The Truth About My Coffee Company (I Screwed Up)

What's up you guys, it's Graham here! So, two years ago, I made the decision to start my own coffee company, and this video is a prime example of what not to do because I'll admit I made some pretty stupid mistakes. For those unaware, the idea of starting my own coffee company really began in 2019 when a subscriber called in asking me to review his spending habits on my second channel, The Graham Stefan Show. During that call, it was revealed that he spent an exorbitant amount of money every single month at Starbucks. So, I jokingly responded that he should just make it at home because my coffee cost 20 cents to make.

Well, after posting that video, everyone began commenting about my 20-cent iced coffee, so it just became like this recurring joke on the channel as a way to save some extra money. Of course, I leaned into it, and a few months later, I created a complete tutorial about how you can make your own 20-cent iced coffee at home. Then, I explained that if you just invested the difference from what you would have spent at Starbucks, that savings would eventually add up to a $1.2 million nest egg by the time you're older. And that was initially it until another subscriber reached out to me who specializes in selling shipping and manufacturing physical products like snacks, foods, and sauces.

He explained that he already owned his own facility, he has the team ready, he has a marketing plan, and together we could create a one-of-a-kind coffee business. We decided to do it. From that point on, we taste tested dozens of coffees to find the perfect blend. We went back and forth on names and branding, and we had dozens of revisions with graphic designers to come up with a theme that was not only fun but also fit the aesthetic of something that saves you money without being cheap and flimsy. After a few months and a frivolous trademark threat against our previous name, we eventually came up with the concept of Bankroll Coffee.

Now, here's the thing: I want to be clear that I've never run any sort of e-commerce business like this ever. To me, all of this was completely new, and even though my business partner had extensive experience in online sales, I quickly began to realize that the cost of selling something as simple as coffee quickly begins to add up. For instance, do you want your order shipped in a really fancy box? Well, that'll be a few extra dollars. Do you want shreds of paper gently nesting your coffee within the box? Well, that'll be an extra 25 cents in increased packaging time. Or how about custom packaging on the envelope? That'll be an extra dollar on top of that.

As you can see, very quickly the break-even price in coffee could be as high as $14, meaning if you sell it anything below that, you lose money. Of course, even though this is all just business 101, I wanted to do everything that I could to pass the savings back on to the customer because I just thought all the packaging is going to be thrown away anyway, so why pay for it? I really wanted to design and build the coffee around something I would buy and drink myself, and after a lot of tinkering, eventually, I think we did that.

We found a formula that would give us the most cost-effective premium coffee, locally roasted right before shipping, delivered straight to your door, while still being an ethically sourced Fair Trade coffee that tastes insanely good for the price. I mean, I'm drinking it now! However, even though that all sounds pretty good, here's where things started to go wrong. Initially, I got to say the whole thing was a massive success to the point where I was dumbfounded because I initially launched the coffee by making a single video, and in the first 48 hours, we sold out of 10,000 bags that were meant to last us the entire month! In total, we earned almost $150,000 of revenue that equated to almost $30,000 in profit.

But here's the thing: all of that money was reinvested back into the company to continue growing. At first, that was also a huge success. We spent some of that money retargeting viewers on Facebook and Instagram, and those saw some of the highest returns I've ever seen. We would spend a dollar and sometimes make $3 to $5 back on every dollar we spent, so really in the very beginning, it was like a license to print money. That was incredible, with all the money being reinvested back into the company, which then got reinvested until things went wrong.

The thing is, within a few months of launching, coffee prices went up by a lot. Brazil experienced a severe drought which impacted production, and winter frost made it even more difficult to ramp up supply. As you would expect, our own coffee costs went up substantially. Pretty soon, our profit margins went from about $1 to $2 a bag to break even, and this is where I screwed up. I was at a crossroads where we could either raise prices to remain profitable, or we could just sell break-even coffee for the sake of growing the business. I sold break-even coffee for the sake of growing the business. That meant that when you were buying the coffee, you were pretty much paying the exact price that it cost us.

But I kind of thought to myself that's not that big of a concern; eventually, coffee prices are going to come back down and we'll start making some money. But uh, nope! Instead of coffee prices going down, they went higher. In addition to that, the cost of Instagram and Facebook ads went through the roof after an iPhone update that disabled tracking across platforms. So with dwindling profits, it didn't make sense anymore to run paid traffic. As a result of that, we came to the realization that we either had to raise prices or we had to get really creative.

So, I decided that we should get really creative. We looked at our overall order volume and quickly realized that we could offset the coffee loss by selling accessories like cups, metal straws, ice cube trays, and so on. This meant that it was an easy upsell for customers who were already placing an order, and those items had the profit margins that we could then use to keep the company running. It worked for the first few months; accessories sold insanely well, and we had a returning customer rate of more than 50%, which is insane for any sort of e-commerce business.

