8. Starting a Business: Interview with Alisha Esmail of Road Coffee Co.
Transcript:
Evan: Hello, and welcome to episode number eight of the Canadian Money Roadmap podcast. I'm your host, Evan Neufeld. Today in my office, I've got Alicia Esmail from Road Coffee, and she's going to give us a little bit of a background on some of the financial factors that you might want to consider when starting your own business.
So, Alicia, thanks so much for joining me today.
Alisha: Thanks for having me.
Evan: So as I mentioned in the intro there, your business is Road Coffee. Now for listeners who don't necessarily know your business, Road Coffee isn't a coffee shop, but you've got a few irons in the fire right now. Can you give me a bit of a breakdown of what Road is today?
Alisha: Definitely. So Road Coffee primarily is a roasting company where we work directly with farmers to renew quality coffee from a farmer's hands to your cup. One thing I'm really passionate about is helping coffee farmers solve the problems they face and one of the main problems most coffee farmers around the world face is access to finances. So this last year at Road Coffee, we launched a micro loan program to help bridge the gap. These coffee farmers can use those microloans to purchase equipment, help them through harvest, maybe fertilize their land post-harvest or whatever they need to get to that next level in their business.
Evan: Cool. So most coffee is grown in parts of the world where I assume getting Government grants and things like that from places where Canadians or Americans might find financing typically, is that the main problem that it's just not an option in places like Brazil and Colombia etc.
Alisha: Yeah, that's exactly it. The other problem is there's lots of corruption and because these coffee farmers often don't have a lot of power or they're living in impoverished situations so if they get a loan, it comes with like a 70% interest rate. So imagine when you get your mortgage at 70%.
Evan: Wow, that's nuts! So your micro loan program might be a podcast all on its own here, but can you give me kind of a breakdown of how you got to where you are today? And I think you just launched it, is that right?
Alisha: Yeah, so we launched it this last year and we've just gone through the first cycle.
So, we started off with Co-op Peru, helping them purchase fermentation tanks for a farming family. Then with that, we partnered with Paul and the founders of Co-op Peru with some education on how to use them and how to increase the quality through different processes and fermentation styles. One of our main goals was to improve the quality of the coffee by two points on the specialty scale.
Evan: Oh boy, I don't know what that is.
Alisha: It starts getting a little detailed, but in coffee we have Q graders just like a sommelier and wine. A commercial coffee is graded between 60 and 80, so the stuff you'd find in the grocery store or your regular house coffee. Then specialty coffee, anything you're going to find at a third wave cafe is considered 80 and plus.
Evan: Oh, okay. Interesting. Does the cost fluctuate accordingly or are production methods different? How do you typically find that being in that range?
Alisha: So it's a bit of both. Prices definitely fluctuate. An 85 grade coffee is more expensive than like a 63 point coffee. But what happens is, without getting too detailed, there's usually four different picks within a harvest. The second and third picking of the coffee is the highest quality. And the first and fourth is the lower quality and so usually they have to pick apart the good beans from the not so good beans. But we always say every coffee has a home.
Evan: It's almost like distilling then. Right? Like, what do they call it, the tips and tails or something like that.
Alisha: Yeah, exactly. There's lots of similarities between distilling, wineries and the coffee chain.
Evan: Interesting, because there are a completely different product, but at the end of the day there's probably some similarities there. So today you have a roasting business, like you mentioned, and then you ship beans locally here to offices like ours and homes for the end consumer. Do you ship across Canada or international?
Alisha: We do, yes. We ship from coast to coast in Canada. We try and keep our numbers low so free shipping is anything over $40 nationwide. We also offer an awesome corporate program, like you mentioned, and we're looking at some more retail options right now.
Evan: Oh, cool. So roasting, retail coffee and the microloans side of the business, that's where Road is today. Take me back to day one. What did Road look like then? Were all of these things on the horizon then or what were you hoping to do when first started?
