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| Missouri Small Business & Technology
Development Centers ... your success is our business |
Friday, November 20, 2009
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Entrepreneur Archive:
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| Richard Loaiza monitors some of the final steps in the salsa production process. This includes the sealing of the containers by the capping machine, which was recently purchased with funds from the business expansion loan the company received. |
Consequently, the Loaizas sought the advice of Chris Thompson, the Cole County business development specialist with the University of Missouri Extension's Small Business Development Center (SBDC) in Jefferson City. He had assisted them with their start-up plan in 2002, and he was ready to help again.
ValRich sold its first case of salsa in January 2003 and currently makes six varieties of La Casita salsa: hot, mild, thick and chunky, black bean, peach and pineapple.
"Although the company was successful and business was growing, Richard and Linda knew that to secure financing they would need a good business plan and solid financial projections," says Thompson. "Their target was to reduce their cost-of-goods-sold by 11 percent, while doubling the number of retail locations carrying their product, ultimately leading to a major improvement in their bottom line."
Working together, the Loaizas and Thompson tackled the business plan one step at time. Establishing goals, reviewing operations and the impact of increased sales on the company's operations, analyzing the market, and developing a sales strategy were all done before the financials were computed.
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| La Casita salsa jars get their labels at the end of the capping process. |
"Too often small business owners will start forecasting their sales and profits before they have fully analyzed their market, their operations and the impact these have on their costs and sales," Thompson explains. "The result is financial projections based on emotion and hope rather than on facts and data. That seldom works. Lenders want to know what's behind the numbers. They want to hear the owners explain and justify the facts and assumptions that produced the financial projections. If the owners cannot do that their chances of securing the needed financing are not good."
Once they determined the operational details and calculated all costs, the Loaizas and Thompson computed numerous financial projections based on a variety of scenarios. For each scenario they used different levels of sales in new stores, sales in existing stores, and ingredient costs. Each recipe uses a different mix of ingredients, so the cost of goods sold also varied by recipe.
Projections were computed using financial-projection spreadsheets from the Kaufman Foundation's Business Mentor CD, one of the many tools available to SBDC business development counselors and their clients. Thompson created additional spreadsheets to calculate costs based on ingredient expenses, new sales and sales to existing stores.
"Thinking through the complete business plan and then reviewing and analyzing each scenario enabled the Loaizas to better understand and explain the relationship between operations, costs, expenses, sales and ultimately their profits," says Thompson.
Armed with their business plan, financial projections, and most importantly the knowledge they gained through the entire process, the Loaizas approached several lenders. The result: they secured the financing they requested through two separate lenders.
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| Huge vats at ValRich Foods' production facility are used to create each of the company’s six varieties of salsa. |
"The assistance provided by Chris and the Extension's Small Business Development Centers was invaluable providing the information needed by the lenders. I don't know what would have happened if we did not get the help we did," says Richard Loaiza.
ValRich Foods immediately used the money to purchase ingredients at more favorable prices, invest in new equipment and hire two new employees. The equipment purchases included a bottle-capping machine that speeds production, freeing employees to do other tasks, which reduces labor costs; a truck used to deliver orders throughout their expanding market area; and a fork lift needed to move their bulk-purchased ingredients.
Within three months of obtaining the investment financing, ValRich Foods saw its sales increase 43 percent. The number of stores stocking LaCasita salsas grew 40 percent, their cost of goods has decreased 11 percent and the "bottom line" is significantly better, according to Thompson. La Casita salsas are available at more than 200 locations throughout Mid-Missouri, St. Louis and Springfield in such stores as Schnucks, Gerbes, Wal-Mart, Hy-Vee and Shop 'n Save.
ValRich Foods
511 Empire Drive, Suite B
Jefferson City, MO 65109
Phone: 573-638-3700
ValRichFoods.com
E-mail: customersupport@valrichfoods.com
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After 18 months of operations ValRich Foods needed and wanted to expand its business. Owned and operated by Richard and Linda Loaiza, along with their children, ValRich Foods produces and distributes traditional salsas based on family recipes under the La Casita brand from its production facility in the Apache Flats section of Jefferson City. 
