Michael Adams Green Mountain Mustard and Gredio

Michael Adams, Owner
Green Mountain Mustard & Gredio

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Why I closed Green Mountain Mustard

Why I Closed Green Mountain Mustard

Let me preface this post: This was a hard one to write. It took a long time for me to be ready to write about it, too. But, I think it’s important to be transparent with you, my reader for just over 4 years – 2/3 of the life of my company.

A few months ago, I decided to close Green Mountain Mustard.

In this post, I’ll walk you through the deciding factors, trying to sell the company, and what I’m doing now. Plus, what you can learn from my food business experience.

The background:

At the end of 2015, I opened a commercial kitchen (you may remember). It was not a well-calculated move. The kitchen closed in July due to a number of factors – we ran out of money and our anchor tenant pulled out, being our top two. Just eight months in, we folded. The ship sunk fast.

To keep the mustard company going, we produced 8,000 jars of mustard just before the kitchen closed. It was my hope that the large production would get us through the remainder of 2016. It did, for the most part, but I wasn’t able to recover as quickly as planned with a “Plan B.”

At the same time we produced the mustard, we listed Green Mountain Mustard for sale. I thought someone else might want to sell the 8,000 jars of mustard. That was an experience in itself.

What it’s like to try to sell a food business:

I decided to try to sell because I could see the writing on the wall. This business simply was not going to make it, with the margins I needed to put food on the table. Plus, I have know who I am. I love to start ventures. I’m the guy who thrives at 0-5 years, not the 5-10 you truly need to get something off the ground. I can get a product to market, establish a brand, and setup the foundation.

Green Mountain Mustard was profitable. We streamlined expenses, reduced our COGS, and had loyal retailers and customers. The downside, as I found out, was that the majority of my revenue – and ultimately profit – came from direct-to-consumer events: the farmers market, online sales, and a handful of fairs and festivals around New England. Turns out, not a lot of people like to spend 30-35 of their weekends every year selling mustard.

Buyers wanted retail sales.

You see, retail sales are predictable. They don’t require as much weekend investment, outside of your demo programs. Retailers have thousands of customers who shop the shelves 1-3x a week, and eventually your product turns over, prompting the retailer to re-order. You get the check 30-45 days later, and you repeat the process. But, multiple this by 100, 1,000, or even 2,000 retailers, and you’ve built a business. Sure, I knew that (I did go to business school), but I loved directly connecting with customers – and I hated retail. It was cold, confusing, and low(er) margin. It was important to me to find a buyer who understood where I was coming from.

In July 2016, we started talking to a business broker who has brokered the sale of many other food brands. After signing the contract and agreeing to a brokerage fee of $5,000, I sent the broker my financials for the past three years. I knew there was growth and decline in my sales (which over-shadowed my consistent net profit), but one thing was still a mystery: how the heck do you actually throw a valuation on a specialty food company.

It’s all about the numbers.

Most business are valued at a multiple of their net-profit (that’s what you make after you subtract your product costs and your operating costs). If you build a rock-solid business, your company will get valued at a multiple of your top-line sales #richlife.

In my case, Green Mountain Mustard was initially valued at $75,000 (inclusive of all inventory). We arrived at that number by multiply my net profit, roughly $25,000, by 3.

My first thought was “if I could get $75,000 for my business that’d be awesome!” Well, as our listing aged, and we talked to about a dozen interested buyers, we kept dropping the selling price. As I started to sell off the inventory I just made, our valuation kept dropping. In the end, after about 8 months of being listed, we had received three offers.

Here they are in chronological order:

  1. $60,000 – that offer came early and was later reneged by the prospective buyer.
  2. $50,000 – 10% down, and payments over three years. Payments were not guaranteed.
  3. $11,000 – all cash

Pretty sharp difference, huh? Here are my thoughts on all offer #2 and offer #3:

Offer #2: This would have been fine, but there was no personal guarantee. For all I knew, the prospective buyer could have crashed and burned Green Mountain Mustard, and never paid me beyond the $5,000 down payment (which would have actually been around $3,650 after taxes. Mind you, the broker’s fees were $5,000. There was way too much risk here.

