Articulate your Idea. Get crystal clear on your product, why consumers want to buy it, your distribution method, and where it will sit in a store and on a shelf.
As a part of our series called “How To Go From Idea To Store Shelf”, I had the pleasure of interviewing Janet Johanson
Janet Johanson started BevSource in 2002 when she saw the opportunity to help break down the product development and manufacturing barriers that kept entrepreneurs from bringing new beverage ideas to life. BevSource is now a $50 million company that has launched and managed operations for more than 1,000 beverage products. Janet recently led the company’s acquisition of European-based MyDrink Beverages, as well as the launch of a new, first-of-its-kind, pilot production facility and “beverage playground,” called The Lab. A 2018 Minneapolis/St. Paul Business Journal Women in Business Honoree, and 2019 EY Entrepreneur of the Year Finalist, Janet, and her team have helped develop and launch beverage products for some of the most successful beverage startups as well as large beverage companies, including the top three beer producers in the country.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a bit about your “childhood backstory”?
Oh man, going way back, I grew up as the second of four children to two Catholic school teachers. At a young age, I saw them struggle to buy our first house and make ends meet (when I was born, we lived in a trailer park), and so when I was little, I knew I did not want to struggle to have money. I knew a different career path was in my future (although I love teaching like my parents — I get my “teaching fix” with my board work and as a volunteer with Junior Achievement — I teach as a volunteer but make money through business). The four of us used to play “house” (we all picked a room to be in), and I remember that I would either get the kitchen and charge my siblings to eat, or the living room and charge them to watch TV. My parents were able to send us to a Catholic grade school because my dad was a teacher there, and one of the benefits was a significant break on tuition. We could not afford a private high school, but we were lucky enough to lottery into one of only two “university-prep” public high schools. Taking public transportation through Milwaukee’s roughest neighborhood taught me a lot as a 14-year old white girl. School came easy to me. I got good grades, but I was more street smart than book smart. I loved making money, and coming out of college, I wanted to manage a Japanese Mutual Fund in New York City. I was never hired by any of the big banks — Morgan Stanley, Fidelity, etc., so I got a job at a local brewery (it came as a surprise to me later that we were the seventh largest brewery in the U.S.) and worked as their export & contract sales manager when I was 21 years old.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
I am a huge Tony Robbins fan, so my favorite quote from one of his seminars is, “Hell on Earth is meeting the woman you could have been. I hope you never meet that woman.” This phrase empowers me to do things that I am scared to do — I don’t live with regrets.
Is there a particular book, podcast, or film that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
For business, it is The E-Myth by Michael Gerber. As our business was growing, and I was about 29 years old, my head was spinning, and I didn’t know why. The book tells a story, and I was the woman in the story. It showed me a path out and how to work “on the business.”
For my husband, Shawn, and I as a couple, it was Rich Dad, Poor Dad, by Robert Kiyosaki. Before kids, I would love reading books about making money, and this was the first real estate investing book I read. It was a significant step in my journey to learning that 80% of everything is psychology. Most people have better skills than me. It is the mental game that takes work and conditioning. We have done over $80 million in real estate transactions since reading that book.
Ok super. Let’s now shift to the main part of our discussion. There is no shortage of good ideas out there. Many people have good ideas all the time. But people seem to struggle in taking a good idea and translating it into an actual business. How can a potential inventor overcome this challenge?
I have LOTS of good ideas, but they all don’t make for profitable businesses. I continue to remind myself that a good business SOLVES a need for a customer — and it is easier when it’s a problem the customer knows they have, and not one that I am educating them that they have. There are several things I have tried to sell to a customer that is really what they need — but they didn’t know they had a problem. Don’t sell products or services that YOU think they need. Sell things that solve a need they already know of. Secondly, you have to DO SOMETHING. You probably will screw up a lot of things when you start your first business, but that is okay, and you learn. I messed up contracts, payments, HR issues, and I took all those learnings away to help us get where we’re at today. And every day, we learn, and we take that away to make a better tomorrow.
Often when people think of a new idea, they dismiss it saying someone else must have thought of it before. How would you recommend that someone go about researching whether or not their idea has already been created?
It isn’t rocket science. Google it. Check the USPTO website. Talk to others in your industry and network. But DO SOMETHING. Shawn and I had always talked about starting an “Angie’s List” and a grocery delivery company, but we didn’t ACT on those ideas. And if you do start a business and someone sues you because it infringes on them, THEN YOU MADE IT. No one sues someone unless they feel a real threat. (Also, someone told me this the first time I was sued, “Congratulations! No one sues someone who doesn’t have money, so congratulations on getting here. You made it. You have money.”)
