Check Yo Self Before You Wreck Yo Self

What a great piece of advise. “Check Yo Self Before You Wreck Yo Self”. Rapper turned actor Ice Cube popularized the phrase with his 1993 single “Check Yo Self”. Back then, as a twenty something, we used the phrase humorously when someone we knew, was about to go off and do or say something that seemed wrong or had the capacity of ending badly.

Every parent tells their kids to “be careful” as they go out the door. I’m not a fan of rap music, but in my opinion, this may be viewed as one of  rap musics shinier moments. Besides making gobs and gobs of  “Cheddar” or “Benjamins” on selling self-expression or life experience lyrics, laid over a track of head bobbing music, coupled with an over abundance of trunk vibrating bass thumps, it simply means “you better know what you’re doing “.

As mentioned in an earlier blog post, I’ve naively spent money on an idea or two, without really understanding what I was doing and subsequently saw my money fly away like a “homing pigeon”, expecting it to come back with friends, but instead disappeared like a Twitter post that was sent, but never showed up on my timeline, leaving me to wonder what happened?

I believe going into a start-up business without completing an exhaustive analysis of the day-to-day operations, expenses and costs of your business goals and know how, can create the high likely hood of the “wreck yourself” or losing your hard-earned investment of money and time or worse, your home.

Understand why a lender wants you to provide a business plan with a loan application. The operational aspect of your business, your experience are important, but they are secondary to the financials of the business and credit rating of the borrower(s). If you your credit ratings are in the high 700’s to 800+, the lender can usually move your loan application further along, asking about cash on hand, collateral assets.

For us, this was the first time we were asking for a loan to fund part of our dessert truck business. As a first time business owner, with less than 1 year experience in the field, our loan package was looked at with a fine toothed comb. Do you have 30% down? 30% is a big number. Why 30%? Well. if you look at us from a “risk” perspective, we don’t look that good. We have good credit, it helped to show our commitment to this business venture with a Le Cordon Bleu course completion. Still, most lenders don’t want to lend money to anyone new to the food or restaurant sector, considering the high rate of failure in the years 1 thru 5.

That 30% I mentioned, is of your Total Project Costs. So for example if you, through in-depth analysis, research and completion of a business plan, determine that your Total Project Cost is $100,000, you will need to come in with 30% or $30,000, before the lender will let you borrow the balance of $70,000. Our lender only allowed us to add or build 3 months of cash reserves for “fixed” costs into the loan, so any extra cash reserves after 3 months, will have to come from some other source. Our original loan request had 6-7 months of cash reserves built-in to the loan application. The lender quickly explained that wasn’t going to be considered, so we had to bring down our loan request to fit their parameters before going any further. All they can say is no. I like to over insure sometimes, just in case.

There are many ways to fund your new business. Our path to business ownership is the traditional method of Cash, Credit and Collateral. Put a percentage as a down payment, show a history of making good of all your past financial commitments, get a loan for the remainder of your project and give the lender the right to get their money back by taking and selling your home or any assets you provided as collateral, in the event you fail to make the agreed upon payments to repay the loan.

I’ve read up a little on the many techniques to launch a business, from: Crowd Funding, Credit Cards, attract Angel Investors, Micro-loans, borrowing from family and friends, tap into a retirement account, home equity. All of these methods, plus others can help an entrepreneur get over the most challenging obstacle to business ownership.

Thanks Cube…

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Watch Me Build My Food Truck

Los Angeles is like any other big city. It has plenty of everything you enjoy, as well as loath. For instance, many come for the work, warm weather, university education, beaches and so on, but like a new relationship, once you begin to settle in, the flaws become clearer and clearer. Be it, a meddling family member, control issues, work instability. So, in a word,  we compartmentalize. We do a little analysis of the circumstances and say, well, it has this going for me or that going for me, so I’m good.

This LA landscape has high housing prices, crime and lots of smog. But wait, This list wouldn’t be complete if “traffic” isn’t included right? Well, this is where we, as Angelenos really stand out. We create gridlock like it was an Olympic sport. We are so good, we bring home the gold every time. OK, stay with me please, while I make my transition to my chosen topic for this blog entry using traffic as the bridge.