Alisha: Oh, that's a great question. I remember moving home to Saskatchewan and just with a kind of cheesy twinkle in my eye and rosy colored glasses on. I moved back to Canada to disrupt the coffee supply chain thinking it would be an easy feat. I had no idea what I was in for, but it's been a fun, wild adventure. We started off with just a simple coffee cart. Using our first loan to put together this coffee cart, just to test the waters to see if people even wanted to buy our coffee. I'm a big, big believer in testing your product and testing your idea before investing too much.
Evan: So this coffee cart was that on the street selling coffee to people walking up, or were you doing events or how did that work out for you?
Alisha: The mobile Espresso cart was for events.
Evan: Okay, weddings and things like that? I think I saw you at a taste of Saskatchewan here, and you're probably still there when we can do those kinds of events.
Alisha: For sure. So it was like weddings, corporate events, birthday parties, for some reason weddings were really a big hit at the beginning.
Evan: So you mentioned that you moved back to Canada to start this, with a twinkle in your eye, but how did you come to that decision? Like what brought you to that place where you said, I want to disrupt the coffee business?
Alisha: Well, I always was really passionate about coffee from a young age, even in high school. In my free time, I would go buy books on coffee and research the coffee supply chain and how coffee was made. My background is actually in international development. So while I was working overseas in these different countries, in my free time I'd often find myself hanging out on coffee farms and tea plantations, getting to know their families and the process and it was so much fun. I learned a lot, but the problem was as I'd get to know them and I'd see them being taken advantage of by unnecessary middlemen. Then when I'd come back to the West, the first thing I would do is go spend $5 or $7 on a coffee in an airport. So then after a while, that just started to really bother me, and I decided I wanted to try and do something about.
Evan: So you mentioned middlemen, and kind of at the beginning giving farmers a fair shake. Is this similar to fair trade or is this fair-trade coffee or how is what you're doing different than the fair-trade system?
Alisha: So there are a lot of certifications out there that market themselves very well, but don't necessarily have the same impact that we were going for. So we've created a new sourcing model, right now we're calling it “Beyond Fair”. It includes the microloan program and partner pricing. So when we purchase our coffee from Costa Rica, for example, when I pay them, it's going from the Road Coffee bank account to their bank account. So it's not going in between, you know, five to seven other companies who are taking a piece of the pie.
Evan: Interesting. I honestly forget who I was listening to, but there's a podcast called “How I Built This” and it was another coffee company and I wasn't too familiar with, and that's probably why I'm not remembering the name right now, but they were trying to do something similar. Not necessarily with microloans or things like that, but they were finding that in some countries eliminating middlemen was kind of a dangerous prospect. Have you run into any situations like that where farmers are a little bit uneasy about changing the model that they're working on?
Alisha: Yes, definitely. It's not for the faint at heart and I think it's all about finding the right partners on the ground, because the truth is farmers still need support and they still need people to help them. Because again, most of these farmers are living in impoverished conditions and emerging markets, right? So they don't have access to the same resources we have, but with the internet and changing times, that's starting to change. So strong partnerships is important and finding ways to support them without taking away that help, if that makes sense.
Evan: Yeah, for sure. Right on. So my podcast here, the Canadian Money Roadmap, I'd love to ask you some more money questions as it relates to starting your business. From a financial standpoint, how were you feeling when you made that jump from largely a more stable income probably than someone that's starting their own business. How did you feel making that jump from stable income to completely unknown?
Alisha: I remember being so scared at the beginning. Getting my first loan, before signing that paper, and it wasn't even for that much, it was your classic Futurpreneur Canada loan for $15,000 just to start our coffee cart. But I remember being so scared being like, what am I doing here? I was definitely scared.
Evan: When did that change? Did you find financial success quite quickly? Were you able to pay that loan back? And what was your experience like converting that loan into a profit generating business?
Alisha: That's a great question. So luckily at Road I'm really grateful that we have been in the green from day one. I think a part of that has been our business model. It was grow sustainably and start getting monthly recurring revenue (MRR). So building up our monthly clients and getting revenue.
