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From $60k MRR to $0 MRR, bringing a business back from the dead ☠️

Salutations to all! 👋

This is my first post on IndieHackers, so thought I'd share my crazy experience of fast growth and fast death.

About 3 years ago, I was running a home-made food marketplace that was doing about $4k MRR. Customers would choose a menu by a home cook, order a minimum 4-5 meals, and receive them later in the future within a delivery time range.

The problems we were facing early on

We were stagnant and just couldn't grow it further. After talks with a bunch of customers, we realized three things:

  1. prices were too high (margins are low for caterers so they prefer higher prices)
  2. delivery time range was too wide (usual time ranges were 4-5 hours long, people hated waiting for that long)
  3. quality was hard to manage across different caterers

We had no idea how to fix these things. We had no control over their prices or their quality and it wouldn't have been profitable to deliver ourselves.

But that wasn't going to stop us. Food is a huge market and meal prepping was a growing trend, we had to tweak, pivot, anything!

An Aha moment that opened our eyes

At first we were focused on the "homemade food" aspect as a novelty experience, though the true UX was about having multiple healthy meals in your fridge throughout the week to save you time. Aha!

How foolish of us. It's about how/why the user uses the product and not what the product is. At this point our perspective changed and helped us narrow down our market to busy individuals. Because meal prep saves time and who better to save time for than busy people.

Narrowing down your market is crucial to scale. The closer you come to your power users, the faster the adoption and the more specialized you become. Don't fear specializing in the early days, it's what will get you product-market fit and later on you can diversify.

So where are the busy individuals? The workplace! Lunch time is always hectic for people and a lot of our existing customers were office workers.

Mind you I had no workplace experience, I started this company straight out of university. So one night I sat with my roommate who worked at a big company in downtown Montreal to get his perspective on the workplace. I asked him, "what do people want at the workplace?" And what came out of his mouth was pure gold. He said, "They want to fit in."

Wow.

The pivot that came after

What he said was profound! If people want to fit in, then give them a conversation starter. A deal that they can't resist but share with their colleagues.

We got to work sculpting the best service. We decided to work with 1-3 caterers and opt them into a model we proposed. The model had three pillars:

  1. be where the customer is
  2. undercut market prices
  3. lower cognitive load

We designed around these pillars and came up with $7 meals delivered to your office fridge. That surely gave people something to talk about at lunch time.

Then we decided to create a menuless subscription to control the types of meals we choose based on ingredient prices. The user just had to input their preferences. That lowered the cognitive load greatly, users didn't have to think and every Monday their week's meals would be in their office fridge before lunch time.

Imgur

Our UI was very simple, just check off what you dislike and our algorithms will choose your meals based on your preferences.

The other punch menuless gave us is streamlining the production line. Since we were choosing the meals, we were optimizing for the largest quantity of each meal and the lowest number of meal types. That was what convinced the caterers to agree to $7 meals with a 20% take-rate!

And it was easier to sell, because now we did B2B sales to HR and requested them to roll out our service to their employees with/without subsidy.

Off to the races

We grew 20% MoM in the first 12 months, it was insane. We were delivering meals for 8h straight, helping the caterers pack meals, and going to office buildings and knocking on every office door.

Imgur

That's the amount of meals we were delivering ourselves, aside from the rest of the meals we'd hire drivers to do.

The margins were really low though. With our 20%, we were paying for meal trays, meal labels, delivery boxes, and delivery drivers. Our cashflow was consistently invested back into inventory.

It was a costly model after all, but it scaled so well that we believed with more volume we'll be saved.

As we reached $60k MRR, it was hard to scale further. And we were worn out. No investor would give us money. Either we were crap at pitching or investors just didn't have appetite for the food market. In any case, an unpredictable event was on the horizon that would shake our grounds.

Imgur

Meals stacked in a company's fridge.

COVID-19 hits like a tsunami

Come March 2020, we started hearing about this new virus going around. A few weeks later, all businesses began to close their doors. We were flabbergasted. We received a wave of cancellations that drove us down to 25% of our customer base in 1 week and it kept decreasing from there. It just wasn't worthwhile to keep on going.

Having to pivot again based on those circumstances was an ordeal we weren't ready for. So we closed the business.

