S2 Ep1 Did you make $100,000 last year?

[Music] Two chocolate tears. One with 250,000 in sales. And the other one with a million in sales. Is it obvious which one of the two is taking home a bigger paycheck? [Music] Hello and welcome to season two of the business of Artisan Chocolate Podcast. I'm your host, Constantine Zego, coming to you from Lansing, Michigan, right here in the United States. Hey, you know, maybe it's your first time listening or maybe you've been with me throughout season one, where I was trying to figure some things out. Either way, it's great to have you. We have so much stuff to think through and to work through together as professional chocolate tears. It's not an easy business, it's challenging, but gosh, I love it. It's fun to be making progress. So there's no shortage of stuff to talk about, and I'm excited to do it. In this episode, I'm going to reveal to you my secret for getting to a hundred thousand dollar a year personal salary as an artisan chocolate tear. I'm going to be honest about how I got there myself, the lessons that I learned, and I'm also going to tell you about the years where I lost money. Maybe it'll be exactly the thing that you need to hear to turn the corner, or hey, maybe you're doing it a different way, or maybe you see a flaw in my thinking, or maybe you've got a better idea. You know how to reach me. I want to hear from you, and I want to echo those ideas back out. Right now, we are already the largest assembled group of professional chocolate tears in the world around this podcast. So we've got a framework from which collectively to think through these problems and to get a hell of a lot better at what we do financially. So without any further ado, let's jump into season two, episode one. [Music] In this episode, we're going to talk about how to achieve a milestone target of a hundred thousand dollars a year and take home salary as the owner operator of a chocolate shop. And I'm going to start with a recap because this is of course season two. I started a year ago, season one. And so I want to make sure that we level set again. First, I am a professional chocolate, a Iona shop in Michigan. I have been a chocolate here for, I don't know, 12, 13, 14 years, something along those lines. Before I became a chocolate here, I had a long business career. I started my first computer company when I was 17. Even though I went to college and became an electrical engineer and got a degree, obviously I never really used that degree. I just kept running my computer company which morphed into a second, an a third, an a fourth company, and I sold companies along the way. And I've had lots of employees. I've had a really successful high tech business career. So I understand business, which is a benefit. And a lot of chocolateeers do not. A lot of chocolateeers are artistic and creative. And they understand, you know, flavors and they may have a culinary background and etc. But they don't necessarily have a business background. So that's my strength. My weakness is exactly that I don't have a culinary background. And I don't, I wasn't a pastry chef classically trained and I didn't have, you know, 10, 20 years of working in restaurants. So there's a there's a trade off there. I started my podcast a year ago because, and if you go back and listen to it, you'll hear it. It's because I got frustrated that after a few years of being a chocolateeer and owning a shop, I wasn't making any money. I wasn't making any profit. I was working hard and I was producing a lot of product and I was getting successful from the standpoint of, you know, notoriety and my quality was improving and lots of customers come into see me, etc. But when you looked at the actual bottom line, I wouldn't make any money. And when I looked around and talked to other people, I didn't see that they were making any money either. And it led me to the question of does anybody making any money and the most celebrated and famous of the chocolate tears that we come to know from Instagram, they all seem to be side hustling, making money in other ways. So I wanted to know if it was possible to straight up make profit as a normal chocolateeer in a decent sized city owning a chocolate shop. And that's what set me on this quest. I've tried to be really transparent regarding what I've learned and what I'm thinking about and what works and what doesn't work. I've also been quite transparent about the numbers, which is something that most people don't talk about because for one, they're probably not super proud of the numbers. And number two, because it's just a general philosophy of business that you keep your mouth shut so that you don't give your competitors any extra information about what it takes to succeed. And, you know, maybe when you get to a point where you're selling your chocolates in multiple countries or in multiple states and you start colliding with other companies that are doing the same thing, maybe that makes sense. But my focus so far has been on the independent chocolate shop owner operator. And let's face it, there's not a ton of competition between us. We tend to sell to the people that are local to us. And you may have another chocolate here, chocolate shop in your same city and so you're competing with them. But in the big picture, it's pretty local, pretty geographic in terms of the way that most of us operate. So that's one of the reasons why I've been pretty confident about being transparent. You'll notice also I don't have any sponsors, which I'd like to have some sponsors, but I haven't really fought for them. So I don't have any sponsors of the podcast. I'm not selling anything. I don't myself have a side hustle. I'm not selling recipes. I'm not selling courses. I'm not. I'm just straight up trying to be successful as a chocolate here. And you can actually contact me. Like there's my email is out there. My Instagram is out there. Give you my phone number. You can call me. We can talk. I'm available to you. So that's another thing you should know. Also, let me just say that this podcast overall is not about encouragement. This is not that encouragement podcast. You know the believe in yourself and you can be successful and follow your passion and successes as you define it. And flavors are so important for human expression. And I express myself through my chocolate flavors. I took care about any of that crap. Okay. So this is not about that. All right. There are podcasts out there that come by ya and put their arms around you and tell you how wonderful it is that you're a chocolate here. And whatever is not me. Okay. And it's not about recipes either. It's not about flavor texture and technique. I'm not celebrating any part of that. There's plenty of that out there. And like I said, again, no