The Month End provides emerging inventory based brands real life knowledge in the accounting, finance, and operational world. Our guests are not only similar brand founders and owners, but key stakeholders and contributors to the industry. Each episode provides a glimpse into the vast experience and insight from its guest’s unique background in a casual, conversational tone.
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In episode seventeen, Accountfully's CEO and Partner, Brad Ebenhoeh sits down with Founder and CEO of Over Easy, Kyle Maggard. As a former Army captain, and busy dad, Kyle was on the lookout for a convenient, healthy and tasty breakfast option. When thick, unappealing protein bars and the classic sugar laden options no longer cut it, Kyle started his own company to solve this problem. We learn some hands on, valuable pricing and development lessons from his journey as a growing company.
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Welcome to The Month End CPG community chat. The Month End will provide emerging CPG brands real life knowledge into the accounting, finance and operational worlds. Our guests will be key stakeholders from those same brands as well as other key contributors to the industry, all of which have vast experiences and insights that will be shared with the audience. Welcome to The Month End episode number 17. This today we have Kyle Maggard from Over Easy. Kyle is the CEO. How are you doing today, Kyle?Kyle Maggard:
I'm doing great, Brad, how are you?Brad Ebenhoeh:
Awesome, man. So looking forward to the chat, Kyle and Over Easy has been a client of Accountfully for the last couple of years and the brand is going gangbusters. So we're excited to chat a little bit of finance and ops with Kyle. Kyle, can you give a little background of Over Easy? Kind of what you're selling what you're doing, as well as kind of what your role is? I see it in the background right there. And let's get into it.Kyle Maggard:
Yeah, I'm glad you can see the the packaging popping on that shelf. Yeah, so Over Easy is a modern breakfast company. Our goal is to give everybody that healthy start, the healthy, exciting start that we all deserve in the morning. I started Over Easy in the fall of 2018. I recognized like my biggest problem that I was facing every morning, consistently was what do I eat in the morning when I'm so busy on the go. I went to West Point for my undergrad I was an Army Captain in my previous life, and then I went to get my MBA and was busy college student again. Most importantly, I'm a busy husband and father. And I've just always been on the go like so many other people like looking for something to eat, when I'm running out the door in the morning or I'm leaving the gym or headed to the gym or going to class stuck in rush hour traffic. And when I was a little kid, I would eat pop tarts and muffins and Little Debbie donut bites. But when you get older and you start worrying about what you're going to eat, and you care about what you put in your body, I realized that there was really a big cap and in practice space, everything was coated in sugar, you know, products hadn't changed since the 80s. And I had just defaulted to these nasty protein bars. And I hated waking up to every morning, but I did because there was no other alternative. And so I decided to change that with Over Easy. Our first product is a high protein, high fiber, oat based breakfast bar, essentially like a bowl of oatmeal pressed into a bar form. And we'll be releasing some new products here over the next several months to build out our portfolio of healthy delicious and convenient breakfast foods. We're sold in Whole Foods, they are our our biggest retailer, Wegmans as well, Giant, and we're getting ready for national distribution here in the upcoming spring.Brad Ebenhoeh:
Awesome. My favorite meal is breakfast, and I love that. SoKyle Maggard:
It's how you start your day.Brad Ebenhoeh:
Exactly. So well, good. So yeah, so you're the CEO, kind of when you started this, just kind of walk through kind of the the team expansion or kind of what, when you started, what were you doing probably everything and then kind of how did you decide to outsource or hire and kind of what was your workflow in terms of that?Kyle Maggard:
Yeah, absolutely. So it was just me for the first 15 months. And this is when I was creating the recipes. So I went off like Pinterest and food blogs. And it took me about a year to land on the recipes in my kitchen, take them to a commercial kitchen and to a contract manufacturer. And then I hired our first teammate, who actually came from Kind with an extensive field sales and field marketing background. I really needed somebody who had industry experience like my, you know, I was in the military before I started this and didn't really have experience in CPG besides being a consumer and loving food and loving to make food. So it was her and I for about six months. And then we brought on somebody on the operation side. So we had someone in sales, myself, and our V who is now our VP of Ops on our operation side. And then it was the three of us for a while. And we just started like building out different pieces of the puzzle for us. We have a pretty large field sales and marketing team. We have been very boots on the ground to this point. There's