The Power Up ⎯ SN.04/EP.02
How Working With Non-Profits Can Be Profitable
When the wholesale food distributor, Amrein Foods closed down, a team of entrepreneurs took over the space with the idea to assist local nonprofit organizations. However, so many different people kept coming to their space looking for Amrein Foods and leaving disappointed that it had closed. Sean Lipscomb, the Director of Operations, and the rest of the team realized the community needed a cost-effective food store and opened Horizon Foods.
Currently, they are focusing on growing their business to where it is appetizing for a larger food distributor to acquire them. This means better pricing with volume deals and sourcing products directly from suppliers instead of distributors.
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About The Business
Business name: Horizon Foods
Founded: 2022
Director of Operations: Sean Lipscomb
Location: Joppatowne, MD
Website: https://horizonfoodstore.com/
Sales diversification strategy: E-commerce, storefront, warehouse, distributor closeout deals
About Our Guest
Like many small business owners, Sean had no experience with the food service business. However, he and his team discovered the opportunity to bring an affordable food store to their community. With so much passion for this idea, Sean put some of his own money into the project, along with a $50,000 loan from the county with a zero percent interest. Horizon Foods was so popular, in fact, that they became profitable during their first year.
A big focus for Sean is using Horizon Foods to support small non-profits. He shares, “They just don’t have the bandwidth to survive. So it just seemed like a good way to partner with the community and strengthen our ties.”
Full Transcript
Sean (Thrive): Hello everyone, it’s Sean from Thrive with another episode of The Power Up, where I meet with successful small business owners and operators to learn about their business strategy so you can take their insights and level up your own business. Once your business is ready to expand, knowing where to start can be overwhelming. Our guests have some creative solutions for how they’ve tackled tricky problems and turned them into growth opportunities. Now, let’s dive into today’s episode.
Our guest today is Sean Lipscomb. He’s the Director of Operations of Horizon Foods in Joppatowne, Maryland. When the wholesale food distributor Amrein Foods closed down, a team of entrepreneurs took over the space with the idea to assist local nonprofit organizations.
However, so many different people kept coming to their space looking for Amrein Foods and leaving disappointed that it had closed. The team at Horizon Foods realized that the community had a need for a cost-effective food store, and they went ahead and opened Horizon Foods.
Sean, are you ready to get started with us today?
Sean (Horizon Foods): I’m ready to go.
Sean (Thrive): Alright, so go ahead and fill in the blanks. Tell us more about Horizon Foods. What do you guys do specifically and how do you make money? Are you a nonprofit? Tell us more about that.
Sean (Horizon Foods):
Okay, well ultimately, we had gotten out of the janitorial business and were looking for our next move. Things seemed to line up to work with a local nonprofit to solicit in-kind donations on their behalf and then either help them distribute to their communities or monetize those donations to help basically fund their outreach activities. These are all local small nonprofits—they’re not the large nationally funded type, they’re struggling to stay afloat. So that was our goal: to do that, utilize the building as a warehousing space and help these guys out and help them survive, and at the same time help us survive.
As you said, people kept wandering in the back door of our facility really upset that the store had closed. Even though we told them, “Look, we’re not Amrein Foods,” they just didn’t want to hear it. So ultimately, we decided to give the food business a go. We had no experience in it. My wife owned a janitorial company that cleaned food warehouses and I used to sell forklifts to food warehouses; that was the extent of our food business other than eating. So we got into it, started providing food service as well as consumers because typically food service won’t break cases, we do, and we allow the public in until we’re sold out.
We also created a space in the rear of the building, which is a closeout area. I always call it the TJ Maxx of the food business because we’re always looking to buy overstocks, anything we can find at a great price that we could offer at a great price and that benefits the community. We have a lot of followers that are just interested in what we’re going to post on Facebook as our latest get, and that’s always gratifying and pretty cool because sometimes you get things that fly out the door and sometimes you get stuck with a lot of things that take forever to get rid of, but it’s still a lot of fun either way.
Sean (Thrive): That’s great. So are you guys more like a market model? Are local growers bringing foods to you and then selling there, or are you guys sourcing your own products and then selling?
Sean (Horizon Foods): No, we source products through the larger national distributors such as Performance Food Group, US Foods, people like that. So we’re basically considered a redistributor.
Sean (Thrive): Okay, and you’re open to selling that?
Sean (Horizon Foods): We’re very open to the idea because I don’t know if you’re familiar with our area, but it’s fairly rural, so there are still some farmers, dairy farmers around. We’d love to partner up with them and allow them to bring their products to market here.
Sean (Thrive): That’s great to hear. So, what is your role specifically? What’s day-to-day look like for you?
