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Ed Soehnel
Attended Webb Schools
Lives in Sedalia, CO
834 followers|288,442 views
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Work
Occupation
Owner | CXO | Consultant | Advisor | Mentor to companies in B2C and B2B2C
Skills
Strategic Planning ★ Sales Leadership ★ Retail Distribution ★ Go-To Market Strategy ★ Niche Markets ★ Distributor Agreements ★ Margin Growth ★ Strategic Alliances ★ Technology ★Consumer ★ Product Development & Launch ★ SaaS ★ Channel Development ★ Sales & Marketing ★ P&L ★ Team Management ★ Marketing ★ Platform Development & Metrics ★ Product Functionality ★ Capital Raising ★ National & International Distribution ★TV, Radio, Print Marketing ★ Media Spend ★ Broker Management ★ COGS & Margin ★ Forecasting ★ Direct Response ★ Branding Fundraising
Places
Map of the places this user has livedMap of the places this user has livedMap of the places this user has lived
Currently
Sedalia, CO
Previously
Alta Loma, CA - Alta Loma, CA - Denver, CO - Humarock, MA
Story
Tagline
I write mostly about starting, growing and operating a consumer product business. Jesus, health and training, outdoors, farming and ranching, and dogs are other topics as well.
Introduction

I love and follow Jesus and consider myself a born-again, non-denominational evangelical.

My professional career includes extensive experience starting and growing companies in B2C and B2B2C.  I currently co-own The Light of Dog with my wife, consult to, advise and mentor companies. For more about my professional and educational background, please visit my LinkedIn page

I am a former national-level amateur athlete and stay active in anyway I can, which can include some combination of the following at different times during the year: cycling, hiking, uphill running intervals, rock climbing, XC/Nordic skiing, biathlon (ski-shoot), alpine skiing, snowshoeing, shooting and weightlifting.  My diet is paleo/primal/ancestral and what I cook and eat is a big part of my life due to autoimmune issues from major food groups.

Contact Me

Bragging rights
Blessed to have eternal life with Jesus
Education
  • Webb Schools
  • Pitzer College
  • University of Denver
Basic Information
Gender
Male
Looking for
Friends, Networking
Relationship
Married

Stream

 
If you give your #dog #rawhides, read this
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Ed Soehnel

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KEY VIABILITY METRICS FOR A STARTUP CPG COMPANY

I got this Quora question and here's my answer.

When I look at CPG investments, my goal is to know the following:

1.  Is this product/idea differentiated in the marketplace and how easy is it for the competition to copy/replicate that differentiation?
2.  Does the team know what they are doing to grow the opportunity?
3.  What's the plan to get the opportunity to 20% EBIDTA

To accomplish the above, I need the following metrics, in this order, with the basis at the product unit level that the end consumer would purchase:

Current sales in units/door/week by channel
SRP - suggested retail price of the item by channel
Repurchase rate
Retailer margin (%)
Wholesale Revenue
Returns
COGS
Gross Margin (Wholesale revenue - COGS)
Tradespend
Marketing Costs
Sales costs, incl. broker fees
Logistics and retailer penalties
All Other operating costs
Net
Cash Investment
The above is structured like a basic P&L.  The metrics are less important because in most cases, they will not be to where they should be.  What's more important is the qualitative discussions on each metric to help me get to my 3 goals listed above.  With the above metrics and a 30-minute discussion, I can usually know if this is a good opportunity for me.

Sales/Units/Door/Week and SRP by channel

This is a core metric to understand how the product is performing in the marketplace.  It will be different for each product category, but a good metric for many grocery categories is 1 unit/door/week. If this is average, does this product exceed that or is it below that?  If so, why?  If above, is it a unique product different enough from the competition?  If above, is the company doing some kind of in-store or external marketing that is driving sales?  If below, why?  Is the companies marketing not effective?  Is it a commodity product getting lots in the clutter of all other commodity products?  Is SRP too high, too low?  Why?

