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Dessert Entrepreneurs Sharing Funding Insights & Advice

(This article appeared in the Summer 2019 issue of Pastry Arts Magazine)      

In this edition of “Business Bites,” we connect with four dessert entrepreneurs to discover how they funded their business and to get their advice on securing capital for those attempting to fund their ideas.


Hot Cakes Owner Autumn MartinAutumn Martin
Founder, Hot Cakes Molten
Chocolate Cakery
Seattle, Washington

Funding the Business

I funded my first company, Hot Cakes, using three different methods – debt, angel investors, and crowdfunding via Kickstarter. Because Hot Cakes was a new concept, and I had zero assets and no cash on hand, I had to get a guarantor for the loan. My landlord of the space I was going into offered to be my guarantor for equity trade. The angel investors were very hard to come by; it took about a year to find enough investors to get the money I needed. I did this by presenting to investor groups, and by getting my business plan in front of as many people as possible. The crowdfunding happened during the build-out of the restaurant when I realized I needed about $30,000 more than I had originally estimated.

Hot Cakes Molten Chocolate Cakery

Best Funding Advice

I am a fan of debt – if you can get good terms, and you like your banker. I happen to love my bank – it is a local Washington State bank, and we have a very close relationship. Investors are great too, but I would keep your group small, and to only those you know closely and trust, and who are accredited and understand what it is to be an investor of a company. I have two investors who put in very small amounts of money, who require a lot of managing – which is the last thing you want to do when trying to run a small business. So, get people on your team that know how investments in food businesses work. My last piece of advice is to spend a lot of time and energy on your business plan and projections. These should act as your road map and help track how you are doing. The better you can predict and understand the ebbs and flows of your business, the more successful you will be. 


Whisked Owner Jenna HunstbergerJenna Hunstberger
Owner, Whisked!
Washington, DC

Funding the Business

I’m cautious, so I used $3000 of personal savings to test products at a farmers’ market. I had a part-time job that paid bills, so the farmers’ market became the source of our funding. I used funds from our market to purchase a delivery vehicle and to expand into a larger rented kitchen space, which allowed us to start wholesaling. Eventually, our revenue grew high enough so I could quit my part-time job and work at Whisked! full-time.

Over the years, I’ve been able to move into larger built-out kitchen spaces using our revenue. I also funded our expansion and built our credit by applying for, and getting, SBA-backed equipment loans. We’re currently in the process of building our own kitchen space, and we were able to get a much larger SBA loan for the project because we have solid revenue, profits and successful lending history.

WhiskedBest Funding Advice

Don’t compare yourself to anyone else. It’s tempting to see other companies successfully raising millions to fund their projects and think that’s the only route to success. But you have no idea how much equity they’ve given up or debt they’ve gone into to make that happen. Growing slowly gives you more control over your company and lets you work out kinks in your business model. Always make sure what you’re doing is profitable or can become profitable relatively quickly – know all your ingredient and labor costs and run your numbers all the time to make sure they’re on target.

Check out SCORE – an SBA program where retired executives mentor small businesses for free. SCORE mentors will go through your profit and loss statement with you line by line until you understand every number. And if you grow sustainably and have a successful business, you can get SBA funding, even if you don’t have big assets, like a house. Going slowly and profitably will set you up for long-term success.


16 Handles Owner Solomon ChoiSolomon Choi
Founder & CEO, 16 Handles
United States

Funding the Business

I received the seed investment from family in 2008 to open up my first 16 Handles location in the East Village in New York City. The amount was $600,000, which went towards the lease, build out, furniture and fixtures, professional fees and working capital. The company organically grew and used its profits to become a franchise organization.

Best Funding Advice

16 HandlesFinding a brick-and-mortar business like a bakery or dessert shop should not be underestimated. Often times, I see entrepreneurs miscalculate how much they need because of a low estimate on working capital. In markets like New York City, where the rent and labor are extremely high compared to the rest of the country, I recommend having working capital for at least six months to a year to cover expenses. It will allow the operator to focus on operations as well as local store marketing to get the brand out.


Gal Danay
Co-Founder & CFO, Woops!
United States

Funding the Business

We funded our business primarily with founder equity, but during certain growth phases, we took on bridge loan debt. Currently, we have long-term SBA financing. In the future, we will look to add smart equity, if needed. We also decided to focus primarily on franchising. The franchising business model allows for quick growth as individual people are investing money to open locations as opposed to the company investing its own capital.

Best Funding Advice

Have a healthy combination of debt and equity for funding purposes. Finding the right equity partners can bring a lot of value to the business – people from different walks of life that have experience and professional expertise in areas of growth. On the other hand, it is smart to use debt when it is available, because you do not have to give up control or stake in the company. In addition, make sure to create a funding strategy. Understand the risks involved in different business models and plan ahead to ensure proper funding.

 

Staff
Staff
Pastry Arts Magazine is the new resource for pastry & baking professionals set to inspire, educate and connect the gourmet community as an informational conduit spotlighting the trade.

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