eight people on our Field Sales and Marketing team now there's 15 total in our company. We keep growing but really you know it's been we have gotten to a certain like checkpoint or milestone in the business or really I bet you know, it's actually better to describe it as a pain point. Get to a pain point where we're running up against the wall, and are unable to figure it out internally. And so we should probably go hire somebody who has a little bit of experience doing this or find a partner who has experience doing this, you know better than we can because one, everybody's stretched so thin. And I think that's just a commonality across all startups. And then two like, you can't, there's no replacement for great people and great partners, there's really just no replacement for that. So we've been growing as, as we build been growing a lot recently, as we've been expanding into retail and expanding online. And then as you know, as we expand from a bar company, to a breakfast company, which is what Over Easy was always intended to be, our team will start growing pretty fast as well.Brad Ebenhoeh:
Awesome. So you're selling into, you know, Wegmans, Whole Foods. So through distributors, you know, direct wholesale. Also on Amazon direct to consumer, so, kind of how do you how do you kind of report or view each of those sales channels, or even give some examples, maybe in one or two of them of how you identify success, not just maybe top line revenue, but also then kind of how you look at like metrics? And maybe financials or margin or, you know, lifetime value kind of situation for maybe a sales channel, too.Kyle Maggard:
Yeah, absolutely. So I'll start with retail. And it's completely we just base it off of velocities. Like how are we doing in the stores in which we have distribution. Now, there's that the common pitfall that everybody talks about in CPG is like gaining distribution before you build awareness and build velocities and your current distribution. And that's great in the short term, and but it's really like a, it could be a death sentence. When you have widespread distribution, you've paid a lot in terms of trade spend in order to get that distribution, and then no one's buying your product. So velocities, and on a, you know, unit per store per SKU per week basis is the number one KPI for us in retail, and then online on DTC its lifetime value. It's been, it hasn't been a big focus of ours to date, like running ads, because we, you know, we're still ironing out some of our internal branding. And it's a challenging, it's a dynamic world. And, you know, with the iOS updates and CAC has just kind of gone through the roof for a lot of a lot of companies. And so it's a challenging equation to solve, a challenging field of play in. But making sure that like when somebody buys, or somebody comes onto our website and buys Over Easy bars, like they have a fantastic experience, from the moment they order to when they get the product and you know, they're, they fall in love with it. And so they're going to reorder. Because we just cannot win, we cannot build a business if we're having people that are one time. So we're very focused on lifetime value on DTC. And we also have a huge foodservice business too. We have, we're in nearly every NFL locker room. We're in dozens of MLB, NBA, NHL locker rooms, college athletic departments around the country. And then that is really number of accounts we get into. You know, it is it's a hard channel to forecast in, because they're seasonality, you know, you don't know there's not like a review. The same way there is for all these retailers like it is just very much a lot of hustle and grit to get into some of these accounts. So we're just trying to get into more accounts, more food service accounts that we feel the product and the brand is a good fit in. And that's the number one metric for us in food service. How many accounts are we in, and of course, top line sales there as well.Brad Ebenhoeh:
Great information. In terms of pricing within each of these specific channels. When you go to market or even like the new the new SKUs you'll be rolling out at some point in the future from a breakfast bar standpoint, how do you analyze price or determine prices? Is it market base, it it COGS plus? Is it a mix of it? Like how do you look at that because I know a lot of founders kind of always kind of go back and forth on understanding or determining that.Kyle Maggard:
We've learned a lot, and we're actually learning a lesson right now on it. So to start, it was market based. We have to be priced to be competitive. And I like after the recipes were already set. I was like okay, well what's the price here? But we have very premium ingredients. We have no fillers in our product. There's no added flavors, like everything is just what you would buy at the grocery store or you would have a kitchen so our product is expensive to make. And so we tried initially to be like, well, let's see what all the competitors are doing and be somewhere in there that we're not too expensive, we're not too cheap. So we're, you know, we're definitely it's a premium product. And it crushed our margins doing it that way. As I was under the false understanding that you could continue to drive down COGS, and that you just like make more and then COGS, you know, it'll be