side hustle. I'll be honest about what I've learned with the caveat that hey, I might not always be right. But this is very much about how you can be profitable. This is about this podcast is about making sure you stay in business while you're enjoying the creativity that chocolate affords. That's really what the focus is and I'm really good at it. I'm really good at helping figure out processes, procedures and techniques and strategies for being profitable but doing it my whole life. And I think deeply about it. And although maybe not all my ideas are right, I'll definitely take you along on my journey as I try to figure it out and as I experience. That's what this is about. And the other thing about my podcast is they're usually really long. So the one of the first things I did when I launched my podcast is I went out there and I looked for advice. And I asked, you know, hey, what do you think of my podcast? I got one person that said, you know, your podcast stars way too long. You know, first of all, you tend to ramble. You tend to ramble is that you don't get to the point you repeat yourself. And so I'm like, oh, I got to make them shorter. Yeah, exactly. You know, we want nice 10 minute bite size, consumer content. You know, that's, that's the way I asked more people. I reached out to like 25 or so other people that originally listen to the podcast. I said, hey, what do you think? And they all told me, hey, keep it long. So I don't know. I'm keeping it long. I'm just, it's just you and me chatting. And yes, I do repeat myself. And yes, I probably do me and her once in a while. and so on, but what the hell? So I'm not trying to be a professional podcaster. I'm just trying to tell you what I've learned. Think of it like this. We're hanging out, okay? You're, you can go and you can be making your chocolate and you can have me on the background or you can sit in your easy chair and be like the two of us hanging out. So let me get to the question. Did you make $100,000 last year? I'm gonna give you that plan eventually. I'm still fine tuning it, but I will tell you that most chocolateeers did not make $100,000 last year. And I mean them. I don't mean the shop. I don't mean top line. I mean, actual take home pay after your investments and your cost of goods and all that stuff, even those weird one time expenses that you wanna say, well that was just because I bought this or that. The question is, did you bring home $100,000 last year? For most people, the answer to that is no. I think the answer needs to be yes because if you don't get to this milestone number of $100,000, it is probably a bit more of a hobby than a business. And $100,000 while that is a lot of money, relative to the amount that you're probably working, I mean, I haven't met somebody yet who doesn't put in at least 60 hours in a week doing this. I don't see nine to five years in the chocolate business, not very many of them anyway. So if you're gonna work that hard, you need to make enough money to where you feel good about bringing that home and also raising a family if you have one or just taking care of your basic needs. Incidentally, a lot of chocolate tears have wrangled their spouse or significant other into helping with the business, whose hours are probably not being caught. So that $100,000 might actually represent almost two people's income as opposed to just one in many cases. I've been at this podcast for a year, so I've done an intensive mental study on this, but of course I've been thinking about it for much longer than that, but I am seeing a pattern, a very important pattern that I wanna explain to you and it defines these various phases of the business and I will get to them in a minute. I hate the stories that are like, "Well, I played around with chocolate for a little while, then we opened the shop and there was a line of people and I sold out and now I just never looked back." And now 10 years later, here I am. You know, that's bullshit, don't fall for that. Nobody has that Cinderella story. If you really bear down on it, you'll see that it just doesn't work like that. It's hard at work, it's long hours, you're cleaning your own equipment, you're mopping your own floors, you screw up endlessly, you throw your stuff in the trash can, it's failure for a long time. No one just opens a shop and serendipitously align forms and the line never stops and you make money happily ever after forever. So let's talk through these phases and you'll inevitably find where you are in these phases as I define them and then you'll also understand kind of what the income parameters are at each one of these phases. Okay, so here goes. The first one, you can also look at this, I said phases, but you can also look at this as steps, you know, like almost like you got to get from step one to step two, 'cause you don't really want to stay in the early phases necessarily. It's not like you can kind of go and then along and then generally stop or you, or you, let's just say, not if you want to make $100,000, maybe I should put it that way. This is almost like a progression. Step one, phase one is what I would call the hobby. All right, the hobby phase is when you, you get yourself a melter, you're reading lots of books, you've purchased 10 molds, your friends are encouraging you, you're not really selling anything, you're kind of giving it away. And I would say that this step takes about a year. You're learning on your own, you're watching a lot of YouTube. It's an important step because you need to decide, A, if you like this, even, and B, because you need that encouragement. And I think you need to go through the cycle of, wow, I started with some raw ingredients and I had a finished product and I received accolades for that. You need to go through that cycle and you also need to go through the cycle of, wow, I did something that wasn't perfect. I went by and changed a few things and then it got better and then I did it again and it got better. And so that concept of, wow, I can iterate through a set of problems and improve, but it's the hobby step, okay? Then comes the next step, the second phase of your business, which is where you step up to a home kitchen and you are probably in the legal category here in the US at least, of the cottage foods phase. Now, I know different countries, we have listeners from all over the world so I realize it's not just a US audience here. So, but you're gonna have to help me because I don't know what it's called, but I'll bet you have the same thing wherever you're from. The concept of cottage foods is, look, we'll allow you, this is the government talking, we'll allow you to experiment producing food in your home, but there are some rules around it. And then once you feel like you can no longer live within the set of rules, then you can graduate up and go to receiving an actual official license, okay? So, what are the limitations they're generally the same? Cottage food says that you have to make physical contact with the buyer. That means that if someone's gonna buy chocolate from you, you have to physically see them and you have to be able to talk to them because they may have questions, right? About what you've made and how you've made it and you need to be able to answer those directly. You have to have a disclaimer statement on your products that says this was made in a home kitchen that was not inspected, right? 