Offer #3: This was from a local entrepreneur who was buying up local food companies because he could control the manufacturing and end up with pretty good margins. He low-balled with $11,000. At this point, we didn’t have a lot of inventory. Take out the broker’s fee and the taxes – I’d be left with roughly $4,980.

I just could not sell Green Mountain Mustard for $5,000. Almost seven years of blood, sweat, and tears was not worth that amount of money. I profit 2x that amount at one farmer’s market alone.

We pulled the listing down in March 2017 and amicably split with the broker.

What was the plan now?

I had this crazy thought of trying to bring the mustard company back to life:

  • What if we only made four flavors?
  • What if we took out the eggs and butter out to reduce costs?
  • What if we produced out-of-state?
  • What if we used smaller jars?
  • What if we just sold wedding flavors?
  • What about food service mustard?
  • What if we made ketchup and relish, too?

A million thoughts raced through my head. With each direction, I ended up discouraged by the reality of my Excel spreadsheets. There was no way to make this work. With increased costs due to higher production minimums and the cost of labor, I’d be right back where I started. Ultimately, it was not worth my time and energy to continue to put resources into something that didn’t quite have legs beyond the northeast. The foundation was crumbling.

In March, I notified customers, retailers, and fans of our closing. At this point, we had two flavors of mustard left. I held a case sale and the product flew out of my parent’s basement – selling almost 30 cases practically overnight. We’re down to just a handful of cases now.

My Next Adventure:

In October 2016, I started a full-time job as an Account Director at Place Creative Company in Burlington, VT. We work with some of the most amazing brands: Darn Tough Socks, Pete & Gerry’s Eggs, Lake Champlain Chocolates, and more. Plus, one of our specialties is consumer-packaged goods packaging and branding. If you ever need branding help, I’d be be happy to talk to you outside of the Gredio blog. My job is what I love most about the food business – branding, messaging, design, and strategy. I’m excited that this role provides me an opportunity to work with new and established brands every day.

What about Gredio?

Gredio will live on – at least for the near future. With Green Mountain Mustard behind me, I’m going to start thinking about other ways I can help you all. The Gredio audience is almost 4,000 subscribers strong. We’re all here to help each other learn and grow. Even though I don’t own Green Mountain Mustard anymore, my passion to help your food brands survive is stronger than ever.

Feel free to keep the discussion going in the comments below – I’d love to hear from you and see how I can best help through the tools and articles I provide on the Gredio blog.

Michael

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37 Comments on this post

  1. AUTHORJames Blair

    on May 18, 2017 at 7:05 pm - Reply

    Sorry to hear your business closed, I sell businesses all the time and if the buyer cant make at least 75,000 pa to feed and cloth his family then the business will never sell. Its a fact that only 20% of all businesses you see for sale ever sell.
    In the food production business you have to scale up real fast and that involves debt.
    Debt is what gives it the juice, but it comes with its headaches
    Good luck in the future.

    • AUTHORmichael

      on May 20, 2017 at 11:46 am - Reply

      Hi James,

      Yes, there is a certain cushion that money provides – some need less, some need more. We did scale up and made investments but they didn’t pan out. On to the next adventure!

  2. AUTHORKaren

    on May 19, 2017 at 12:08 am - Reply

    Michael,

    Best of luck in your new venture! I truly always appreciated reading your blog posts. They are real and honest and super helpful for somebody starting out like me. Huge thank you for laying it all out there. I read every word- sometimes twice. Kudos to you! … and trust me, change is good. You’re onto something better
    With gratitude,
    Karen

  3. AUTHORCarolyn

    on May 19, 2017 at 12:15 am - Reply

    Wow…I read this as soon as I saw it pop up in my email. I understand, but as long as you are happy in your new job that’s most important. I’ve been working hard at my business,and it took me almost two years of prep work/trying to figure out the food business, and in july I would’ve been in select health food stores for one year. I just got accepted with a distributor though, but I haven’t signed any papers. Sorry got off topic, I do want to thank you for your blog, as I have read many of your articles, especially the product spec sheet. I created my food bootleg version based on your examples…lol

    • AUTHORmichael

      on May 20, 2017 at 11:59 am - Reply

      Hi Carolyn – I am happy in my new job! Good luck with your food business and with the distributor! Glad the Gredio blog has helped you!