These are exactly the kinds of questions category buyers ask in determining whether to take on new products,  expand existing ones into more stores, or discontinue them out in favor of another product.  Even if a product is meeting sales threshold does not mean it won't get discontinued.  Another better product could come along or one with better marketing.  The company needs to know its category and competitors and trends very well to try and position against this.

When I say "by channel" above, I mean I want to know SRP and margins by channel - grocery, drug, mass, club, etc..  Even if the company is not selling in these channels, what would SRP be in those channels, against the retailer margin?  Eventually, I would want to see them sell to the other channels to get more growth.  This is important to know now because setting SRP relative to margin and EBIDTA has to be done in the context of looking at other channels, because even though it might work in one channel, it will break in other channels, so you want to get that right from the start.

Repurchase Rate

This metric can only be derived with accuracy if the company has a direct-to-consumer (D2C) component (i.e.: sell via their website).  And it is very important to know because if the company has a low repurchase rate - and I assume if in grocery stores it's a consummable product, so there should be repeat purchasing - then the company has a structural problem and eventually it will fail when it runs out of new consumers.  Having a D2C component is very important to know information like this.  I look at repurchase rate in contest of 12-months from initial purchase.  Another similar metric is customer lifetime value, but I limit to 12-months.

If only in retail, the best way to gauge this number is through specialty or smaller chains that the company has been selling in awhile.  If succeeding, then you might be able to infer that there is a good repurchase rate.  However, the caveat there is that the product is not in an impulse-buy store location, like the checkstand area.  If so, then be careful.

Retailer Margin (%).

For grocery, the target is 35% - the difference between wholesale and SRP, or the retailers markup.  Is it higher or lower than this and why?  If lower, then to expand to other chains, it will have to go higher, meaning it eats into EBITDA.  If higher, why?  Is it because its a new product and the category buyer wanted more margin because of the risk?  Or, is it because the company is not marketing or not marketing well to support sales, so the category buyer wants more margin?

Returns

Usually will be 1-4% for small companies in smaller retailers.  It should not be higher than that. If so, why?  Dig in to understand what is going on.

COGS

For smaller CPG's in food, selling organic, this figure is easily in the 50-70% range.  The key to ask is not necessarily where it is now, but can the company get it down over time with increased volume?  They should be able to get it to the 30-40% range - closer to 40 if an organic product. Again, this is for consummables.

Tradespend

On average, for all CPG consummables, its 13.5%.  If higher why, if lower, why?  What is the company doing to warrant it being higher or lower?  It's almost always higher the first year in a retail chain, then goes down.  What are the specific factors in tradespend that is causing this number to be what it is?  Experienced CPG people will know how to negotiate this number down over time.  Does this company know how to do this? Note: diving into this area will really tell you if the company knows what they are doing or not, in my experience.

Marketing Costs

This goes with tradespend, because in-store marketing is in tradespend. But external marketing (what the company does independent of the retailer) is everything else.  For small companies, marketing should really be direct response drive, in my opinion.  By DR marketing, your marketing has to drive sales and you have to be able to measure it to see if its working.  You can't just throw dollars at brand marketing like large CPG companies because you will run out of money before they have an effect, in my experience.  With DR marketing, you need to know how many dollars are spent and what sales that brings in - simple equation called MER (marketing efficiency ratio).  A ratio of 2 more more is what you want, but it takes time to get there to optimize marketing.  A CPG company that knows how to do this can leverage it into retail growth very well.

Sales costs, incl. broker fees

Broker fees is what I really want to get at.  Goal is to get to 5% with no monthly upfront payment.  Hard to do for smaller companies, but that is the goal.

In the natural channel it will be 8-15% with a $500-800 monthly payment to good brokers. Over time, you can get the monthly payment to go away and with volume, get the % down.

I care less about the costs now and more about who the brokers are, what are they doing and are they good ones (I can usually tell by knowing how the brokers work by asking the company questions about them).  Good brokers are key to growing in retail.  You want relationships with good ones.