Evan: Perfect, and so what were some of the ways that you were able to do that? Was that mostly through subscription coffees? Or just doing more events, or I guess events wouldn't be recurring revenue necessarily.
Alisha: So we did a mix of both. Our events were kind of a way to offset the reoccurring revenue. Then we started focusing on monthly clients that got their coffee, either biweekly or on a monthly basis.
Evan: So now, lots of people are often curious about when it comes to starting a business is how do you pay yourself? You don't have to tell me how much, but do you pay yourself a consistent salary, do you treat yourself like an employee for the hours you put in you pay yourself something? Or if not, how do you decide when to pay yourself because you got to live, right. How do you decide when to pay yourself instead of reinvesting back in the business or hiring staff?
Alisha: That's a tricky question but I do pay myself.
Evan: It's different all the time, right? Like, depending on the season.
Alisha: Totally. That's what I was going to say. I got some really good advice from one of my business coaches early on, and he said to make sure you pay yourself consistently. And in the early days, the first couple of years I didn’t. I was working a second job and I didn't want to take from the company. I wanted to put everything back in, so that we could keep growing because growth is also expensive, right? But then as things got going, I realized I needed to be able to pay myself if this is what I'm doing full time. So I slowly started taking, you know, a little bit of money each month but I think I did that for too long. I wish I would have taken my business coaches advice a little sooner and just paid myself consistently, like I do now, because I think that would have pushed me a little bit more to just creating those foundations. I think it's a foundation piece.
Evan: Can you elaborate on that a little bit more of if you would have taken more money out of the business from the beginning, do you think you'd have the same growth potential? You said it's a little bit of a motivator, is that just on the personal side, to have more personal income? That's why most people start a business, I guess. Is that kind of what you're doing
Alisha: A little bit? I think it forces you to work a little harder to propel the business forward a little faster because you know, X amount of dollars are leaving the account every month and it doesn't have to be a lot, right? You can pay yourself consistently as much or as little. So, I think I still would have been responsible, but then there would have been that consistent, okay, we have to push ourselves higher. We're pretty good at making our sales and pushing ourselves. But I think there's a key, like it's a foundation piece and a strategy piece that I wish I would have had in place a little sooner.
Evan: So, an alternative to paying yourself is keeping the money in the business and reinvesting in the business. Which it sounds like you're doing a little bit of both and you always have. In addition to reinvesting your own cashflow in the business, have you received any funding from outside sources or other investors at how do you make that choice?
Alisha: That's a great question. Investing is always a funny topic when it comes to your business. We've had an interesting journey. So we haven't taken on any outside investment as far as for shares or anything like that, but we've been really lucky and grateful to have a couple grants come our way. So this last year, I don't know if you know this, but the Canadian government launched the women entrepreneur fund and Road Coffee was chosen as one of the companies and we were awarded 100K.
Evan: Wow, Congratulations! That's fantastic.
Alisha: Yeah, it was a lot of fun to be a part of that project and help push female entrepreneurship forward in our nation, but it also allowed us to really propel forward and do some projects that we probably wouldn’t have been able to do otherwise.
Evan: So oftentimes with government funding or government grants there's strings attached. Were there strings attached to this one or do they kind of give you a carte blanche to do whatever you feel is responsible with the money?
Alisha: We had to submit a proposal and so ours had to do with our micro loan program, “Beyond Fair” and how we're shaking up the coffee industry. It was in line with what they're wanting to do as far as sustainability and female entrepreneurship.
Evan: So You've got the government of Canada grant. Did you receive some other grants as well? Or were you part of any groups or things like that to help you get started?
Alisha: When we first got started, we just had our loan and we were part of like the greater business community. Then recently we got another grant during COVID just to help with a little bit of a buffer to make sure we could get through that fist sticky part of the situation.