  4. AUTHOREmily Shaules

    on May 19, 2017 at 12:16 am - Reply

    Congratulations on all you’ve learned and on your new direction, Michael. I know everything is working out perfectly for you and am excited to see what you do next…

    • AUTHORmichael

      on May 20, 2017 at 11:47 am - Reply

      Hi Emily – thanks for your note! Stay tuned — good luck with Shift!

  5. AUTHORDan

    on May 19, 2017 at 12:38 am - Reply

    Michael
    Loved hearing your stories and your insights. Good luck moving forward!

    • AUTHORmichael

      on May 20, 2017 at 11:47 am - Reply

      Hi Dan,

      Thank you! Best of luck to you as well!

  6. AUTHORChip Chapados

    on May 19, 2017 at 1:26 am - Reply

    Michael,
    What an incredible learning experience for you. Thank you for sharing your story. What you shared provides important lessons for anyone looking to create a goods based business, especially if they plan to manufacture their own products. I wish you all the best as you move on with this next stage of your life. While the pain of having to let go was great, the fact that you have shown such resilience is the most important lesson people can learn from your story. Make sure that any risk you take is one that you can, at a minimum survive with minimal harm, and maximum learning.

    • AUTHORmichael

      on May 20, 2017 at 11:47 am - Reply

      Hi Chip — Thank you for your note – means a lot!

  7. AUTHORDolores Smith

    on May 19, 2017 at 1:38 am - Reply

    Michael, you have learned a great deal and your experience am sure is now benefiting you tremendously in your new work life. Your blog supported entrepreneurs psychologically since we knew that you were going through challenges related to our own food businesses. Thank you for sharing these with us and hope you have many wonderful experiences as you move forward to various new directions in your future. We never know the twists and turns our lives will take. I think you made a great decision based on your age and many years ahead of you. All the best. Thank you from Canada.

    • AUTHORmichael

      on May 20, 2017 at 11:48 am - Reply

      Hi Dolores! Thanks for your comment — it was important for me to share what I was going through. I’ve met so many entrepreneurs in the same boat. We can all band together and help each other out!

  8. AUTHORCoachMaz

    on May 19, 2017 at 1:59 am - Reply

    Michael,
    This is a very brave thing you did. Most people won’t kill off their baby.
    And it’s even more courageous of you to bare your soul.
    But there are more ways to live your passion and it sounds like you found one.
    Wishing you delicious success.
    Deb

    • AUTHORmichael

      on May 20, 2017 at 11:49 am - Reply

      Hi Deb – thanks so much!!

  9. AUTHORBernice Wong Brown

    on May 19, 2017 at 2:50 am - Reply

    Michael,
    I certainly understand your decision. I had to make the same decision for my business. It is not an easy one, and is definitely hard to let go of something you put your heart into.
    Best of luck to you. The experience is definitely worth the journey.

    • AUTHORmichael

      on May 20, 2017 at 11:49 am - Reply

      Hi Bernice — it is a tough decision, isn’t it? Good luck with your business, too!

  10. AUTHORSandra

    on May 19, 2017 at 2:53 am - Reply

    Hi Micheal,

    I made that same type of decision this year myself, and decided to retire. I know how hard it is to let go and start over on a new venture. Best wishes for your future endeavors.

    • AUTHORmichael

      on May 20, 2017 at 11:50 am - Reply

      Hi Sandra – glad I’m not the only one :p — Good luck in your next gig!

  11. AUTHORDawn

    on May 19, 2017 at 3:18 am - Reply

    Michael,

    Thank you for your help and advice. Your job sounds like the perfect fit: building brands and helping businesses grow.

    Best,
    Dawn

    • AUTHORmichael

      on May 20, 2017 at 11:50 am - Reply

      Hi Dawn – Thank you! I’m excited!