'Cause that's the big thing. You're working out of your house. There's no controls. There's no inspector that's coming to your home. So, you have to have this disclaimer statement that says, hey, you know, this is not inspected, which is the reason why you have to be able to talk to the seller one on one because the consumer needs to be able to interrogate you, so to speak, and ask you some questions about how and where this is made and get some confidence. And from a financial perspective, you cannot sell more at least in my state and many others as well. It seems to be the magic number of $10,000 a year in top line sales for the category. So, if you are making chocolate that is one category and all of the chocolates that you make together cannot have more than a top line sale of $10,000. Okay, that's the max. If you sell more than $10,000 worth of products retail, then you need to move away from cottage foods. So, you see what they're doing? They're saying, okay, you can be small, you can incubate, you can, you know, but underneath in this like little box, you can experiment. And if you stay in the little box, you're cool. That's that's kind of what it is. By definition, you can't make any money. I mean, it's $10,000 top line. That was before any of your expenses, right? Cost of goods, so, et cetera. Maybe you can eag out a couple thousand dollars if you're lucky, but all that money is going in to buying more mules, you know, more melters. What little equipment you actually have, you're gonna probably use that to buy that and more chocolate, et cetera. So, it's definitely not a money making phase. However, you probably are going to farmers markets, which is a great place if you're in cottage foods to try to sell. So, you're making direct contact with customers that satisfies that requirement. And, you know, you can go and you can make a couple hundred bucks. So, you can go there and lay out your table and people get to see who you are and they get to buy your chocolate and they get to see how good it tastes. They get to talk to you. They build a relationship with you, et cetera. And it's good that you have this cycle. So, you were able to make it, you were able to package it, you were able to price it and you were actually able to sell it to someone like, wow, right? That's pretty cool. That you were able to do all of that. And, I would argue that this is somewhere between a three to five year phase. Not a one year phase, three to five years. So, usually you're three to five years in this phase, in this home kitchen phase. Before you get the confidence to go to the next phase, which is the rented commercial kitchen phase for most people. So for most people, they're not gonna go buy, you know, they're not gonna buy a facility yet. They're not gonna skip to that step. They're going to probably rent. There are a subset of people that decide that the cooler way to do that would be to embellish their home and to make it licensable. So they'll take a spare, not just a spare room, but like a section of their home or maybe like an exterior garage or possibly a basement or some larger space and carve it out and try to get it licenced. Which is really great because now you have a home that you live in and you know your walk to the office is basically a walk across the hall or something to your licensed kitchen area. But that's that's rare. You don't see that at all. Most people are going to spend the money to go into a rented kitchen facility. That's phase three. Suddenly the $10,000 cap is gone and you can sell indirectly without requiring face-to-face contact. In other words, you can now put something into a retail store. You can put your proper food label on the back of it and the customer never needs to see you. So now you can go into into retail. And, incidentally, this is the first time that you can actually sell something online because cottage foods is not allowed to sell online because they never make face-to-face contact with the customer. Then you realize in this face how incredibly undercapitalized you are. Like, wow, I don't have any money. I don't have enough money. I wish I had more money to go do something. That's what most people face when they enter this phase. I would argue that your efficiency is suddenly the problem. And you begin to question yourself. Like, were you actually ready to make this move? You know, maybe you had some recipes down. Maybe you had your techniques down, but your procedure is just suck. And because you're renting a kitchen, your lack of efficiency is starting to cost you real money. Now you go into this kitchen, right? It's not free anymore. Now they're charging you 20, 30, 40 dollars an hour, whatever your setup is. And you don't have so much room anymore for failed batches and screw-ups and things like that. So I was in this phase too. Okay, I rented a commercial kitchen phase. And it was a church in my case. Good old St. Catherine's Church. They have a decent-sized kitchen there and they have some extra rooms and a little bit of refrigeration. But this is also where they cook their own meals for their own congregation. Tom using it when they're not using it. So the first thing you had to do when I got there in the morning is I had to set the whole thing up and I had to start by cleaning. Like you have to clean because nobody there is going to clean it up for you in the way that you want it to get the ball rolling. So the first, oh God, full hour, I would say, was just cleaning and prepping and in a place and hauling shit in. So from the car, you know, my boxes and crates and stuff, some people can leave stuff in there in their commercial kitchen. I never felt confident in that because it was shared space. So maybe you can skip that step, but I was hauling in cartons of crap. And of course I had to get inspected in that kitchen. So the inspector would come and so on. And you know, I, there were problems. There was like, there was a, there was temperature control because I didn't really have control of the temperature. There was a big gas stove there that was blowing out heat. That's when I first learned that ambient indirect heat could cause