendor.
Andrew: Suddenly I want to do this. Now I suddenly understand the value of having a lifestyle.
Andrew: You can do all of that in less than $100,000 in profits a year?
Jeremy: Yeah, I mean it’s obviously not lavish. If we travel we’re not staying in the nicest hotels in the world but it’s freedom and it’s the ability to travel which to me is invaluable.
Andrew: I want to do this. So I understand why you don’t want to start your own local Madtown Munchies. What’s been the response to offering this up to other people?
Jeremy: It’s something that we’ve just started. We have gotten feedback and we have gotten responses from people but another thing that we do value is how can we build a relationship that we know we’re going to feel comfortable with. So we’re not going to just sign up anyone to set up a business of their own just because they’re interested in doing it. There has to be a good relationship and we have to feel comfortable moving forward. We’ve had several people contact us saying their interested in starting the business, willing to cut us a check, and we’ve actually turned it down because we said, “You know what, this isn’t going to be a great relationship moving forward. Best of luck to you, but we’re not interested in helping out at this time.
Andrew: I’ve got all those pictures at the top of my website right now; like the founder of Groupon, for example. When you take a look at that and you see the guy is building a multimillion dollar business, and he’s creating insane profits or insane taking money off the table, cash is going all over the place, and his business is getting big; do you ever say, “Screw [??]. I’m going to just sit here, and I’ve got to work.” Do you ever feel inadequate in comparison to all of those other people?
Jeremy: Absolutely. Absolutely. It would be na?Øve of me to say that those thoughts never cross my mind.
Andrew: What do you do about that?
Jeremy: You just have to remind yourself that money is not everything. That goes back to the Tim Ferris philosophy, too. That’s something I really took away from his book is that time is really our most valuable resource. We have X amount of hours on this Earth. What are we doing with that time? Perhaps I’m not making as much money as the next guy, but I haven’t come across too many people who are able to do what I’m able to do.
Typically I get responses like, “Oh, I wish I could do that.” My answer to that is, “Anyone can do it.” It’s just a matter of being able to deal with that insecurity that you mentioned, that you might not be making as much money as someone else, but you have something where you’re in control of your life, and you have a huge amount of freedom to do what you want to do on a daily basis. Like I said, I think that’s invaluable.
Andrew: All right. People are now going to listen to this interview. You’ve told them how you got your initial customers. You’ve told them how you’ve automated it. Why don’t they just go and start their own? Why can’t somebody come to D.C. and say, “I listened to the Mixergy interview 100 times, the way that Jeremy used to listen to that documentary on Cosmo. I’m prepared.” What are you bringing to them that they can’t get on their own?
Jeremy: There’s a huge amount that we bring to the table. We designed this license program so that the licensee has what we wish we would have had when we first started the business. I used to do things when we first started the business, like I would run after delivery trucks in order to get an account set up with a local vendor.
Those are difficult connections to make if you don’t have industry know-how or business experience. We can set people up with vendors. We can allow them to leverage the negotiations we’ve already made to get the pricing we have. We have all the industry know-how. We’ve been running the business for five years now.
Those are things that we can offer to someone at a really low cost that perhaps, yeah, they could go do it on their own. They absolutely could. I’m not going to say they couldn’t. But the price point that we’re looking at to offer all those things to them so that they are immediately an expert in the munchie delivery service field — it’s a no-brainer move.
Andrew: We’ve seen that a lot of people have gone out of business. The D.C. guys who inspired you, I don’t think that they’re still around.
Jeremy: Yeah. You know what? I’ve actually been in touch with the guy that started that. I think he has just moved on to bigger things and wasn’t interested in continuing to run the business, but I do know that he did really well with it.
Andrew: All right. I’m going to ask you in a minute for one piece of advice for any entrepreneurs listening to us here to end it on. But let me read an email from a guy that I got from a guy named Richard Robinson. Let me read the second paragraph. He goes:
“I also have to share that I really dug your interview with Dan Shapiro and I reached out to him right before his Google acquisition. (His company was acquired by Google.) We’ve been in touch ever since. I also reached out to Adam Strum, the founder of Wine Enthusiast, after hearing his very open interview. I managed to meet up with him for lunch here in Beijing, where he was in town, which was great. You’re extending your connection to people from cyberspace to meet space,” as he calls it.
