Had someone asked Jesse Thomas a little more than a year ago if his energy-bar company, Picky Bars Inc., would turn a profit, he would probably have scoffed.
Thomas thought the end was near: major disruptions in manufacturing, $200,000 worth of rancid product that needed to be tossed, a depleted inventory and the loss of six employees. He and two partners, Lauren Fleshman and Steph Bruce, were out of money.
Flash forward to today, and the 39-year-old triathlete sees a rosy picture for his nearly 10-year-old company that makes nutritional bars, oatmeal and granola for athletes.
“2018 was the worst year, and 2019 was a great rebound for us,” Thomas said from his Box Factory distribution center. “2019 was also my worst year athletically, but that then subsequently allowed me to work on the business.”
Between the rancid rice protein used in his energy bars and running out of stock for two months, the company sustained a loss upwards of $450,000, he said.
“For a company our size, that’s a lot of money,” Thomas said. “It was everything and more.”
It’s not an unheard of scenario, said Oregon State University-Cascades business professor Julie Ann Elston. Nearly three-fourths of all entrepreneurial ventures end in failure. The No. 1 reason for failure across all industries is a lack of capital, Elston said.
“It’s really hard,” Elston said. “It’s just as hard to start a small business as you’re becoming an elite athlete. There are millions of ways you can fail.”
Elston called the period after starting a business and driving profits, the valley of death. It’s the time where most small businesses get lost, between the inception period and maturity.
Thomas said that the problems of 2018 revealed where he needed to throw his efforts to shore up the business. The $3 million in sales are enough to break even, but not enough to merit a profit.
The solution, Thomas said, was to build in redundancy, find a manufacturer that would supply them with product, trim away unneeded positions and focus on what is key to the business model. For Picky Bars, it is supporting the subscription program.
More than half the company’s revenues comes from subscriptions and direct sales, and only 30% come from retail sales from stores like REI, Pacific Northwest Whole Food outlets, Market of Choice and other smaller regional retailers, Thomas said.
Thomas, Bruce and Fleshman poured in capital from their own pockets in early 2019 and hoped for the best. At the end of year, they actually showed a profit, he said.
“We don’t have any equity partners, and at the time, about a year ago, I was seriously considering taking some equity deals that wouldn’t have been good for the business,” Thomas said. “You lose control, and it might change your lifestyle. Now we’re in a stronger position, and I”m back out there looking at potentially bringing on financial partners.”
It’s common for small businesses to have revenues, but no profits, Elston said. Tapping into venture capital is a good way to fuel growth, but at the risk of losing control, she said. Sometimes businesses can even find venture capital funds that provide business or technical expertise with the capital.
“In reality people grossly overestimate how much capital is out there,” Elston said. “You have to pick the right venture capital partner who will bring in business experience and capital.”
Bend Outdoor Worx is a Central Oregon outdoor accelerator that aids startup businesses with funding and offers mentoring opportunities.
“We have a group of mentors who have longevity in this industry and have likely experienced many of these challenges before,” said Gary Bracelin, Bend Outdoor Worx founder. “We help our entrepreneurs realize they aren’t the only ones who’ve been in their position. We can help them mitigate the risks and develop the Plan Bs.”
It’s fairly common in the outdoor business industry for founders to be athletes, Bracelin said. For Picky Bars, the founders actually have experience in business and food science, with Fleshman having a degree in science and athletic performance and Bruce’s pro-marathon experience, Bracelin said.
Looking ahead, the mantra has become Picky Platforms and Picky Profits, Thomas said. Finding new ways to connect with customers will help the company earn profits in the crowded energy bar field, he said.
“No matter what we do, profit has to be our No. 1 priority,” Thomas said. “Mistakes are part of growth, and you become stronger through failure. I learned that in my athletic life and now in business too.”
While he’s not officially retired after recovering from the stress fracture in 2019, Thomas said he plans to apply that mental and physical acuity to the business. Picky Bars will be laser focused on retaining and growing its subscriber base.
“The subscription service is more than a product delivery, it’s about community and aspiration,” Thomas said. “Our subscribers share the brand and the seminal values with us. We send out emails, social media videos and podcast content to our subscribers.
“We provide a personal connection.”