bloom. That's when I first learned that. The day that I had hundreds, hundreds of hand dipped carmels on a tray on multiple trays, four trays lined up. And to my horror, I looked out at those trays and I saw them bloom from the left to the right in slow motion. Like a, like a tidal wave of destruction from the left to the right in slow motion in about, in the, in the time about 20 minutes, I saw like a thousand hand dipped, hand dipped carmels like disintegrate in front of my very eyes. I had no idea why that was happening. I'm like, shit, I thought I was in temper, you know? And, you know, much later I discovered that there was a gas stove that was in that proximity and that gas stove pilot light was just hot enough to where it created this cone of heat around it. And I didn't, I never really knew that. It's just stuff like that. You know, there's no storage there. It's just, it's, how do you package anything? It's getting late and we're not done yet. And how am I going to finish? And now it's 10 or 11 o'clock at night and I'm trying to get to a finishing spot. I'm cheating like crazy, right? You're not supposed to make anything at home. You're supposed to make everything at the commercial kid. Ah, hell, I was making the carmels at home and bringing it to the kitchen pre-made. I would take the stuff and package it at home and I was supposed to be packaging it there. That's why I say that efficiency is suddenly the problem. That your procedures suck because your procedures are created for probably your home kitchen environment. And now when you scale into this rented kitchen environment, obviously your environment has changed and there's suddenly all this pressure to make money. And also there are more phases of the business that you're looking at. I think this is a pretty rocky transition. But you know, if you stay nose to the grindstone on it eventually your rented commercial kitchen will succeed until you outgrow it or some situation changes and you want to move on. So that is the rented commercial kitchen phase. Technically no upper end on your income, but you will probably feel capped. You then decide in your mind, but what you really need because you begin dreaming about it, what you really need is your own shop. Man, if I just had my own shop, it would be my own retail space first of all. So I could sell to actual customers. You'll have your own kitchen where you can start and stop whenever you feel like starting and stopping not when you're scheduled to be able to work. And I would say you're living your dream and you're living your nightmare at the same time when you own your very first shop. I hate this phase, this first shop phase because and I spend a lot of the first podcast, explain this to you. So go back and listen if you don't remember. But doing retail is a whole thing unto itself and you're going to suck at it. Retail is the idea that people are going to come into your cute little shop and ring the bell and go look at your case and go buy some chocolates and you're going to be making direct sales at full retail, which sounds good, but it is a separate thing. You don't have to be a chocolate tear to be a retailer is my point there. So you have to learn everything there is to learn about retailing. Your time is split between production and selling. So half of your time or so at your end production because you're making the stuff and the other half of the time you're trying to figure out how to sell the stuff. And you're probably confused about how much money you're making because your time is completely interwoven between those two steps. You suddenly have employees and you have stress. So now you become a manager. So you've moved into management. So you're managing the retailers or the production staff or whatever else. And I would say overall it's very hard to make money. And you're very busy. You're very busy because you're doing stuff you never had to do before. You're making beautiful signage to go into your retail shop. You realize that your website is terrible. So you need to go build a website or hire someone to build a website, which means you're designing the website. You don't have any photos. Now you're taking photos like a maniac and you got to have your email list and your point of sale system has got to be working that you never had before, and it just goes on and on. I just, there's no end to that. The first shop has a lot of challenge. However, I have come to conclude after some time of really reflecting upon it, that your first shop is actually necessary, even though I hate it, it's necessary. And the reason I think it is necessary is because it gives you the credibility that you need to move beyond it. If you don't have a shop, it's difficult to answer the questions from perspective customers. You go, you talk to customers and they're like, "Oh, do you have a shop?" No, not really. I'm wrenching a kitchen from St. Catherine's Church. Can't come see me, but trust me, I'm really good at it. That just doesn't really sound good. And so you want to be able to, it's like this marker of success that yes, I have a shop, I have a location, I have a place you can come see me. And that seems to be really important, a pivotal point in the progression of your business. It draws customers to you instead of vice versa, instead of you going to the customer, they're coming to you, which is cool. It does put pressure on you to perform, obviously. I mean, you can die in that shop. You can. And I mean that, is I have spoken to people who have died in this. I have spoken to people that are 20 years in one chocolate shop. They go in every day, they make this stuff, they sell this stuff, they go home, they only make enough money to survive, and they do it again the following year. And they have, and they have, they've lost it. They have, their excitement is gone, the creativity is gone, they're cynical about it, and they're just stuck. There are a lot of people like that. So that's what I mean when I say you can die in that store. So if, you know, you have to understand that if you don't turn the corner on that, if you don't become successful out of that retail store, or at least use the store to gain the credibility that you need to move beyond it, that you can get stuck in that space. But it introduces some discipline as well. Your first store probably what teaches you that you can have unlimited skews, for example, you know, you have to have a few skews that are successful, a few products I mean to say, right, that are successful, and that people buy repeatedly as opposed to just having to constantly re-impress the people that came to the farmer's market. What do I mean? Because you only have like in farmers more, you only have this small group of customers. I don't know, 40, 50, 60 customers maybe, right? 