here is a frank and honest summary of his business... i admire him for putting this in the public domain..
http://nickrace.net/2010/08/brewers-hardwa...-1/#comment-852
Tom Hargrave says:
April 25, 2011 at 10:46 pm
I have no problem telling you publically what happened to me and my business.
I am an Engineer by trade and I started
http://www.kegkits.com as a side business a number of years ago. I did fine and seemed to be making a lot of money working out of the house, and then my Wife said No More!!! At that time I had the computer, parts and malt extract in the spare bedroom, grain stacked in the dining room and packing stacked in the living room. My wife can be a very tolerant person, to a point and I had crossed that point about 6 months earlier.
I moved into an office, set up a warehouse, started shipping from there and I did not know at the time, immediately started losing money. It took an Accountant friend who is much smarter than me to explain to me what happened. What I did not realize at the time was my margins were not high enough to survive in the real world even though my mark-up was an average of 45%.
I hired my Son full time to help with the business and he worked full time until I could no longer afford to pay him. Remember, I was losing money but I was so focused on selling stuff I did not realize it yet. We shipped a lot of product and the business grew and I started losing money faster.
About three years later, March of last year to be exact, I finally ran out of money and ran out of options and the business imploded. I owed suppliers money and I owed customers product with no way to deliver and no money in the bank to refund. I hurt a lot of people but no-one more than me. Its hard to stop and realize its all over, just like that.
But failing instantly gave me a lot of time to stop and figure things out. I discovered right away that I was charging way too little for the product I was selling and the gross profit was not generating enough cash to pay for everything. But how do you lose money with 45% gross profit? Its really easy, if you dont have a firm handle on all of your costs then all of your other business expenses will consume your cash. For example, I was selling grain at a 100% markup and losing money because the markup was not covering the cost of freight, packaging and shrinkage (grain I had to throw out).
So I regrouped, I cut the number of line items I have from a little over 700 to about 300 by dropping everything that was not profitable. The remaining 300 are items that were more profitable. And BTW, stir plates were profitable before the business imploded but there were no enough stir plates being sold to make a difference.
Ive been running for a little over a year since and I am making some money. I still owe suppliers a lot of money but all of them stuck with me. I also owe the landlord over 10K in back rent and he has reduced my rent so I can stay where I am at. In return I am paying him back as fast as I can. But I am still in business and we still screw up an order every once in a while. But financially, Im sound and I pay for wholesale orders as they come in. The business is about 20% of what it was and Im growing slowly.
