The Bar Business Podcast: Smart Hospitality & Marketing Secrets For Bar & Pub Owners
Welcome to the Bar Business Podcast, where we help bar owners increase profits, attract loyal guests, and simplify operations without burnout so you can finally enjoy life outside the bar. Our host, Chris Schneider, draws on his over twenty years of experience in the industry to bring you valuable insights and practical advice every week. From creating a winning menu and designing a stylish bar, to effective marketing strategies and HR best practices, we've got you covered. Join us on the journey to bar business success and take the first step towards a brighter future for your establishment.
The Bar Business Podcast: Smart Hospitality & Marketing Secrets For Bar & Pub Owners
Revolutionizing Small Business Funding: Ross Chanowski on Community-Focused Crowdfunding and Financial Resilience in Hospitality
Learn about different types and forms of bar financing with Ross Chanowski, the founder of NuMarket. Ross passionately shares his journey into social entrepreneurship and the profound impact small, community-focused businesses can have on their local areas. His insights reveal how NuMarket is providing a lifeline to bars, restaurants, and coffee shops, enabling them to secure the necessary funding to thrive and become financial pillars in their communities.
Facing funding issues in your small business? You're not alone. We tackle the inherent challenges of securing traditional loans, from high interest rates to overwhelming paperwork, especially in rural areas. Through personal stories and real-life examples, we uncover the emotional and psychological toll financial struggles take on business owners. Ross also sheds light on the importance of understanding regulations and information on different funding sources.
Explore the innovative concept of credits-based crowdfunding, a game-changer for local businesses. Learn how offering credits to supporters can ensure a loyal customer base while boosting financial health. Hear about successful crowdfunding campaigns and the importance of authenticity and community engagement. This episode is packed with practical advice and potential solutions to help small businesses not just survive but flourish through collaboration, proper setup, and mutual value models. Tune in to see how fostering community ties can lead to significant growth and sustainability in the hospitality industry.
Contact Ross:
NuMarket
Ross@NuMarket.co
Welcome to the Bar Business Podcast, where we help bar owners increase profits, attract loyal guests, and simplify operations without burnout so you can finally enjoy life outside the bar. Our podcast is packed with valuable insights, expert advice, and inspiring stories from successful bar owners and industry professionals.
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You're listening to the Bar Business Podcast where every week, your host, chris Schneider, brings you information, strategies and news on the bar industry, giving you the competitive edge you need to start working on your bar rather than in your bar.
Speaker 2:Hello and welcome to this week's edition of the Bar Business Podcast, your ultimate resource for bar owners. I'm your host, chris Schneider, and joining today is ross chanowski of new market, and ross is the founder of new market. New market is a company that does essentially crowdfunding. We'll get into all sorts of different discussion about funding and what is crowdfunding and what's not, and how they're different than what you may think of as crowdfunding, but they specifically target the hospitality industry and that's not, and how they're different than what you may think of as crowdfunding, but they specifically target the hospitality industry and that's bars and restaurants. They also do food stores like grocery stores, distilleries, breweries all sorts of pieces that kind of fall in that larger hospitality umbrella.
Speaker 2:But the reason I really wanted to have Ross on today is because when I talk to people starting out in the industry, they have a lot of trouble getting funding and Ross has an innovative way to potentially get funding that is a little bit different, that has real benefits to it, and I kind of want everyone, as you're listening to this and if you're looking in a position where or rather, if you're in a position where you're looking for funding try to expand some of maybe what you're looking in a position where, or rather, if you're in a position where you're looking for funding, try to expand some of maybe what you're looking at from traditional funding to some of these other options that are out there.
Speaker 2:So with Ross he has a background in entrepreneurship and has worked in hospitality off and on, but is definitely now more on that funding side of things. He also has a passion for psychology and social entrepreneurship and social entrepreneurship is one of the things that Newmarket is kind of based on, and so before we get into Newmarket or funding or any of that finance stuff that I like to nerd out over Ross, first of all I want to give you a chance to introduce yourself and then talk a little bit on that social entrepreneurship.
Speaker 3:Yeah, thanks, chris, for the introduction and for having me on. I think we are going to nerd out as we have in the past, so hopefully some other nerds or hospitality and finance geeks out here are going to be listening. In my name's Ross Chinowski. I started new market three years ago after it's like you mentioned, having various experiences working hospitality. I actually had started a coffee company before starting new market that I shut down when the pandemic hit. I know a lot of people listening have had some pandemic horror stories and can commiserate to what happened in the world. My background is a little bit all over, but I think you nailed it in terms of social entrepreneurship being the guiding light.