This guy, Richard Robinson, didn’t just sit back and watch one of my interviews. He started reaching out to the people who he watched in the interviews. Adam Strum, the founder of Wine Enthusiast, happened to be in Beijing and the two of them met up. I see this all the time. I get nothing out of this. I don’t want my interviewees to get flooded. It would be nice if they just got a bunch of thanks from my audience.
But I don’t say it because I want my interviewees like you, Jeremy, to be flooded. I say it because you should never sit back and just be in the audience of life. You’ve got to jump in there. If you see someone who you think is interesting, there is no wall between your world and his. It’s not like we’re watching Tom Cruise in the movie and we’re not supposed to reach out to him, or watching Lady Gaga on stage and we’re not supposed to reach out; there’s security guards who are designed to keep us away.
Any other part of life, in business, you’ve got to jump in and say hello to the people whose interviews you liked, or if you read a Forbes magazine article and there’s someone you connect with, you send them an email. I see that all the time. I want to keep highlighting some of these stories that I hear in my email so guys if you’re listening and you have a story like Richard, send it over, and if you don’t have a story like Richards, do what Richard did and start contacting the interviewees and start contacting other people you see who inspire you. Get in their worlds. Don’t just be on the outside watching them. What do you think of that, Jeremy?
Jeremy: You know, that’s exactly what I was going to say when you alluded to I want to get one piece of advice is don’t be afraid to reach out to people because you think you’re not going to get a response from them. I think nine times out of ten, you’ll get a response from someone, I don’t care who they are. If you want to get a hold of someone badly enough, you’ll get a hold of them. A great example of that is early on I read a book called Raising the Bar, which was about Gary Erickson, the guy who started Cliff Bar, which is an amazing book. If anyone hasn’t checked it out I definitely recommend it. I was really inspired by the book. My wife was really inspired by the book and we said, “You know what? Let’s get a hold of Gary Erickson and see what he thinks of our business.” It took a bunch of emails but we got a hold of his assistant and we got him on the phone. We talked to him for like two hours over the phone. He had a huge amount of advice for us and that was really inspiring to know we’re just some little business in Madison, Wisconsin, that this guy has never heard of and he’ll take two hours out of his day to talk to us. I think most entrepreneurs are like that. They’re willing to talk to other people in order to help them out, even if it doesn’t provide them with anything. So, kind of piggybacking off of what you said, reach out to people – get out there.
Andrew: What is one thing that you learned from talking to him?
Jeremy: The biggest thing I learned from talking to him was that he is a normal guy. I was expecting him to get on the phone and it feel like I was talking to the Dali Lama and have all of these words of wisdom but he was a normal guy and he is the 100% owner of a business that has like $400 million of revenue. So that was the big thing I took away from him is anyone can do it. It’s all about just wanting to do it and like you said, just going out there and doing it. He stayed true to all the principles of running the business the way he wanted to run it early on and he is still 100% owner. That was really inspiring.
Andrew: That is inspiring. And you’re right – sometimes we imagine that these guys have super human powers, that they were born with some math ability or some interpersonal skills that the rest of us can never attain. And then we are really exposed to their stories, either here on Mixergy or somewhere else, or we meet them in person and the message sinks in even deeper. They’re human people like us and in some ways that’s even scarier because it means look if he’s human just like me and he’s capable of so much and doing so much then what am I capable of that I’m not aware of and it fires you up.
Jeremy: Exactly. Yeah, it’s extremely inspiring.
Andrew: Well, the website is MadTownMunchies.com. I hope, I’m only going to be in DC it seems like for another few months so I hope in the next few months somebody sets this up so that I can get it delivered to my office. If not, we’ll figure out where I move next and you guys will hopefully set one up over there.
Jeremy: And we could help someone get it started in under a month.
Andrew: Under a month?
Andrew: All right. I would like that people. Get this started in another month. This is a huge college town. Now these people here from what I see in DC, they are not big potheads. They don’t seem like they drink that much, so what you might want to do is add khakis to the menu. They love wearing khakis here. I don’t know what else. Maybe some herbal tea. I know what…
Jeremy: 30 minute khaki delivery.
Andrew: Right. There you go. There’s probably a good mark up in that. They love it. All right. We’ll leave it there. Check out MadTownMunchies.com and thank you all for watching. Bye.