Evan: Yeah, exactly. So, I was maybe going to get to this closer to the end, but you mentioned COVID and how your previous business model had to change a little bit. Can you tell me how you looked pre COVID and how you look today.
Alisha: For sure. We're still figuring it out a little bit to be honest. We'll see where the shifts lie, but it's been a wild ride. You know, we were so focused on our corporate accounts and growing nationwide corporately. We were picking up accounts in Toronto and across the nation and all of a sudden, these corporate clients are not working from work, they are working from home. So part of our business model is shifting, I think, indefinitely. We're focusing on our online sales and a couple of different avenues. There's one pilot project that's in the work right now. We'll see, I can't quite say yet what it is, but I think you'll see pretty quickly if it goes through or not.
Evan: It's a scary time for everyone. So no one prepares for a pandemic, but emergencies show up in every different shape and size. So how do you prepare your business for emergencies. Not necessarily pandemics, but you know, you say you lose some staff or sales dry up for a couple of months. How did you prepare for that? Do you have an emergency fund for cash? What are some of the things that you use?
Alisha: One thing I realized is we were prepared better than I anticipated. So, you know, right off the bat, there's the roller coaster emotions, what's going on. Lots of confusion, lots of unknowns. We had to make the hard decision, like most companies, to lay off some staff for a little bit. That was really hard because you have a staff relying on you and that's their income. That's a big part of their life. That's a really challenging thing to do as a business owner, I think. But then we were able to bring people back on sooner than anticipated, and that was kind of cool. I think, you know, we just had a little bit more resources in the store house than anticipated, so that when the wells were on pause for a bit there, we were able to navigate without sinking the ship.
Evan: So was that by accident that you had more on hand than you really anticipated. Or is that kind of your mentality of running the business, that you want to make sure that you know you've worked so hard to build this that you have to do your part to make sure that it doesn't go down when an unforeseen circumstance comes up. Is that kind of how you think about things?
Alisha: That is how I think about things, but I didn't realize it would have had the effects that it did. So I didn't realize truthfully that we were as set up and now I know in the future we'll start always putting stuff away because you never know what could happen, when we're going to have another global pandemic.
Evan: Totally. Well that's one of the weird things that we've seen. Just that the data in Canada, that during this time where tons of people have lost jobs and income has reduced and businesses are closing. Canadians are actually having less debt than before because I think a mentality is changing. And having some government support definitely makes a difference, but people aren't turning those CERB checks into new TVs necessarily, or the data isn't showing it on a large scale anyways. It's kind of unique that the mentality is changing as a result of receiving more from the government.
Alisha: That's very interesting. Thanks for sharing that.
Evan: I'd love to know some more of the boring stuff. From your experience, would you recommend spending all the time on your bookkeeping, legal and that kind of thing? So you have an idea of what's going on in your business or do you recommend outsourcing that so that you can spend more time on doing what you're the expert on? No right answer, I'm just kind of curious.
Alisha: I do think it depends on what type of entrepreneur you are, right. When I was getting started, I used to do all our bookkeeping and then just go to the accountant at the end of the year. I thought that was serving me well, but I am not a details person. So every month I'm doing bookkeeping, it's stressing me out and it's taking longer than it should. It's just not something that gives me life. I'm a big believer that you should spend your time doing what you love. Sometimes you got to do some stuff that isn't as fun, but for the most part, we should be spending time doing what we love. So eventually I brought on a bookkeeper and it was one of those things that was game changing for me. I think as business owners, sometimes it's hard to release that financial control. I think that's what held me back a little bit. But once I finally released that to a bookkeeper that I trusted, I was so much happier. I could focus on what I'm passionate about, what I'm good at and just grow the business.
Evan: So it doesn't seem like you're wanting to ignore that side of things. You have a good idea of what's going on. But the actual nuts and bolts of the details you have outsourced that to somebody else.
Alisha: I'm looking at our numbers daily, that's part of my job as a CEO, like your job is to make sure there's money in the bank. I'm doing that, I just don't want to be inputting receipts and you know, the small details that would stress me out.
