Some local businesses are changing their spots to survive

In the business jungle, some companies win by altering models and targeting different customers

zkyle@idahostatesman.comJanuary 16, 2014 

80833

Jerome Eberharter, center, founder of White Cloud Coffee, looks over a freshly roasted batch of Colombian with Michael Priddy, left, Full Circle Exchange sales manager, and Chad Kay. Full Circle operations manager. Eberharter used to own two large coffee roasters but now uses a Full Circle microroaster. The change was part of his effort to increase profits by downsizing. “The bigger the sandbox you play in, the more competition there is,” he said.

KYLE GREEN — kgreen@idahostatesman.com Buy Photo

The big time isn’t always what it’s cracked up to be.

Boise’s White Cloud Coffee grew out of founder Jerome Eberharter’s garage into a regional player in the market, producing more than 10,000 pounds of beans a month in 2010. Eberharter took satisfaction in knowing that enough beans were sold in more than 70 grocery stores in five states to make about a million cups of his coffee each month. White Cloud was growing just as Eberharter had hoped.

But bigger business didn’t result in more money. White Cloud raked in about $700,000 in annual revenue, but that money went right back to the stores and to middlemen.

White Cloud was losing money. So Eberharter made a change in 2012 that would have seemed counterintuitive when he started roasting beans in 1988. He left the grocery business, downsized his operation and started selling online directly to coffee drinkers. Smaller proved to be better: Eberharter expects to have turned a 10 percent to 15 percent profit for 2013.

Overhauling the business model saved the company, Eberharter said.

“A lot of companies don’t make it,” Eberharter said. “You either adjust or you don’t see how the horizon is changing.”

About half of startups survive for five years or less, according to the U.S. Small Business Administration. Many of those that make it alter their business models to stave off extinction, said Wink Jones, CEO of Boise startup Meal Ticket, which underwent its own transformation.

The trendy term in business circles for such shifts is “pivoting,” which has become overused because business transformations are now commonplace, Jones said.

“It’s almost become cliche to hear a startup talk about their pivot. That’s why I avoid the term,” Jones said. “Frankly, people are having to be scrappy to stay alive and hustle and make it work.”

Meal Ticket started in Boise in 2010 as a marketing company that built advertising campaigns for restaurants using Facebook and a mobile app. Jones found the company competing against Groupon, Google Places and dozens of apps providing similar services. The model wasn’t profitable, so in 2012, the company switched its focus. Today, Meal Ticket provides a subscription service that helps match inventories of food distributors to the buying habits of restaurants, helping the sides find each other.

The company has grown to 15 employees from four. It has increased revenue by 50 percent each month for the past eight months and expects to be profitable in 2014, Jones said. The business is owned by Boise founders Jones, Brian Konrath and Dan Henderson, and about a dozen investors.

‘BE NIMBLE’

Americans hold a notion of entrepreneurs as visionaries with unshakable faith in their ideas and a willingness to stick with them through thick and thin. But the ability to let go of failed ideas is important.

“That entrepreneurial stubbornness wouldn’t have proven useful for us,” Jones said. “Our ability to be nimble over the last three years has been extremely valuable.”

Inovus Solar of Boise went through a transformation of sorts, too. The company, founded in 2007 to make outdoor solar-powered lighting systems, originally planned to market its products to large building developers, military bases and universities to use in parking lots.

Co-founder and CEO Clay Young said research suggested a different direction. Young said cities were interested in Inovus light systems because of their zero-cost power supply and 20-year maintenance cycle. So Inovus now sells equipment to power city street lights with solar energy.

The company now has light systems on city streets and parks in Phoenix, Los Angeles, San Diego and San Francisco.

Today, Inovus has 23 employees in Boise and has a chance to become a “ubiquitous standard,” Young said.

Every startup should expect to transform at least once, Young said.

“I find most businesses fail based on a motto of ‘build it and they will come,’ ” Young said. “Far more businesses would be successful if they started with the basic of idea of what problem they think they can solve, then tested the thesis and its iterations rapidly.”

White Cloud’s transformation came 22 years after Oberharter started the company. He said the more stores he distributed to, the more bites were taken from his bottom line. Brokers take between 2 percent and 7 percent of sales, he said. Distributors take at least 25 percent. Grocery stores want their 2-3 percent. Something had to give.

White Cloud has just three employees today and ships 2- and 5-pound bags of coffee beans to customers.

“A hundred and fifty grand in sales isn’t huge, right? But making $15,000 or $20,000 last year is far better than doing all of that work of previous years and just breaking even or going negative,” he said.

Zach Kyle: 377-6464@IDS_zachkyle

Idaho Statesman is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service