For the benefit of our readers, can you outline the steps that one should go through, from when one thinks of the idea, until it finally lands on the store shelves? In particular we’d love to hear about how to file a patent, how to source a good manufacturer, and how to find a retailer to distribute it.
- Articulate your Idea. Get crystal clear on your product, why consumers want to buy it, your distribution method, and where it will sit in a store and on a shelf.
- Conduct a feasibility study. This is where I think many of our customers fall down. They are so excited; they want to jump right into formulating their product. I love their excitement, but really look at the numbers for the business and determine if this is what you really want to do for the next three to five years of your life. Many times, when you are inventing a new product “that has never been seen before,” it is likely because there is an operational challenge that exists in our current market. I remember being in Japan in 1998 as an exchange student, and they had coffee in a can everywhere. I remember starting BevSource in 2002 and coming to realize the filling method for canned coffee was not prevalent (nor cost-effective) in the U.S. at that time. Also, the consumer is VERY different. In Japan, they are a vending machine culture — they take the train to work/school. The U.S. was not a vending machine culture, and believe or not, drinking out of a can 20 years ago was not socially acceptable in the U.S., and that stigma has changed. So, start to look at if it is possible and the costs and challenges your product might have. Know your END game before you start. And know all the questions you need answered before you get started — how am I going to distribute? What does freight cost? Does location make a big difference for my product (look at the total cost to serve, not just the co-pack fee)?
- Know thy Cost of Goods Sold (COGS). (1) Keep an eye on your inventory. Production losses can add up quickly. (2) Discuss with your manufacturer what acceptable loss rates are and make sure this is factored into your COGS and also factor in miscellaneous damage during shipping or in the warehouse. (3) Remember to add in storage costs. Those can also add up quickly, and (4) know what ALL of your upfront/one-time costs are going to be — everything from legal fees, UPC codes, shelf-life testing, artwork/plate charges, travel, business insurance (most people forget this one), etc.
- Work with commercial formulation (not your kitchen sink). Most formulas in our business are not patented. Flavor combinations are created, and those become your “secret sauce.” There is not a lot to patent in formulas.
- Source a manufacturer and vendors. In my experience, manufacturers see a LOT of entrepreneurs who want the manufacturer to be just as excited about their product as they are — THAT IS NOT REALITY. They will not be as excited as you — no one will. They just want to make a quality product and make some money. If operations and supply chain management are not in your wheelhouse, get help. Outsource it. There are companies in all industries, just like BevSource, that are operational experts. They may be a little harder to find, so ask your manufacturer and vendors who you might connect with. We already have all of the fancy inventory systems and have made 20 years of mistakes that we can help you avoid.
- Don’t do a full run yet! Get a customer and a purchase order. Sometimes this is easier said than done. You may need to do a small pilot run to get samples. I wish I had more advice here on pitching a wholesaler or retailer, but I leave that to the experts.
- Making that first run. People often ask me what I love most about my job, and I answer, “Making grown men cry!” And then I go on to say it is because usually, by the first production run, it has been nine months, blood, sweat, lots of money, lots of people believing in you. And maybe it is the customer’s Grandma’s lemonade recipe, and he holds the can in his hand and literally cries. We really do make dreams a reality, and first-run moments are unforgettable.
- New products also come with mistakes. Production likely will not be perfect. In 20 years, I can remember only a handful of times that the second run for a client was exactly the same as the first. They tweak the formula, they change the artwork, they change the date code format, etc. I think it is in our human nature to want to perfect things. Also, there will be manufacturing issues — be patient, be kind, be a partner — it will go a long way.
Let’s imagine that a reader reading this interview has an idea for a product that they would like to invent. What are the first few steps that you would recommend that they take?
1.Get help. Most likely, your product is similar to someone else’s, and they have been on that journey. People like me who have been on a journey can help you find the shortcuts and put you in touch with others in a network.
2. Get more help. Don’t be shy. Really ask for help, be vulnerable, be open. Ask uncomfortable questions. They are probably not uncomfortable to the person you are asking. When asking for help, try your best to make it a two-way street — if they help you, what can you do to help them? Volunteer, be a customer, connect them with someone else you know.