On top of that, from popular demand, we also decided to launch Bankroll Tea, which gave us a slightly higher profit margin that we could then use to reinvest into ordering even more stationary ahead of future orders. But without running any sort of paid traffic or really any external marketing whatsoever, eventually sales began to fade. Now sure, almost everybody stayed who was on the subscription model, which is incredible because it meant that they liked it enough to continue ordering on a regular basis. But just like any business, it requires constant promotion to continue growing, and honestly, that's where I kind of fell off.

Initially, going into this, my goal was to be able to build something that could grow independently of myself, like I see companies like Cars and Bids and Sour Strips do extremely well outside of the brands of Doug DeMuro and Max Chuning. So, I thought I would be able to do something similar, except I severely underestimated just how much work it would take to get to that point. Admittedly, I let Bankroll Coffee fall to the side; it wasn't a priority of mine, and no one at fault except for myself.

Like, just for some context here, throughout the last four years, I've practically done nothing other than focus on creating regular content throughout the three channels. Anything that didn't fall into that bucket was put to the side. I guess in the big picture, from a business perspective, that was the smart choice because all three of those channels more than tripled in size. But from a Bankroll Coffee perspective, that required more work than I had to give, and that was absolutely my responsibility in order to grow it. Looking back, by all means, I spread myself too thin. I was trying to do too much at the same time without giving myself a clear focus on what to work on, and with Bankroll, that became a problem.

Now, here's what I found the most surprising from all of this. In the last year, despite zero active promotion or anything whatsoever, we still managed to do $65,000 in revenue. That meant that almost every single day, we were getting about $200 worth of orders simply from people who liked the product enough to order it again without any additional work on our end. That gives me a lot of confidence that if we could do $65,000 in sales without even talking about it, imagine what we could do if we really take it seriously throughout the next year.

That's why, after letting Bankroll Coffee run very passively in the background for the last year and a half, I'm going to take a more proactive approach in the next year just to see how far we could take it. I've also partnered with YouTube to incorporate Bankroll Coffee into the shop feature, so if you click, I think it's the link over, it's flipped. So, if you go on the website, or maybe it's on mobile, and you go into the tagged products, which I believe should occur right here, you'll be able to click on this link right here and browse or shop for Bankroll Coffee.

Now, we've also been working quietly behind the scenes on some new flavors and additions. For example, we just launched a brand new limited edition flavor, Santa Claus Rally, and once the first thousand bags are sold, it's gone forever. We’re also going to be giving away a free mug on all orders over $50 for the next 7 days because we just barely missed Black Friday.

Hey, this is Graham in the future, and that's a $16 value. Obviously, there were some growing pains in terms of maximizing the outreach, but all of that was really on me as a result of taking on too much and not being able to give each business the time it deserves. So now that I have more time, back to the coffee it goes! The way I see it, all of this is simply a great way to share a different perspective of business with everybody. I could talk about what works and what doesn't work, and if there's any takeaway from this video, let it be this:

Number one, don't be afraid to raise prices sooner. For some reason, I had this internal fear where if we raised prices, I'd be letting everybody down. However, when we did finally make the decision to raise our prices alongside our overhead, to my surprise, nobody cared. It made zero difference whatsoever; nobody dropped off. I was making it a way bigger deal than it ever had to be.

Second, I know this sounds stupid, but a business requires a lot of time and focus. I know this sounds dumb and common sense, but there is no such thing as a business that runs completely passively without a lot of work up front. I guess I underestimated just how little time I would have to focus on other endeavors at the time that we launched, but that's now something that I could correct going forward.

Third, I also should have focused more on remaining profitable. I guess in my mind, I just thought that I didn't need the extra money, so I may as well just pass on that little savings back to the customer in the form of lower prices for the sake of growing the company. But after a year of letting it run on its own, I was stupid. I should have focused on profitability, and I should have done that a lot sooner. That was on me.

This was all something that I just started for fun. I was not concerned whatsoever about making any money from it; I just wanted something cool to share with everybody watching, and it made for a really cool talking point. I got to share it in videos and talk about what worked and what didn't work. It was just different; I really enjoyed it.

So, with that said, as of now, like right now at the time you're watching this, as a way to thank you for all of your support or for even just making it to the end of a video, if you are interested in trying it out or placing an order, all I ask is you click the link using the YouTube shopping feature, which on mobile I believe should be below the video, or on a desktop it's on one of these sites here; it just pops up on the screen. It means the world to me if you tried it out; let me know what you think. Give me honest feedback; I would really appreciate it.

Thank you guys so much, and until next time!