a linear decrease, you know, in your COGS. And it's just not true. That like, it is very difficult. And we are very good at working with our partners, and have some great partners that are in it for our long term success. And obviously understand that the more we sell, the better margins we have, like, that's a win win for all of us. But there is a bottom, you know, there is a floor, unlike what you can get your COGS down to. And if you don't price yourself appropriately to your product, then you won't be successful, right, like, you'll just continue to burn cash. And that's what we've learned, probably over the last year. And so we're going through an exercise now where we're thinking the right way about it, at least the way that we think is the right way about it. So we're like, our product is a premium product or ingredients or premium ingredients. And we need to price ourselves appropriately. And if there's any disconnect with the consumer, then we have to do a better job of educating the consumer and why our product is priced the way it is, not trying to compete, or keep up with the Joneses, you know, with all our competitors. So that's a hard lesson that we are learning now, or we did learn, I would say probably over the last year, like I said, but we're rectifying it at the moment.Brad Ebenhoeh:
Interesting. Yeah, and it's, you know, the day and age, we live in the last 12 months in relation to just kind of inflation, you know, soaring kind of freight cost, you know, limited supply and various items, you know, advertising and Instagram or Facebook or Google like that your your your cost structure of your product and the COGS, it seems to me across the board just keeps on increasing. And so it's really understanding kind of where where your price point is, in terms of, you know, what are your consumers were willing to buy? So interesting on that aspect. When you look at, you know, from an inventory perspective of, you know, the growth that, you know, Over Easy is having or has had, and planning on having, how are you managing, like inventory, buying inventory planning, you know, not understanding what your kind of your your whole supply chain setup looks like. But, you know, are you doing it? How do you do at a company wide level, then how do you even like, segment it down at the sales channel level or the location level?Kyle Maggard:
Yeah, that's a great question. And so I have a couple ways to kind of tackle this. I'd say like high level, we work very, like very closely with our contract manufacturer on sourcing all of our ingredients. It has been a challenge, given the current world, and I know I'm preaching to the choir, everybody listening to this, and you probably experienced this a lot too, with all your clients and their supply chain challenges across across every industry. But it's about having for us very close relationships with our contract manufacturer in our 3PL to make sure that we are not building our working capital more than absolutely has to be. Right like it's a fine line of well, we have to have enough raw material, raw ingredients to flex up our inventory. You know, if we take on a new account, or we have, you know, an unexpected bump, you know, boom in sales. But also like we don't want a lot of, you know, our working capital be more than has to be, you know, we don't want to that cash to just be tied up in oats and peanuts, sitting at our our contract manufacturer sitting in their warehouse. We are very, like we have one KPI that we're extremely focused on for our supply chain, and that's day sales inventory. So the really that unites our entire team, it's our VP of Operations, who leads the charge there and brings it up in all of our meetings. And it's a big focus for our team, big focus of his, but it requires our sales team to like actually give accurate sales forecasts and then hold ourselves to like, hey, this is what we said we're going to sell because if we have too much inventory. You know, that's held up at our, in our warehouse, there's a number of ramifications that results from that. One, obviously, we have our working capital is much higher than it needs to be. And as any high growth business can appreciate, like you can limit your set you unintentionally limit yourself and your growth if your working capital is too high, and so day sales inventory, like helps us keep our working capital down, it also helps us provide a better experience for a consumer. You know, like, every food product has an expiration date on it. And every food product is better the day that it's made, then, you know, even halfway through the expiration product, every product is like that. Everything's better fresh out of the oven. And so we want people to have the product as fresh as possible. I mean, you can still enjoy it, our expiration date is a year, so you can still enjoy it in a year. But there's nothing, you know better than being fresh out of the oven. So, you know, we focus on minimizing day sales inventory, at the moment while having a reserve so we can flex up, if needed. And also having an agreement with a contract manufacturer was like, Hey, we own these days of production. So especially as we're growing and as we go through these, like uncertain times, like you have to give us the ability to flex up production if we need to. So we don't have to over produce. And we constantly have old products sitting in warehouse and we're pushing it to retailers or distributors that we're really not too excited about. And then ultimately, you know, the worst case scenario is that the customer has a bad first experience. And it's like Over Easy bars are not as good as everyone says they are.Brad Ebenhoeh:
Yes, think that's great, and that two follow up questions. So you are burning cash big time, because of your pricing, you know, where you're at with your business now with kind of moving to the next phase of Over Easy, are you going to be identifying, or will you be managing cash differently with kind of, you know, startup setup now maybe like more mature, you know, moving into the maturity phase, or like the next phase of the business? Will there'll be a difference of how you manage cash or inventory with that?Kyle Maggard:
Yes, we are shooting for profitability now.Brad Ebenhoeh:
It has been to this point, that we are like brand building. And now we have the foundation for which you're going to see us do a lot of very exciting like brand building over the next 12 months. And we have great retail partners that we're very excited about great food service partners, we're very excited about. We have an awesome Amazon partner that's really helping us win in that channel. But I don't subscribe to the DTC mentality that, you know, or just the mentality that has killed a lot of companies over the last 10 years of just, you can always get more cash. Like that's not a true business. And in some industries, like the beverage industry, it's very cash intensive, you have to get distribution, there's only so much distribution because there's only so much cooler space. The foods, the thing for food is like we can sell our bars anywhere, we can sell our bars on a coffee shop counter top. You know, we can sell them directly to consumers. And it's DTC, it's not too expensive for us to do that way. So now we are very focused on getting to profitability. Our cash conversion cycle is a big KPI that we're focused on. So we continue, we can continue to grow and fund our own growth and not be reliant on external funding to take on the next big client or you know, build up inventory if we're going into a big retailer big wholesaler. So yeah, for us, it's all about getting to profitability next, when you're looking at 2022.Brad Ebenhoeh:
Awesome, yeah, when you're looking at you know, P&Ls and in different financial reports like looking at, you know, the growth phase of the business of brand, brand growth, brand awareness versus then looking at it focusing and making decisions on profitability is a different game. When you're handling inventory, and you kind of discussing inventory, you know, expiration dates and things like that, you know, I know you use like inventory system to your inventory or, you know, how, from your perspective having that level of visibility or automation or that tool at your, you know, your forefront has that really helped out your business and if so, like how?Kyle Maggard:
Oh it absolutely has helped out our business, and I just think visibility and clarity around KPIs and around where you sit in terms of an inventory standpoint, and just working capital that's out there. And what it would take in order to minimize working capital, and minimize like day sales inventory, minimize cash conversion cycle. And like where that puts you in terms of lead times with suppliers. And if they're like, what is the what is the right balance there, of, you know, having the minimal amount of inventory on hand, but being able to not having to pass up an opportunity, because you can flex up. And we wouldn't be able to do that, if we didn't have a great inventory tracker, and our VP of Ops who's like, very in tune with it. And then also, if we didn't fully understand exactly, you know, how, like, our lead times with suppliers, and we didn't have constant communication with them to where they can tell us, hey, guys, and in two months, it's gonna be hard for you to get apples. And you know, in the six weeks that, you know, we, we usually give them to you in or three weeks, whatever it is. And so we're like, alright, we better order these ahead of time. And even though we're gonna have more inventory on our books, it's a lot better than being out of stock, you know, in our, at our retailers. So those, like, I just think that visibility and clarity around KPIs and like where the business stands, is the only way you can make smart decisions. Otherwise, you're just flying blind.Brad Ebenhoeh:
Yeah. And inventory, the key, you know, to any inventory based businesses inventory efficiency, inventory ROI, like having the least amount of inventory in hand with the generate the highest amount of revenues, but not to lose sales. And so it's this constant game. And when you're when you're when you have four or five SKUs, or four or five flavors right now, and you're gonna go to different, you're creating a new segment or a new lane, going from a bar to a breakfast, you know, brand. There's so many different SKUs, there's so many different suppliers, so many different demands, so many different timing lead times that you just need to stay so proactive on those items in terms of what's on hand, what what cash do I have available? How do I fund this? When do I need to bring it in? So it's definitely a key aspect of any inventory based business, and especially as you're ready to go to kind of growth mode. From a financial reporting standpoint, you know, segmenting by different sales channels, on the P&L and understanding the different kind of KPIs, the different reporting mechanisms within each sales channel, you know, direct to consumer via Shopify is different than Amazon, right is different than distribution, in terms of, you know, kind of reviewing those on a monthly basis, you know, is there any specific kind of sales channel reporting, you really dive into outside of some of the stuff we've already chatted about? You know, any kind of any thoughts on that?Kyle Maggard:
Yeah, I'd say each sales channel is just an equation. And I think of like the end result, if it's, you know, net revenue, it's just an equation. Like, for DTC, its website traffic, multiplied by your conversion rate, by your average order value, right. And then it's like your repeat order rate. And I think on food service, or on retail, it's your average velocities, multiplied by how many placements you have in storage, multiplied by how many stores you have. And so like, we break it down, we get very particular there, because there's certain variables you can control and certain variables that are just in the equation. You know, so for us, when we break down our our financials, we want to know, what is the equation for each sales channel? And what is the key metric that we can actually make a decision around, that's going to impact that variable or that metric. So like for DTC if its average order value, or like, hey, we don't have the funds to increase or we're not ready to build brand awareness to drive more traffic to the website, our conversion rate, like we already optimize that, but like our average order value, like we could sell more to the same consumer. And that'll, you know, improve our margins because shipping is not going to be linear, you know, the same way as average order value would be. We get granular to that level. And then we also tie expenses to individual sales channels. Because with us having for sales channels, food service, which is big for us, which usually isn't big for early companies, it's you know, usually an afterthought, after you have saturated, you know, retail and DTC. So foodservice, retail DTC, and Amazon, like we really need to know what is the profitability of each of those sales channels. Because we could be spending a lot of money in a channel that like really isn't profitable for us. And so like being very mindful of that, tying our expenses to individual sales channels whenever we can, while being mindful that there are certain brand building activities that you cannot tie to a specific sales channel, so somebody can go and see our brand online and then go to Whole Foods and buy it. Yeah, or vice versa. And so, but we at least give it a shot, we at least, you know, try to tie our expenses to a specific sales channel. So we can have discussions on like, guys, how well is Amazon really doing? How well is food service like really doing? If we spent more on food service, do we see an uptick in in retail? Like, why is that the case? And is that scalable? So we get very granular with each sales channel and like really try to analyze, is this profitable? And if it's not, what is the metric? Or what is the variable that we can manipulate in order to change that story?Brad Ebenhoeh:
Yeah, just from kind of my visibility to things I think identifying, reporting, and segmenting them by channel or a specific customer or something really helps you make better decisions on whether you to your point, what variable can I tweak? And or, Hey, I'm going to forecast the next 12 to 24 months, like you have to have individual forecasting within each sales channel, or the last descision to your point, is this really worth my time or not? Is this is this a breakeven? Or is this a loss leader channel? But does it impact overall brand equity of the other channels? Great, but maybe if it doesn't, so, really, I think getting to that level really helps out, you know, to make the best decision that you can for the organization. Now we're getting towards the end of the podcast, you know, kind of the the one do, one don't here. So to your fellow CPG brand owners, founders, you know, somebody that's getting ready to maybe launch a brand, what does one do? That, you know, from a recommendation to those folks?Kyle Maggard:
Well, I have a few and I guess they apply to people at different stages. And of course, I'm still, you know, learning as I go. I think a big one is like don't underestimate the power of having spectacular people on your team. Everything that we've done at our company, and everything that we will continue to do with Over Easy, is just a result of like having fabulous people. Like hard working, salt of the earth, individuals that believe in our mission, that are smart, that are resourceful. That is it. Everything after me deciding, okay, I'm going to start this company is all a result of the people involved. And everything that happens is just a product of the people that are involved, the good and the bad. And so I think it's the biggest challenge of a startup is it's all people business and making sure you have the right people