3. Do something. Be prepared to fail. Remember to laugh at your failures.
What are your thoughts about bootstrapping vs looking for venture capital? What is the best way to decide if you should do either one?
Bootstrapping as a startup is probably the only way to go and the only way I recommend to others. The same is true in real estate. For us, you get your first money always from your own pocket, and then family and friends. Venture capital or debt might be a way to scale the business once you have established your product, brand, and market.
What are your “5 Things I Wish Someone Told Me Before I Started” and why? (Please share a story or example for each.)
1. Do you know that you will be doing this for the next 20 years of your life?
I started BevSource a week after I was laid off from my first “real” job after college. It sounded like a good business to get into. I had the skills. It filled a need. If you had asked my 24-year old self, I would have laughed at you that I would still be doing this at 42 and have 50+ employees. I had not even managed anyone at 24 years old.
2. Make sure your family is ready and clear around the time (and financial) commitment you will have on your business and how it will affect your spouse.
This was advice I received when I bought out my business partner. She was right. I needed to make sure my husband knew my new time commitment and OUR financial commitment. Shawn is an unbelievable husband and gives me great perspective when I want to run free. He helps me clarify to him what is in my head when it comes to time commitments.
3. Be ready with an answer when people doubt you or tell you, “no.”
This will happen. Be mentally prepared for your response to them. I remember my husband, Shawn (who is a success in his own right, growing up with a single mother who worked two jobs to make ends meet while his grandmother raised him) and I started to get into real estate investing. My uncles said it was too risky and too hard and that we would lose money, and it would never work out. I was ready for this reaction from people and did not take it personally. I took this as a way to prove them wrong. It was calculated risk for us, and we were young without children and really had nothing to lose. Now my uncles brag about how proud they are of their “little niece and her husband.” Be the story that people will brag about.
4. Ask for help.
People want to help. People want to mentor you. Repay your mentor with something of value — work for free, give them kind words, be an ambassador for their business, give them a testimonial. For the last ten years, I have been blessed to have Scott Scheel be our mentor — both for commercial real estate and for me as a businesswoman and student of the game. He gave me hard homework. He led me down paths that he knew weren’t going to work out, but he also taught me some great lessons along the way. It is hard to repay a guy like this, but through promoting his business, sending him random words of kindness and comic relief, and testimonials — I know he knows the gratitude Shawn and I have in our hearts for him.
5. Open your eyes on the journey and take advantage of the moments.
One of my only regrets is that early on in our business, many of my clients and vendors gave me incredible offers to experience life — and I always thought I was too busy. I wish I would have taken advantage of some of the opportunities like learning to play cricket in England with a professional cricket player, golfing at some of the most tranquil courses, or flying to Tonga for the inauguration of the new king.
Ok. We are nearly done. Here are our final questions. How have you used your success to make the world a better place?
The racial inequalities have hit close to my heart. After the murder of George Floyd, as a company, we took the approach to look internally at ourselves and how we can be better. Because my heart lives with small businesses and their impact on wealth creation, encouraged by my BevSource family, I created the Black Business Is Beautiful Market. It is a way people can financially support black-owned small businesses AND have an AWESOME experience with a person of color. We are using our building and our banking connections for sponsorships and volunteers to make this happen.
You are an inspiration to a great many people. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
That is a BIG question. Our country is suffering from systemic racism, and moving toward a country where “all men and women are created and treated as equals” will be a long journey. So, for those of us who “don’t think it is a problem” or think “I am not racist,” I encourage you to open the door and listen to the other side and find four truths in what someone else is saying. You don’t have to agree with everything. In my life, self-awareness is the key to change, so if we could all become a little more self-aware, we can start to change our behaviors and biases. Be prepared for meetings or conversations where someone will do something inappropriate and be PREPARED for what you will do or say. I think it is human nature not to say or do anything because we are taken by surprise. Be prepared and have a response that you are ready to say — mine is “Hmm (x person), can we talk about that in private later.”
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US, with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
Bill & Melinda Gates. I am starting to learn more about their foundation and the work that they do. I am also on the board for Give Us Wings, a small charity that helps communities in Uganda. The opportunities to improve lives with clean water, proper sewage, nutrition, education, and health care in our lifetime IS ACHIEVABLE. I would love to explore more ways to use my time, energy, and effort to help in the most effective way.
Thank you for these fantastic insights. We greatly appreciate the time you spent on this.
You are very welcome. It was fun to sit back and write these answers.