That's the dip you see in the Stripe graph above.

Reviving the business

After a few months, I decided to reopen the service but streamline even more. We raised our prices to $9/meal and put all our cost on the caterer (meal labels, trays, delivery boxes, and delivery drivers)--they were happy to take it on. We also began offering home deliveries.

I sent out a newsletter to 2000 emails about the reopening and 10% of our original customer base came back. But with the new model, we began to make around $1.4k MRR pure profit. We became more of a SaaS business at this point. I only have to spend 30min per week to maintain it.

Imgur

Here are our sales and net income in June 2021.

As for next steps, I wish to grow it further because we've gained so much insight and connections in this space. I will be building out a standard food ordering interface for people that prefer choice and allow one-time purchases. That will be available for our current caterer, which could open the way for being an online ordering service for caterers--many of them have bad UX and slow sites. A lot of this can be built with no-code/low-code, so looking to pump it out quick!

If you personally know any caterers in your community, would love to get in touch with them! Also if you're wondering what the company is, Yuma's the name - check it out: www.itsyuma.com (we still service Montreal).

Hope you enjoyed the story! It's not over so hope to share more as it unfolds.

Also feel free to reach out if you're just starting off and need a soundboard to riff with. I made the mistake of shutting myself out and sticking my face against the screen 24/7, which affected me me-ntally and physically. So remain social and healthy!


PS. a weird discovery I made while writing this post is that there are a few substrings that if found in my article, I got the error "Sorry, you're not allowed to post this." Me n, die t, aski n are the ones I caught. If I don't split the word like I did, I would get the error. Weird! Let me know if you've come across this before or know anything about it.

  1. 2

    So, it's just the COVID affected your business temporarily? You didn't blunder, right?

  2. 2

    It's very well written. How did you find vendors for making the plastic containers?

    1. 1

      Thanks @nategetahun !

      The meal prep caterers already used different suppliers, but we were always looking for the cheapest prices. So we'd enter the container model number on google, find the producer, and then ask them for their suppliers in our city or search on google the model # in our city.

      But considering today's consciousness about the environment, we moved to compostable containers at the end.

  3. 2

    Do you want to try again in London? (Contact me)

    1. 1

      How do I contact u?

  4. 1

    Pretty wild! Happy for you guys!

  5. 1

    I think there's room for you to position yourself as ethically conscious and sustainable too now which big corporates LOVE to appear as though they're doing something like that. Maybe sourcing non-plastic foodware and containers that your caterers can buy off you, or give them a discount if they use non-plastic wares.

    I think what's great about your appraoch and story is your willingness to listen and pivot. That's what truly makes a company last. In some ways the Covid crash may actually put you on very solid foundation. If you'd raised your prices by $2 before, all your customers would be very unhappy. But leaving and then coming back at a $2 higher price changes the percerption.

    Keep going, keep updating - love the look of your product and I think there's lots of room here for you to grow and I don't say that often.

    1. 1

      @jatacid Thanks a lot for your kind words and encouragement ✊ Your words ring true and after resting my head for a bit, I think it's a good idea to double down now

      One thing we did when people deactivated their plans is add a quick questionnaire on why they're deactivating. We saw a lot that deactivated due to the plastic containers. So we found a supplier for compostable containers, which is now what our caterer uses.

  6. 1

    Very interesting read! Thanks for sharing.

    On the weird discovery: The words are probably a failsafe @csallen built in to catch SPAM. As this is your first post I think your future posts won't have this limitation again.

    1. 1

      Thanks @YannickVeys, glad you enjoyed it!

      ah makes sense!

  7. 1

    This comment was deleted a year ago.

    1. 1

      Hey @Primer, to answer your 2 questions:

      1. it's preordered, refrigeratable, microwavable meals
      2. we used to work with home cooks in the early days, when we pivoted we narrowed down to 1 caterer for scalability.

      I support you in the home cooks endeavour, it's a much more fulfilling to provide new opportunity for people. Although it's such a low-margin business for home cooks, that it's hard to have a sustainable take-rate unless you scale nation wide. Btw who does your delivery and who pays for it? Check out Shef.com if you haven't

      We should definitely jump on a call and chat if you're down

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