on the bus. One don't is don't get complacent, I would say. And I would say that, I've heard this narrative so much about you just need to own this one business, like this one product, you just need to own your one specialty or one area of of your core business. And just focus on that, and just focus on that, and just focus on that. I can tell when certain parts of our business are not going to be a success. And I think that there's a lot of a lot of companies out there that are like working really hard to their own death, that are already set up for failure. And so what I would say is being very honest with yourself, being very humble, and making changes before the industry tells you that there needs to be a change. Before someone gives you the negative feedback that like hey, there needs to be a change. Really, we look ourselves in the mirror and we're not perfect. We have failed at this plenty of times. And we'll probably fail at it plenty more times. But we asked ourselves, is this really going to be a success? No one said it hasn't been and we have no reason to believe besides our own intuition that it's not going to be a success. But something in our gut is like no, that's not right. Or on the opposite side. Being very honest with ourselves like hey, I know everybody said don't do this. And this is like against the industry best practices, or the industry guide, but screw it, we think it's the right way to go. And like you have to trust your gut. So just being like very honest, very open, removing, like any ego, which is always harder to do than to say, that's probably the biggest thing. You know, the biggest advice that I've been trying to tell myself, I will continue to tell myself and, you know, hopefully it's helpful for other people too.Brad Ebenhoeh:
I think that's great information. I mean, clearly, you've done a great job so far, and building a team of 15 people from zero, right and so, people, people, people, man, every business is a people business. So I think, you know, you you discussing, that is clearly key to everybody. And even if your inventory based business, the team is the team, and they're the people that are and help take you to wherever you're gonna go. And then, you know, having conviction on your decisions and data that help support those decisions and move forward. I think you know, that what you're done with that you mentioned really shows like, you know, the entrepreneur in you, right? Like, I'm not going to go always with the grain, probably the entrepreneur mindset is against the grain. And why am I going to do that and let's go and blaze that that path.Kyle Maggard:
That's the whole beauty of entrepreneurship, is that you get to do something for the first time in a way that nobody else has done it. And like there, I just don't believe I don't believe--in business school, I had the privilege of listening to a lot of successful entrepreneurs and CEOs come in and like talk about their case studies, and talk about their path to success or their path to failure. And the most, the biggest lesson I learned is like, there is just no blueprint. And so embrace that and like people that try to tell you exactly what you should be doing like and that don't start with this is just my perspective, please take it with a grain of salt. They want to be experts, but like I think everything needs to be taken with a grain of salt. That's the whole beauty of entrepreneurship, somebody decided to do it a little different. And it worked.Brad Ebenhoeh:
I agree man that that rings true to me and Accountfully so well good stuff, Kyle. I really appreciate your time the insight was fantastic. You know, I love that love the brand. Definitely had a couple bars already, love it. Can you tell the the audience where they can buy Over Easy? You know what flavor is your favorite? Yeah, give us a little little sales pitch here.Kyle Maggard:
Yeah. All right. So we have seven flavors. You can buy our bars on OverEasyFoods.com. We're also on Amazon. We're also in Whole Foods, will be national with Whole Foods in May. Wegmans, and a whole bunch of other retailers up and down the East Coast and into the Midwest. My favorite is our toasted coconut. I'm a huge Girl Scout cookie fan. And it tastes exactly like a Samoa Girl Scout cookie. Which is why I love it so much. So I think that's a big favorite. Also peanut butter dark chocolate. I mean people are just addicted to peanut butter and everyone likes chocolate. So that's another big favorite. But the bars are essentially like a bowl of oatmeal in a bar, high protein, high fiber. Very clean ingredients. No fillers, no flavors needed to be added. If it tastes like apples and cinnamon, it's because of the apples and the cinnamon in the bar. So I just made these like I wanted to. I wanted to make our bars as if somebody had 30 minutes to make them themselves in their own kitchen. And I figured I would just do it to make life easier on everybody else. So that's the gist behind Over Easy. Please give them a try. I strongly believe it's the best bar in the market, and definitely has the most heart out of any bar in the market. So give them a shot. Thank you, everybody. Thank you, Brad.Brad Ebenhoeh:
Awesome, Kyle. Thanks again. And take care. That's episode number 17 of The Month End podcast with Kyle Maggard from Over Easy. Take care.