60 customers, they can't keep buying the same damn thing every time, right? So it's got pressure on you to invent new products to keep those 60 people happy. You switch to a store, suddenly it's exact opposite. You've got lots of customers. Every skew that you make costs you so much effort in terms of pricing and support and ingredients and scheduling and keeping it in stock, etc. That you have to think about each one very carefully and limit the number that you put into your shop. It's a complete opposite of what happens when you're in the phase in front of it. So that's what makes that shop, I guess, so incredibly challenging. But like I said, I think it's necessary for the credibility aspect, which then leads me to step five or phase five. This is what I would call the expansion phase. What do you do after you have that first shop? And this is where you pick a direction. Direction one could be I want a second shop and a third shop and a fourth shop. I love retail. I think it's cool. I like having lots of stores. So if one store is good, two stores is better. So some people pick that direction and create multiple stores. Other people create a direction that is wholesaling to other retailers. It's like, okay, what do I do next? Okay, I don't really want to be retailer. I want to be a wholesaler. I want to make higher volumes of the chocolate that I make and I want other people to sell it. That's that. The third direction might be full court press into online sales. Maybe you want to really be an electronic storefront. So your retail is not so much brick and mortar. Your retail is actually online, which you want to get really good at it, right? Good website, good targeting, lots of social media, lots of CRM or customer relationship management, a lot of software or technology that you're going to put at the problem to try to get people to buy. So a lot of energy going there. Some people pick the direction of supplying to restaurants or to event coordinators. People that have weddings and things like that, right? Special events. That's another direction that you can go. A lot of restaurants around you probably write to you pick a dozen or so restaurants and you're pushing out product to them for their guests and for their events and stuff. You can be quite busy and not need a store. So you've used the credibility of having been having owned a store and then you as slowly over time, you sort of let the store go a little bit or you even close it. But your name now is good and your relationships are solid. So then you transfer that into a restaurant support business. This is what I'm talking about. You could also go into the corporate business side, which is supporting companies who want to give chocolates as employee incentives or as corporate gifts, which is something you can be very good at or something you can dabble in and you can always tell the difference between people who dabble in corporate business and people that are actually focused on it because corporates need special things. And I could do a whole podcast on that someday, but that's a direction that you could head. Another direction is actually the last direction that I can think of. Maybe there are others. The last direction is you can hustle. You can do teaching. You can sell your recipes. You can be a paid influencer. You can try to make money in some way from other chocolate tears or from the industry itself by being some kind of a rap or spokesperson or maybe you want to be the chocolate tear for somebody who's bringing the chocolates in to the country or to an equipment manufacturer or something like that. So that's that sort of hustling side project type of work, which Instagram is full of. So where in all of this, these five phases, where in all of this, are you making a hundred thousand dollars a year? Well, that's exactly what we're going to identify. Exactly where in all of these phases, you can earn a hundred thousand dollars a year and what the formula is for doing it. Okay, let's take a breather and reflect for a moment because that was a lot to take in. And I want to make sure that you understand the timeline for making money as a self-employed professional of chocolate tear. Let me reiterate that if you start in your home kitchen for, let's say, that first year and then you're under cottage foods for, let's say, another three years, that's the first four years of not making any money at all. You're literally using that time to practice and you're spending money the entire time on chocolate and courses and equipment. Your goal is to be break even, but you probably won't be. So you're going to need money from somewhere to whether this period of time, because you obviously will have living expenses that aren't going to go away and chocolate won't be paying the bills. And it could even be longer. It could be five or six years of home kitchen and cottage foods before you step into that first commercial kitchen. So one way to look at it is that you have these first several stress-free years to learn and practice and experiment before the pressure is really on. So you want to use that time wisely. There's a lot to do in that amount of time before the pressure is on. As I'm about to lay out next, the way that I achieved a hundred thousand in net take home pay last year was a combination of driving personal production efficiency, reducing labor cost, and marginally increasing sales to take up the extra inventory I produced. It's a formula I think a lot of people could use if they're willing to put their ego aside and reassess the way that they work. So let's jump back in and really delve into how this could be done and the challenges that you'll face. I'm going to make this prediction. When you get to step four, your own shop, you will be overcome with a sense of inadequacy. The inadequacy comes from the fact that you will feel like you simply cannot make enough product fast enough. You'll say to yourself, "If I could just make more stuff, I could make more money. My problem is I'm constantly selling out. I am behind all the time. How am I going to fix it? I can't work any longer hours. I'm already maxed out. And you'll say to yourself, "Look, so many of my tasks are simple and they're repetitive. I just need to hire someone to get my volume up." That's what you're going to say to yourself after you start your shop. Might be a month or two after, might be a year after. But I'll bet it's very soon. Very soon. Like, I would say a couple of months after. Now I'm going to tell you something that I need you to be sitting down for. Don't do it. At that critical moment, when you think that the solution to your problem is to make more product and that making more product equals at least an employer to, I'm telling