Sean (Horizon Foods): Oh geez, it typically looks like drinking from a fire hose. The title was Director of Operations, which means everything in between, whatever needs doing, I do it. But my job is primarily searching out the closeout deals and working with larger distributors and just trying to establish partnerships with different people under different realms. It keeps me busy, and then in addition to working in the store when needed. So, a lot of days, no two days look alike.
Sean (Thrive): What does the business look like for you guys right now? Are you trying to grow it or are you comfortable where you are? If you are trying to grow it, what are you trying to do with the business?
Sean (Horizon Foods): Well, eventually we’d like to get absorbed by one of the larger players, one of the people that distribute to us currently. But currently, we’re in growth mode. We’re in our second full year of existence. We actually turned a profit our first year, which was shocking to me, but we did it.
So we’re just going to keep growing and scaling and see what we can do to get our pricing down because obviously at a beginning level you’re stuck with what you’re stuck with. When you get to a certain size, you can handle more bandwidth, so when you can purchase more, you can get better pricing. So that’s currently what we’re working toward, being able to step away from our current suppliers and be able to go to their suppliers.
Sean (Thrive): So, making a profit in your first year, did you guys get a round of funding like a grant or something? How did you start the business? Was it your own personal funding or how did you guys do it?
Sean (Horizon Foods): It was our own personal money. The county gave us a loan of $50,000 at 0% interest, and that was it. We just went after it.
Sean (Sean): Trial by fire.
Sean (Horizon Foods): We’ve been learning as we go.
Sean (Thrive): Why nonprofits? How did you guys particularly get into that space?
Sean (Horizon Foods): I don’t want to get too deeply into that, but small nonprofits, it’s important to say that because, yeah, in my opinion, I have no way to substantiate this, there’s just a lot of corruption that goes on in the larger ones. You see the small guys that are genuinely trying to do some good but they just don’t have the bandwidth to survive.
So it just seemed like a great way to partner with the community and strengthen our ties and just help out the little guy. We have no interest in Maryland’s food bank or Feeding America or anyone like that. We’re focused specifically on the small little guys that probably don’t even hit the map.
Sean (Thrive): Makes sense. So, growth mode, trying to get absorbed by one of the larger distributors and producers. What’s the next six months look like for you guys? What’s on the roadmap for continuing growth?
Sean (Horizon Foods): I’m looking for more and more volume deals because, in addition to having a storefront, I have a couple of resources that will buy truckloads of product from me if I can get the right price. So I’m going to continue to try to seek out more sources.
That’s the hardest part of it, getting the sources with legitimate product at a good price. So my thing over the next six months is working on forming more partnerships with people and more relationships and accessing more sourcing.
Sean (Thrive): How are you managing your costs right now? What point of sale do you guys use?
Sean (Horizon Foods): We use Clover.
Sean (Thrive): How do you think about the costs of your product? That’s obviously the big focus for you.
Sean (Horizon Foods): Man, that’s a tough question. I don’t generally handle that side of it, so it’s hard for me to say. But it’s basically simple arithmetic: buy it once and probably sell it higher. I’d like to tell you it’s a much more complicated process, but it’s really not. It’s also understanding what the market can bear. When we first started, many prices were outrageous.
Sean (Thrive): Do you report on it weekly or monthly? How close of an eye do you keep on your revenue, cost, and profit?
Sean (Horizon Foods): Weekly. At the end of the week, we run a few reports and keep an eye. We like to compare this year versus last year, this month versus last month, or this week versus last week to see where we are.
Part of what we’re doing is we’ve recently implemented a loyalty program so we can have more access to customer data to keep more contact with them. When we see drop-offs, we can address them and go back and say, “Hey, what happened? You were here consistently and then you weren’t. Did something go wrong?” It gives us the opportunity to form relationships.
Sean (Sean):
What do you guys use for the loyalty program?
Sean (Horizon Foods): Loyal Zoo. It is a Clover app. It seems to do enough. We’re in our second month of that. I think it’s going well, but we’ve yet to begin using the direct marketing function. I just wanted to accumulate enough of a base to give you a 100% idea of how it’s working. But it’s definitely capturing data and paying out points.
Sean (Thrive): Does Loyal Zoo follow up with email or text communication? What’s working for you guys?
Sean (Horizon Foods): Right now, it’s set to text. When someone does a transaction, they get a text message right away that says, “Hey, thanks for stopping in. Here’s your points balance currently.” Then from there, we can offer flash discounts, flash sales, just understanding where our low points are and how to fill those.
Sean (Thrive): Do you have any metrics you like to track on customer recidivism or return customers?
Sean (Horizon Foods): No, that’s one of the reasons we implemented the loyalty program, because we did not have a mechanism to track that. So with this, we know exactly who’s doing what and when. We still have to take the time to review the data, so capturing it is half the battle, but before, we had nothing.
