Small businesses can do big things. In this new series of videos, I would like to explore success stories of small businesses in Australia and what we can learn from them.
In this video, I share with you the story of Over The Moo ice cream.
Over The Moo is a dairy-free ice cream business and the brainchild of entrepreneur Alex Houseman. Houseman created his business out of his own personal need. He loves ice cream but is sadly lactose intolerant. While dairy-free ice cream is available in the market, he felt that there wasn’t any product that could deliver indulgent and delicious flavor at an affordable price. This led him to develop his own dairy-free ice cream made from coconut milk.
Over The Moo is Houseman’s first business. He quickly recognised that he needed money, advice, and exposure to make it a success. He decided to seek funding in Australia’s version of Shark Tank. In the show, he received three offers but eventually walked away without a deal.
One of the concerns of the judges in Shark Tank during the Over The Moo pitch was that Houseman had not yet trademarked his recipe. Seeing the wisdom in the judges’ advice about owning his ice cream recipe, he immediately worked on fixing this intellectual property issue after the filming wrapped.
However, Houseman’s main concern with the judges’ offers were that they were lower than what he was willing to accept. It was unfortunate that the show was filmed before Over The Moo began appearing on Woolworths’ shelves. Since the judges didn’t take into consideration this particularly important business milestone, their valuation for Over The Moo was lower than Houseman’s own valuation for his business.
As of 2018, Over The Moo was available in 2200 stores, that include Cole’s, Woolworths, and IGA supermarkets. Despite a wide distribution, it maintains a lean business model of just three full-time staff.
What we can learn
1. Hard work and strategic planning pays
Houseman is a former marketing consultant, but it proved to be a difficult sell in the beginning. Houseman approached every supermarket and tried hard to convince them to carry his brand on their shelves. He started with independent supermarkets and eventually made strides toward large chains. His hard work, strategy, and very good ice cream proved to be a recipe for his current success.
Houseman said in an interview, “As I have learnt, a successful business is only one per cent good idea, and 99 per cent hard work and commitment.” This rings true for any business, but moreso for a business operating in a very competitive industry.
The ice cream business in Australia is a AU$1.1 billion industry dominated by major players such as Unilever and Baskin-Robbins. While Over The Moo is considered vegan ice cream, Houseman does not consider it as a health product as it contains the same amount of fat and sugar as a Ben and Jerry’s ice cream. This is to deliver the same indulgent flavor as regular ice cream to those with special dietary needs. Its product caters to a very specific niche: those who are lactose-intolerant or who follow a plant-based diet looking for a sweet, indulgent treat.
2. Check your cash flow
After Shark Tank, Over The Moo earned a gross profit of $1 million, but its net profit was zero. Houseman’s initial spending went to growing and expanding distribution.
Houseman confessed that he was lax with cash flow in the beginning. When he felt that this became an issue, he sought advice from other people and created an advisory board. He also took short courses on financial management. His efforts paid off.
Houseman consistenly advises having a tight watch on cash flow in his interviews. He says of his early experience with the business,
“I wish I’d known earlier how to forecast cash flow better. It’s terrible when you put all that effort into growing and promoting the business, then don’t have the cash flow to keep up.”
“At our worst, we had literally $45 in our bank account. All the while we have thousands of dollars in wages and product expenses every month. Being able to balance growth versus cash in the bank is the most important thing I have learnt regarding starting Over The Moo.'”
In my video, Allow Sales to Trump Everything, I share why cash flow management is important and how a fast growing business experiencing record sales could get into trouble if it does not manage its cash flow problems.
3. Fine-tune your product, and make sure you own it
It took Houseman 4 to 5 months of research and product development to get his ice cream recipe right. But despite doing all of the work developing the recipe, he initially shared the intellectual property of the recipes with the manufacturer he worked with. After failing to get a deal on the show and seeing that the ambiguity in the IP could become a costly issue, he immediately took the necessary steps to ensure that he had full ownership of his ice cream.
Houseman also knew how much his business was worth in his mind. He was willing to listen to other people (i.e the Judges in Shark Tank) and was able to make an educated decision on the business value and decided not to take up their offer. He probably knew that his product was going to go into the shelves of the major supermarkets, but could not yet reveal it to the judges at that time due to confidentiality issues.
Having said that, I have also met business owners who have inflated values of their business that were not based on market valuations. You need to be aware about the difference between your valuation of the business and how the market values your product—and you need to learn how NOT to get emotional in the process.
If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.