you, don't do that. I've done that. I did that twice. Okay? Twice, I did that. That twice in two different ways. I dropped employees because of COVID. And I began to experiment with driving myself personally to increase efficiency and productivity without an employee. Something that I hadn't done in the three, four, five years prior. And it worked. And this is why I want you to learn from what I'm about to explain to you because it will change the game. I'm going to say to you that the real reason that you feel inadequate and that you can't make enough product is that you actually still suck. That's right. You're not good. You think you're good, but you're not good. You think you're good, but you're not good enough, not yet. And this is going to be a little hard for your ego to take because you're going to be like, no, I'm way, man, I'm a great chocolate here. I know my recipes. I know my shit. I can produce great product. And I mean, look, I got, I got, I'm making these peanut butter balls. I need somebody to roll the damn things. That's all I need. Okay. Here's my, here's my, my pot. And there's the trays. Somebody else go stick a spoon in there and roll them up. Okay. That's what you're going to say. And you're going to say, look, that person pays the charges 15, $18 an hour. I'm, I've done the math. You know, it's going to save me 10 hours of, of my time. I can spend that 10 hours doing something. You will rationalize. And because you are arguing with only yourself, you will win. Except for the Connie's little voice in your ear, telling you, don't do it. So let's, let's go through these two options again. Option one, hire someone full time. If you work with another person, you'll make more product just in time. So you can meet surging demand. Right? But what happens when it gets slow? You're steadily paying out payroll and you're inventing stuff for them to do. Or perhaps worse or connected, you're making more skews. Make, different product. Make more product because you suddenly have help. You have help. You can make more stuff. These are all mistakes. So hiring someone full time to work while it looks good on paper is not the solution to getting yourself to $100,000 a year. Option two, ready for option two? Buy equipment, batch up and get better. If you work alone and efficiently, you will make more product in batches during times that you can't sell it. In other words, you're making product all the time. You'll slam into a different problem as a result. And that problem is solvable. It's storage. It's my next episode. I'm doing an episode on solving that problem. You must be able to store your product a lot more than what you originally used to when you worked in sort of just-in-time method. Like I said, it's literally my next episode. But I'm not going to talk about it now because I didn't need to solve this problem to make $100,000 a year. But I'll need to solve this problem to make $200,000 a year. So I'm going to get to that. But right now, option two is what you need to do, which is to work alone and increase your batch sizes and get more efficient. When you are working by yourself, your mind is in the game. You're doing something repetitive that is less efficient than you would like. It starts to bother you. You're looking at the clock. You're thinking about it. You're analyzing it. And you're like, I wonder if I could do it this way or what if I just tried that? You start playing these-you start rolling these ideas around your head. Like, is there a way for me to make this better? Could I be more efficient? What if I did it this way or that way? What if I changed something? You will not do that if you have employees. Because when you have employees, the whole point is to have a replicable process that you've mastered. The whole point is you've mastered a process. You've figured out a way to divide the process into at least two parts, yours and theirs. I realize, of course, you could have more than one employee. You could have five employees. So I'm not to oversimplify this, but I gotta explain it. So let's just say you've broken the two pieces, you know, your piece and your friend's piece. And the piece that you're giving them, you're telling them exactly what to do. I want you to take this and I want you to roll them and I want you to put them on this tray. This is how many you go on a tray. This is exactly how it's done. So you've got all this like procedure in there for exactly how they're supposed to get from point A to point B. And the whole point is for not to not to necessarily encourage too much independent thinking on this, you want it to be replicable because what you don't want is the product to drift in terms of quality. You don't want suddenly things to be smaller or larger. You don't want things to be drier than there used to be because your employees off trying to invent some new way to doing something, right, or cut in corners or making mistakes or forgetting things. But you're different. You're a master. You're a professional, right? So you know when you've screwed up and if you've screwed up, you throw it away. But you're probably not because you're better now. You're, you know, you own your own shop for goodness sake, right? So you're not, you're not experimenting. You're not cottage foods anymore. You're a little bit further along. You're smarter than that. So when you have a problem, you can actually fix it. And I'm saying that if you are faced with the stress of the constant nagging stress of my God, if I could just go faster, if I could just make more stuff, then we could sell more and make more money, which is what's constantly plaguing you. You are going to solve that problem and you will solve it better than you would if you had an employee. Your employee will probably not solve that problem for you, but you will solve that problem if you're working alone. And if you have an employee, you're not going to be incentive to solve the problem because you feel like you already have solved the problem by giving it to the employee. I'm telling you, this is the difference. All right. 2018. Pull up my stuff. my sheets, my P&Ls right here, right in front of me. Ready for this? 2018. My sales minus cost of goods sold. Sales minus cost of goods sold. $80,000. Okay? So that was after I paid for the chocolate and everything. And my sales I was left with $80,000. My wages for my employees, which at that time was three chocolate tier apprentices and like a cleanup lady. $77,000. Then take away your basic general and administrative expenses, which for whatever reason I spend a good $18,000 in office supplies and equipment that year. I lost $63,000 in 2018. I was pissed. Here comes 2019. 