Evan: The difference between delegation and abdication. We talked about getting some outside money, either by investors or spending time on grants, because I know that applying for grants is really time consuming to do a proper grant application. For someone starting their own business, how would you recommend that people balance that pursuit of new money, whether it's grants or investors, versus just going out there and grinding, and maybe not having as much financial security out of the gate?
Alisha: Well, that's such a good question, but it's so situational. I would say it's almost a bit of both and it depends on what's your vision, what's your goal? What industry are you in? You know, if you're opening a car dealership, you need a lot more capital. You're probably not going to just like hustle it out, you need some outside investment. I think the biggest thing is testing your business model before you spend a ton of money. There's this thing in business, people call validating your idea. It’s talking to your clients and understanding what their needs are. You can go talk to 50 to 100 potential clients and you'll know if you have a business or not. Then testing it in the simplest way possible. For me, one of the big reasons I didn't take investment off the bat, is I wanted to learn how to grow a company. So with my next company, I might take on investment from the start, because now I know how to build a company from scratch. But it was more that learning experience I needed.
Evan: Interesting. So you kind of alluded to the minimally viable product. So you recommend spending more of your time and efforts getting to that MVP first. Then spending the time, because time is a resource that all of us have. It's all finite for everybody, but everybody has it at least.
Alisha: Totally, and the cool thing about Canada is we're so lucky to live in a nation that has so many available resources. Most of these countries I traveled to, there's no such thing as grants or entrepreneurship funds and resources available. In Canada, there's so many things to each province that I really encourage people to look at their local community and see what's available for them.
Evan: Perfect, good advice. Is there a local, like a centralized location where people can go to look for those grants and opportunities and things like that?
Alisha: Actually it's a little tricky to navigate sometimes, but the federal government has a website that has all the grants available for each particular province.
Evan: Oh, perfect. I'll try to find the link to that and put it in the show notes here. So wrapping up, what's the big picture for Road Coffee from here? Are you looking to add more products, more services, or do you want to expand your current offerings into new markets? What does that look like?
Alisha: So right now, we're focused on growing our online sales coast to coast in Canada. We're continuing with our Beyond Fair program and gearing up to launch some new microloan projects this year. It's going to be an interesting year in the coffee industry, the supply chain is kind of on pause. So, it's going to be interesting. We're excited to continue to grow coast to coast in Canada and depending on this pilot project, you might see us in some new places.
Evan: We’ll be on the lookout for that. If people are wanting to connect with Road or you and follow your story, where can they find you?
Alisha: You can check us out at www.roadcoffeeco.com as well as our social channels at Road Coffee.
Evan: Last things here. Anything that's come to mind, I think we've covered a lot of ground here already, but any financial tips for people starting their own business. We talked about getting an accountant or bookkeeper, building some emergency savings, and you've seen firsthand how well that can work in your favor. Anything else that comes out at you for financial tips for new entrepreneurs?
Alisha: I would say, take bigger risks while you can. I talk to so many friends who already have kids and they're really settled in their lifestyle. It's really hard for them to step out and take risks, even though that's what they really want to do. So take those risks while you still can, but before the cost is a little higher.
Evan: Well, thanks so much for joining me today, Alicia. I really appreciate you taking the time.
Alisha: Yeah, you bet. Thanks for having me.
Evan: Thanks for joining me today on the Canadian Money Roadmap podcast. If you enjoyed today's episode, I'd really appreciate if you left me a review on Apple podcasts with your biggest takeaway. If you have questions or ideas for topics you'd like me to discuss on future episodes, please reach out via my contact info in the show notes.
This podcast is intended to be educational in nature and you should always consult with your Financial, Tax and Legal Advisors before making changes to your financial plan. Any rates of return discussed are historical or hypothetical and are to be used for educational purposes only. Evan Neufeld is a qualified Associate Financial Planner and Registered Investment Fund Advisor. Mutual funds are provided through Sterling Mutuals Inc.