Logistics and retailer penalties

Goal is to get to 5-7%, or even lower if possible.  If higher, why?  This is another area that by digging in, will tell me if the company really knows what they are doing on an operating level.  Companies with less experience or with weak operations will have higher logistics and retailer penalties.  This area can kill a company if not under control.  This area might not be a problem now, but its a sleeper land mine because it could become a problem if internal processes and systems are inadequate.

All other operating costs

I usually don't dive into any other cost areas. The above is what I really need to get to me 3 goals.

Net

What is the EBITDA?  Goal is 20%.  Now, let me say that 20% is my goal.  It does not necessarily mean that is the goal of other companies.  I like 20% because it gives me room for error, because there will always be error. In general, if its less than 10%, that's a problem, because errors will eat into that fast.  If not at 20%, then what is going on above to impact this?  Based on the above discussion, I would be able to understand better what is needed to get to 20% EBITDA and if the company has the expertise to make it happen.  However, I see opportunities all the time that will never get to 20%.  Does not make them bad ones, just maybe not ones I would consider.
Put the above into a simple excel model and as you play with all the variables, you will see its impact on EBIDTA.

Cash Investment

What will my cash investment do for the company to get it towards 20% EBITDA? Or, if its at 20% now, what will my investment do for growth?  If my investment won't get it there, will the company need more investment?  If so, can they raise money from other investors besides me?  Do they have a differentiated opportunity and a good team that would be attractive to other investors?

Growing CPG companies, especially those in retail, even at positive EBITDA, often need more and more cash to growth.  So, even if goal EBIDTA is reached, growth still means more cash will be needed.  Can they get it?

What's the exit?  How do I get my money back?  Because growing CPG companies, especially in retail, need cash to fund growth, don't expect your investment to come from EBITDA distributions to investors, at least any day soon. And selling a company is really really hard and very few are able to do that.
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Ed Soehnel

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Some things about backcountry skiing are obvious, or at least should be, but often the subtleties are just as important. Here are a few tips to keep you rippin'.
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Great pic!
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More on the changing landscape of #logistics and #retail
RetailWire Discussion: Last Christmas Eve, Amazon received a patent for "anticipatory package shipping." This combined with other actions Amazon is pursuing indicates how the online giant is working to widen the already sizable "moat" separating it from the competition. What do you see as the net effect of Amazon taking on more of its own logistics?
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I think this will succeed early on due to its novelty with consumers, but as it increases in use, it may become too much of a distraction and consumers will turn off, especially if marketers over-use with promotions.
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Ed Soehnel

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This would be a blast to do:  http://bentgate.com/graphics/email/2015/0113sickdayslocals/0113silvertonsickdayslocals.html

Too bad the boss (wife) would not approve me leaving 3 days for this, plus my patellar tendon is bothering me, so no extreme skiing at the moment.  

I've never skied Silverton.  Hope to someday.  
Please add bentgate@bentgate.com to your Address Book | View Online Version. Silverton Sick Days. Copyright © 2015 | Bent Gate Mountaineering 1313 Washington Ave. Golden, Colorado 80401.
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Recent pics of the dogs slaying some snow.
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Thx for the comment, Joshua!
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Good overview on marketing channels to acquire customers, with example companies that have successfully utilized.
Get the book at http://bit.ly/tractionbook, or get the first 3 chapters free at http://snip.ly/5Wwo Most startups end in failure. Almost every failed startup has a product. What failed startups don't have is traction -- real customer growth. Traction book - which this slideshare is based on - introduces startup founders and employees to the "Bullseye Framework," a five-step process successful companies use to get traction. This framework helps fo...
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Great ad. Worth watching. 
Some People Call This 'The Best World Cup Ad Ever'. After Watching It, I Might Have to Agree. Cam Lincoln. Some companies pay big bucks to sponsor top athletes. Not McDonald's — it finds a bunch of ordinary people doing extraordinary things…
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