2019. This year, sales minus cost of goods went up. $110,000. That's say what, $30,000 increase, right? In honest sales, sales minus the chocolate, okay? Wages, $71,000. That was different than the first year because in the first year I had three apprentices and a cleanup. I swapped the three apprentices for a full time pastry chef. I paid that person a salary. Wages were effectively the same, right? So I increased my sales, my wages stayed the same. So I had $110,000. I had $71,000. But that was the year in 2019 that I decided that I needed to get more people than the shop. So what I did was I increased the marketing budget and went from effectively zero to $25,000. I put billboards on the road. I did all kinds of stuff to try to drive people into the shop, okay? With other expenses, administrative expenses and repair and all this stuff that's normal in a business, I lost $62,000 in 2019. So I lost $60,000 in 2018, lost $60,000 in 2019. 2020 COVID hits, right? In March. Had momentum and had marketing and stuff, commitments signed from the year before. I wasn't expecting it, right? I went back to 2018 level. Not bad really, considering that we basically shut down. But $75,000 in sales and cost of goods sold. Wages only $27,000 in wages. Because we fired everybody, it was COVID, right? Still had $17,000 in marketing commitments. I lost $28,000 in 2020. 2021, I started my podcast. 'Cause I was pissed, right? $151,000. I'm working alone. Why? What did I discover? I discovered wholesale. I couldn't, people couldn't come into my shop anymore, right? We had COVID, people running around and masks. I tried, I did curbside pickup, I did online sales like the rest of you did. We had plenty of sympathetic sales and we shipped stuff all over the place online, just like everybody else did. We were successful. But they couldn't come into my shop in browse. So, what the hell am I gonna do? I've got, I've got to try something else. So I went to a couple of local retailers, some specialty shops and I asked if they'd be willing to sell my chocolate. They said yes and I started putting my chocolate in there. Wages for 2021, $30,000. I made just under $100,000 in my pocket. What was different? What was different was the wages went down dramatically and the efficiency of me producing product went up. I can prove it because before that, I had an employee, I only sold $110,000 worth of stuff, right? And I had employees to help me. Somehow I was able to make $151,000 worth of stuff after I didn't have anyone but me working alone. So I made more stuff and sold more stuff and didn't have the employee cost and that direct path to my bottom line. I still benefit from that today because my efficiency is through the roof. And it's getting better. I'm still suck. I know I can be better. Oh, by the way, say yes to every opportunity to spend money on equipment. Equipment, tools, everything gets a green line. Because it's all about reducing employee cost. That's my position. Here's what I'm saying. Full-time employees in production are a mistake until you've personally maxed out. I'm gonna repeat that again. Full-time employees in production are a mistake until you have personally maxed out. I have still not maxed out. I've been working at this and I'm getting better and I still haven't maxed out. I'm getting better. They will cost you money all year long, even in June. Even in June when the chocolate business is not necessarily rocking and rolling. They will distract you. Quality control, care and feeding. That you have to provide them, management, last, they will amplify your stupidity. In other words, your inefficient processes, they will amplify them. They will take what you started with that really wasn't that great. And you gave it to them to replicate. They will replicate and amplify your mistakes. And you don't even know it because you're so happy that stuff's happening in your shop. You know, you're excited. Shits moving around, trays are getting made. Everybody's bouncing off of each other and they're happy and they're smiling, right? You get that sense of, wow, this place is really starting to happen. We're getting sales, products being made, it's fun. It's fun. But if you did it too soon, you don't even realize that you're bleeding. I keep saying it. I don't know if you're mad at me right now or you're laughing at me or what. But like I said, you're not that good. You think you're good, but you're not that good. I know because I thought I was good. I thought I was really good. I thought I was the shit. I mean, I did not just fall off the pickle truck. I mean, I have been making chocolates for like 12 years. Many would consider me a master. I'm very good at what I do. High quality, beautiful product coming out the door. I mean, I felt like I was the man. It was not until I was actually faced with not having any help and so angry at the problem that I was going to find a way to improve the efficiency with which I made product and its quality and all related processes that I finally actually began to do that. My advice is I would pull every lever before you get production employees. Every equipment, supplies expense, pales in comparison to a full time employee cost. You want a mold? You think a mold's expensive at 20 bucks, right? You want a new mold, this like 20 bucks. Compare that to 20 bucks an hour. Okay? An hour. You want a new mold, right? You want eight new molds. Oh, I'm going to buy four molds. I'm going to buy four molds because it's too expensive. I really would like to buy eight molds. Okay? That's eight hours, eight hours of production support. Buy a hundred molds guys. Buy a hundred molds. Change the game. Get the big ass temporary machine. All right? That's $30,000 you say. Yeah, $30,000 for a temporary machine. Well, it's $30,000 for a new employee. Take the trade. Buy the equipment. Don't buy the employee. Not yet. Take that trade. In fact, everything you want is approved. You want a depositor? Get it. You want a ganache cutter? Done. You want new confectionery frames? Approved, maybe. No problem. You want stuff? You get it because every piece of equipment pales in comparison to recurring employee cost. And it will make you more successful. I'm telling you, load up, batch up, scale up, bigger pot, bigger table, max yourself out. Now, when you do need help, my advice is hire a gig worker. Uncall, side money, specific task. It's a lot different than a full time employee. All right. You know, you've got this little task to do over here And it's an eight hour thing and you can call someone in to work for eight hours? Great. But but not every day for eight hours forever. See what I mean? I know a chocolate tier does very successfully like that is in a situation where she's in one of those resort towns and the the staff that she hires if you will, they're all doing other jobs. They're all doing other