Sean (Thrive): Going back to future partnerships and relationships and lowering costs, what’s the strategy there? Are you trying to prove to a particular seller that your sell-through of their products is really good so they should give you a better deal? How do you think about gradually lowering costs over time?
Sean (Horizon Foods): That’s always going to be based on volume. Our current capacity is we can buy half a truckload at a time at a certain price. When we get to buying a whole truckload at a time, that should bring the price down. In my opinion, unless there’s something I haven’t seen yet, it’s going to be based on volume.
Sean (Thrive): Are you doing a lot of shopping around for other vendors or focusing on existing vendors and getting their costs down?
Sean (Horizon Foods): There are different levels of vendors. Currently, we deal with redistributors, and they deal with distributors. Our goal is not to hijack them but to have the size to go to their suppliers. Technically, we’re a redistributor, or really a re-redistributor at this point until we get to the next level.
Sean (Thrive): Do you see yourself ever getting to that point, being your own micro-distributor?
Sean (Horizon Foods): We’ll be there this year.
Sean (Thrive): Is that something you’re trying to hang your hat on and make sure it happens this year?
Sean (Horizon Foods): Absolutely. We’ve already begun shedding some of our suppliers and going to that next level. It’s still on a smaller scale; we’re not completely independent yet, but we’re pretty sure we will be by the end of the year based on current trends and momentum.
Sean (Thrive): Awesome. Let’s start wrapping up with five rapid-fire questions.
Number one: What would you say is your fastest-growing sales or marketing channel currently?
Sean (Horizon Foods): It’s the only one we have, which is Facebook.
Sean (Sean): How are you using Facebook?
Sean (Horizon Foods): Basically, I use Facebook for capturing an audience, having a captive audience, and that’s where I blast out all the deals we have in our closeout area.
Sean (Thrive): Great. What would you say is your favorite resource, like a blog, YouTube channel, or book, to grow your skills or business?
Sean (Horizon Foods): That’s a loaded question because I had no skills prior to getting into this. I mean, I had skills, but they didn’t really come from this business. I’m going to have to say trial by fire, that’s the way I learn. Some people pick up a book and read it and know it. I’m the guy who has to get his hands dirty and figure it out.
Sean (Thrive): Very similar to me. What piece of technology can you not live without in your business?
Sean (Horizon Foods): I don’t want to sound like I’m sucking up to you, but currently we have to have Thrive to manage our inventory effectively.
Sean (Thrive): Is there anything in particular with the Thrive app that you use heavily?
Sean (Horizon Foods): We probably don’t use it to its full capacity, but what it does do for us is pretty easy to pick up on. It took a little while, but we never felt like we were out in the woods by ourselves. The simplicity of it is one of the things that appeals to me. With simplicity, you’re probably trading off something you can’t do, but we’re not at that point yet. For us, Thrive is the perfect-sized application with controls we can deal with.
Sean (Thrive): Great. Number four: What piece of advice would you give to business owners ready to start growing their business?
Sean (Horizon Foods): In my personal experience, if you’re going to take on a business partner, make sure you know that person very well before you agree to win. We had a very bad experience and had to buy somebody out early on because our morals didn’t line up. We never knew that going into it.
Other than that, it just comes back to commitment, drive, and hard work. It takes a while to get something to where it’s operating on its own and can live with or without you. Currently, our business is dependent on our participation. I don’t know if that really answers the question, but that’s my take.
Sean (Thrive):
Are you open to digging into the business partner’s point a little more? Our audience is dealing with whether to open a business with someone else or alone. Are you open to sharing more stories or advice about vetting partners or structuring deals?
Sean (Horizon Foods): When you do your Articles of Incorporation and have to do an operating agreement, make sure you have a very detailed operating agreement that covers everything you can think of. You want to have an exit strategy, you want to have a buyout strategy, you want to have a dispute resolution strategy. We had none of that. It was just a handshake and a “we’ll figure it out later,” and that later was very painful. So my advice is to get all of that in writing before you start because it will save you a lot of headaches.
Sean (Thrive): That’s excellent advice. Thank you for sharing that. Last question: What’s one thing you wish you had known before starting Horizon Foods?
Sean (Horizon Foods): I wish I had known how much time it would take and how much personal sacrifice it would require. I thought it would be more straightforward. I thought it would be more like a job with set hours. It’s not. It’s a lifestyle. You have to be ready for that and be willing to put in the hours and the energy because it’s not easy. But if you love what you do, it’s worth it.
Sean (Thrive): Great insights, Sean. Thank you so much for joining us today and sharing your story and advice. I’m sure our viewers will find it very helpful.
Sean (Horizon Foods): Thank you for having me. It’s been a pleasure.
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