Insider's Guide Part 1: Flavorman's Lessons in Cash Flow & Investor Relationships

When Aspire first came to us, they were very particular about having a natural product; they wanted to compete in that marketplace. When you have a beverage category that is dominated by so many big players, there are always distributors who are looking for new products to dispense because big companies use their own distributors. They believed their idea was an opportunity in two ways: they could supply smaller distributors or distributors who didn't have a sports drink, and they could make their product natural. We put the product formula together, focusing on the technical side of the business. We spent time looking for ingredients that would be typical for a sports beverage, plus a little bit more, finding innovative, natural ingredient solutions that would help them address the very problem that inspired their drink idea in the first place.

Unfortunately, Aspire may not have paid enough attention to their cash flow. The business grew so rapidly that they quickly ran out of cash. They manufactured their sports drinks to supply distributors, but were not paid quickly enough to satisfy cash flow management. Eventually, this caused the company to run out money and eventually shut down production completely. Moreover, energy drinks are different from other spirited beverages because they require a lot more input costs than just distributors. Costs included packaging, bottling, ingredients, shipping, salaries, and other miscellaneous expenses. It is important to keep these costs in mind when you are selling a product so rapidly, or you might risk falling into the same trap that led to Aspire's shutdown.

It's critical to pay attention to accounts receivable. Within the energy drink market, there is more competition and working parts that need to be managed in order to sell a product and maintain the flow of money. Oftentimes, start-ups get to a point where they either borrow money from banks or find investors. It is important to get to know investors ahead of time so that they get know the business and their product vision. Start-ups find that they have one particular thing in common with investors, and that is money. As it turns out, brand owners don't know exactly what investors want out of the relationship. Investor relationships can be tricky, but it is important to establish what both parties want, and to do it early. If not handled properly and communication is not effective, these relationships can quickly become toxic.

Aspire was open to looking at new ideas and new ingredient concepts. They didn't approach Flavorman with strict guidelines and product demands. They told us their idea and their mission and asked for advice about how to make their product better with creative flavors. They came in with a concept and were willing to listen so that the end product would be the best it could be. Not all clients are like this. By working with many different types of companies, Flavorman has learned how to better manage relationships and give clients what they want in a way that speaks to their best interests.