things. But she has trained them over time to be many chocolateeers. But she's never brought them in full time. She only just brings them in when she needs them. So she brings them in for a little job and then she sends them back to go do the other things that they do. You know over time she's cultivated an on-call workforce which allows her to manage peak loads and things like that. Maybe that would work for you. If you really feel the need to have somebody else in there. The other part of the formula to get to 100,000. The other part of the formula is to increase your sales. Right? Because if you kept your sales at only 80,000 and your wages went down to let's just say 30 or whatever, you're still more of a break even. Right? You need to get you need to get up to the sweet spot and sales. Otherwise all this efficiency and production I'm talking about there's no place for it to go. You've got to have a place for the product to go. How do you want to do that? Well you could you spend advertising money and drive more people to your retail store. You know I did that as I told you in the earlier years that was about a thousand dollars a month. You could be all social media and drive people to your online store. Right? There are some chocolate tears that do that. I mean they cultivate their Instagram or their Facebook following in such a way that when they promote a product they get instant sales and their online stores. It's a trade off. They spend a lot of their time in social media to get to a point where they can drive their own product sales just by doing it. But it believed me you can't constantly do that. You've got to also put other content out there that makes you lovable. And so it's a real commitment if you're going to use social media as a channel like that. You could get a couple of good restaurant hotel deals. Now that travel is coming back you could get into the weddings and events business by courting event planners. That's another way to move some extra product. You could do what I did which is wholesale into retail stores. Or you go after corporate business right. We talked about that list before. But you've got to probably have to do something because you probably won't have magically an increased demand in your in your retail store. But you don't have to go crazy. There's a sweet spot. I found it. You can find it too. You need enough sales to where you cover your overhead and you don't give a way all of your profit and wages because you've become personally more productive through efficiency and equipment. That's what you that's what you got to do. It's true that the chocolate business always seems to be about bigger, bigger, bigger. I mean that's really what I thought about all last year. It's like everything seems to be better if you're bigger. Your price goes down on everything. Your price goes down on packaging. Your price goes down on chocolate. Your prices go down on nuts and things like that. Just everything with the bigger you are the better. You know, you got bigger equipment. You're putting out more product. Your cost seems to go down per piece. And as I've said before in other podcast episodes, that is in contrast to the concept of being artisan, right? Because now artisan, you're supposed to be sitting there by hand and making these little delicate pieces by hand. I'm telling you that the better if it's blasting off some production line. So there is that inherent struggle between those two philosophies. But if you get bigger the wrong way, your sales will be high, but your costs will also be high. And you will sound impressive in terms of the numbers of pieces that you sell. But you may not personally be making any money. This is what is so important for you to understand. The thing that I figured out was that there is a sweet spot where you make enough money and sales against your low wage cost that the differential in that is actual profit you can put in your pocket. Just because you're bigger does not mean you are more profitable. And that is definitely a misunderstood concept in general business and in the chocolate business. Two chocolate tears, one with 250,000 in sales, and the other one with a million in sales. I used to think so, but I no longer do. All right, you made it through episode one of season two. Another hour of me rambling about the chocolate business. I didn't say this explicitly earlier, so I want to say this now. That feeling of inadequacy I was talking about where you feel like you would have sold more if you could have just made more. That probably comes from the fact that you nearly sold out or completely sold out of product. If you have more customers than product, you feel bad about it. If you follow my advice and you increase your productivity and therefore make more product, you will need enough customers to buy the extra that you made so that you can actually be profitable. You need to have demand for your extra supply. So if you go up by 50% productivity, which I'll bet you can do if you really work at it, that would be 50% more product. You will not be able to get there with just your store is my prediction. It's harder to grow your customer base by 50%. Then it is to increase your product output by 50%. So in your first year, you wouldn't make it. You wouldn't catch up. You would grow your inventory faster than you could grow your customer base and that will cause you a problem. You'll have excess product that you won't be able to sell. That's why you need the extra pull. So wholesale corporate accounts, hospitality, whatever, but you'll need some extra draw. You probably can't get through organically. It's too fast of a growth. Now that you know how much money I make, you might be less inclined to throw five bucks in the donation bucket for the podcast, but I would still appreciate it if you would since it is funded at the moment. You can do that by looking me up on anchor.fm where you'll find the show page Constantine - Zego. If you want to email me, I'm at Connie at MastersofConfection.com. As ever, please share this on social media. I really want this to grow and get more of us listening and sharing ideas. It's only been a year, but it's already working. So until next time, keep making your fantastic chocolates and a healthy profit at the same time. Bye-bye. The business of artisan chocolate is written and hosted by Constantine Zego. Music by the "wow, he's really talented, filled any," editing and production by the dapper and sophisticated Chris Sweeney. Our lawyers wanted us to remind you that Constantine Zego is not a financial advisor. This podcast should be considered informational and entertainment, not financial advice. He's really just a guy that can open an Excel spreadsheet. And I'm Nikki, his loving and mostly tolerant wife.