  12. AUTHORAndy Wunsch

    on May 19, 2017 at 3:26 am - Reply

    You have been a inspiration Michael. We are going into full production June 21st for your first product. Taking your “Fantastic” course really helped
    me alot. I keep referring back to it for motivation.
    All the best to you in the future. I would like to send you a bottle of product when it’s ready.
    Cheers.
    Andy.

    • AUTHORmichael

      on May 20, 2017 at 11:51 am - Reply

      Hi Andy – so happy that the course help you out! Best of luck with your first production run! I’d love to try some when you’re up and running.

  13. AUTHORHema Reddy

    on May 19, 2017 at 3:30 am - Reply

    Michael, I have been a regular visitor to you blog. I have greatly appreciated the concepts broken down into digestible articles, especially as someone who is new to the CPG business. I am sure there’s another greater opportuniy lurking in the corner. Good luck with Place Creative Company!

    • AUTHORmichael

      on May 20, 2017 at 11:52 am - Reply

      Hi Hema – thank you for your comments and coming back to the blog for more! Good luck with Sneaky Apron!

  14. AUTHORWendy Osmundson

    on May 19, 2017 at 3:59 am - Reply

    Argh! What a timely post this is! I am at a crossroads with my own business. I either need to make a big investment to take it to the next level or I need to shut it down. I’m tired, really tired. And I don’t have any other good ideas or my whole life ahead of me as you do…lots to think about. Honestly I haven’t heard enough success stories. Very brave of you to quit, I know. Sounds like you found a good place to be moving forward! Thanks for all the knowledge you’ve shared!

    • AUTHORmichael

      on May 20, 2017 at 11:53 am - Reply

      Hey Wendy – Great to hear from you! It’s a tough decision that can’t be taken lightly. It took my months to figure it out and a lot of conversations with mentors and business advisors. Ultimately, you have to be comfortable with the decision you’re making and move forward with heart and determination to conquer it all. Good luck!

  15. AUTHORHiram Davis

    on May 19, 2017 at 4:14 am - Reply

    “There, but for the grace of God, go I”. That’s my first thought.
    Longevity itself is no guarantee. 20 years this month for me and the struggle continues. I wish you all the best…..

    • AUTHORmichael

      on May 20, 2017 at 11:53 am - Reply

      Hi Hiram – I hear that a lot from industry vets, but they still pull it off. Good bless ’em!

  16. AUTHORTerri Maize

    on May 19, 2017 at 2:52 pm - Reply

    Best to you, Michael! Thank you for your years of generosity and perspective!

  17. AUTHORParker Stewart

    on May 19, 2017 at 3:06 pm - Reply

    Hey Michael,

    I’ve been reading your blog posts for several years now to help with my food startup, so you’ve always been an inspiration. Thanks for sharing, and good luck with your next adventure!

    • AUTHORmichael

      on May 20, 2017 at 11:56 am - Reply

      Hi Parker – thanks for your kind words — good luck with your business!

  18. AUTHORDr. Kristina Swan DC

    on May 19, 2017 at 4:22 pm - Reply

    My goodness! What a surprise! I can’t thank you enough for all your assistance and what you are experiencing now certainly gives me “food for thought”, haha, as I move forward. Wishing you much happiness and success in your future ventures.

    • AUTHORmichael

      on May 20, 2017 at 11:56 am - Reply

      Hi Kristina – probably came out of left field for you! Good luck with the applesauce!

  19. AUTHORRandall Glaze

    on May 19, 2017 at 7:17 pm - Reply

    Thanks Michael,

    Your insights were invaluable to me! Good luck on the fresh start.

    A Southern Louisiana Fan!!

    • AUTHORmichael

      on May 20, 2017 at 11:57 am - Reply

      Hi Randall – that’s great! I’m wishing you luck with your business, too!

  20. AUTHORJulie Wasmer

    on May 19, 2017 at 11:33 pm - Reply

    Michael, I know your perseverance, creativity and thoughtful evaluations will provide you success of a financial nature in the future. It is hard to read and hard to do ( close a business) and I really appreciate you sharing that part of your journey as well!
    Best, Julie

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