3 years ago, I decided I was going into the gourmet food truck business. Past experience reminded not to jump in with two feet without the thorough vetting necessary,  prior to starting your dream business. I mean, I once dropped a few G’s into a business start-up, only to be contacted by the US Dept. of Justice just after my money was received by the franchisor. Apparently this franchisor was already under investigation. The DOJ eventually flew me to West Palm Beach, Florida to testify against the persons I dealt with. Well, the day of the trial, the defendants settled on the charges being brought against them. I’ve watched enough cop/lawyer TV to know how it works. lol. The DOJ probably used the threat of victims testifying against them in a jury trial to get a submission. The Gov’t put away two criminals. I’m still waiting for my money to be returned. lol again. I drove their rental to Miami to check out South Beach. Florida is unbearably humid in June.

Getting back to vetting and traffic. Before investing a piece of my hard earned retirement money from an old IRA that was just slogging along with Fidelity Investments, I was going to make damn sure the segment of the food truck business I want to be involved in, is not only sustainable but more importantly, profitable. The “savory” side of the food truck business here in L.A. is already saturated in my opinion, my interest and field of expertise is in the “sweet” or dessert trucks segment. I completed a 6 month Baking/Patisserie program at Le Cordon Bleu in Pasadena back in 2011, before deciding on part-time work in a food truck to gain experience in the food truck business.

I’ve attended several “small business start-up workshops” put on by non-profit SCORE (So. Cal. Organization of Retired Executives) and concluded that a business plan is one of the first orders of business for any aspiring bus. owner. The various “Start a Food Truck Business” books I read, also advised the same if, you are going to finance part of your start-up. The “Business Plan Pro” program ($85 online) requires certain data that can only be gained by physical research. Not just statistical research, but actually seeing with your own eyes the amount of business your competitors are doing. Once I had an idea of what kind of desserts I wanted to make and sell, I set out to visit the particular dessert trucks that were already selling what I plan on selling, where ever they were in LA, Orange Co. to count the amount of items that passed through the dessert truck service windows. I recorded them in 30 mins. increments for 3 to 4 hours each time.

For example, if I was researching a dessert at the extremely popular Abbott/Kinney First Fridays in Venice Beach (as seen at the end of the excellent foodie movie “Chef”, when the chef meets up with the food critic again), I would just bring my folding chair and park my butt down on the sidewalk and count using a cell phone counter. I like to move over a truck or two as to not look like some weirdo food truck stalker, but still in view of the service window. Yes, It can get boring after a while, but if you enjoy people watching like I do, it’s not so bad. I would multitask by plugging into a podcast about business start-ups, food truck start-ups or social marketing to learn something new about my business of interest every time I was out. It’s about getting things done.

This takes a lot of time, I wanted at least 5-6 consecutive days of sales for each truck I researched. At home, I planned out which truck I’m going to visit that week, after work each day or on the weekend. During the week I would ask and sometimes make my then 11yo son to come with me, so I can travel across town in the diamond lane to avoid the gridlock. After a while, he would ask me when I got home “are we going to do some research today dad”, he knew the payoff for him was he could eat out of any of the food trucks at that location. It works out for both of us.

Getting a weeks worth of sales data enabled me to roughly calculate the amount of money going into the business on a monthly basis by multiplying the weekly figure by four. It’s not an exact science, but using their menu to figure out an average price point, coupled with the amount of items moving through the window every hour, you can get a pretty good idea what the sales total are that any truck took in, at that location

After estimating what my costs are for my dessert truck ie. truck, build-out, labor, food costs, fuel, commissary rent, insurance, fees, permits and licenses etc. and the loan payment for all or part of it, I can make a calculated assessment. The food industry has a reputation for gobbling first time owners. This calculated risk is one that I choose to take, based on research and my own experience.

The business plan program allows for customization of sales, costs and expenses monthly, this allows the plan writer to account for seasonal slow-downs. Trust me, when I say get the business plan complete as soon as possible, it can easily drag out to several months.

I will be posting a video series named “Watch Me build My Food Truck” on YouTube, Facebook in the coming weeks, introducing viewers to the experts that we are relying on, to help us through the start-up process. Follow us @sweetsuitetruck on Twitter.