Speaker 3:There's a lot of different definitions of social entrepreneurship and what it means. It's kind of a new term. It's kind of a catch-all, if I'm being honest, and can really mean anything For me. It's building businesses that try to create some type of social change, something positive for real people's lives is the way that I would think about it. For us, that's access to finance and, specifically for community-focused businesses, that might be a bar, it might be a restaurant, a bakery, a coffee shop really anything where real people are serving real people in a way that matters, and for us on the social side and I know we're going to talk about this a lot getting funding for those types of businesses is an absolute nightmare right now, and it's a true systemic challenge. The system is just broken and doesn't work for real people, and so we're trying to change.
Speaker 2:Well, I think that's really important because when you think about impact and social entrepreneurship, you can have a lot of impact, but you have to have the money to be able to make an impact. Yeah, exactly Right. And for a lot of bars and restaurants, especially when we're talking about the small mom and pops, the proprietor type establishments, owner operator type establishments it's all about building that community and I think it's great that your kind of viewpoint and your mission, how you guys are coming at this from the funding angle, ties in so well with what bars and restaurants are doing on the ground and you know, building that community and bringing people together. And so one of the things I heard you say and because I listened to you a bunch before the podcast, not gonna lie but one of the ways I heard you define social entrepreneurship at one point was real change that makes a positive impact, and I think that is such a compelling and positive message.
Speaker 3:So I don't know if you want to, but maybe take a second and kind of break that down a little bit for us. Yeah well, let me give a couple of real life examples and things that I know my team really believes in and probably everyone in our kind of new market world believes in, which is the power for restaurants, bars and small businesses to create real, lasting change and positivity in their community. So let's take a bar At its core, it's a place where people can get together and it's where people can find some identity and belonging. So numbers for loneliness right now in the US are at all-time highs. If you have a neighborhood bar or restaurant that you can pop into and feel like you belong, the downstream impact of that is enormous. You're going to feel less loneliness, you're going to be a lot more fulfilled in your life, which is going to lead to better health outcomes, which is going to lead to stronger communities.
Speaker 3:And this is where I really nerd out. Does that lead to cheaper healthcare for all of us? Because we have less negative health outcomes. The mental health crisis is such a big deal right now, and so there's so much and anyone listening who either goes to restaurants or bars which is everyone or owns. One knows that their place has a really big impact on their community. So I don't need to provide a thousand examples, but I really could.
Speaker 3:And then there's you know the stuff that others think are in the margins but for us really aren't. And then there's you know the stuff that others think are in the margins but for us really aren't. So you know you're a bar and you sponsor the little league team or the dance team or the community organization in your neighborhood and in your community. That stuff matters and without that we have just much, much worse places to live and worse lives. I mean, imagine if you lived in a place where all you had was Walmart. That would not be a really good place to live. You need the places to convene and to be together.
Speaker 2:For sure and I'm going to quote you from now until forever that bars make you healthier, because that was. I don't know that I've ever heard that argued, but the way you did that was skillful.
Speaker 3:You know there's an argument for every side of everything, I think. But you know I know that in a lot of different places that I've lived over the years, that you know the bars and restaurants that I frequented were incredibly important for myself, for my friends, for my family. There are centers of employment in ways that really matter. I mean small business, jobs and small businesses in general. I don't know how many people know this or realize this that they represent a majority of the economic activity in the US, more activity than anything else. So if we have more of that, we're just going to have stronger everything. If you want to make more money so that you can provide for your family, if you want to have a really strong community that you feel you're a part of, all of that starts with small business. Whether it's bar, restaurant, coffee shop, bakery, bookstore, wine bar, anything. All of those are really important.
Speaker 2:Yes, they are Sorry I'm taking a moment. All of those are really important. Yes, they are, and I'm sorry I'm taking a moment. I'm just trying to digest what you just said because there's a lot of power in that thought process and it's a thought process that probably a lot of folks especially if you're in the industry and you're plunging toilets and washing dishes and doing all that don't really think through the true impact that they have, totally, Totally. And a way, if we leverage that impact to empower ourselves, to empower our teams, to make a better life for our customers. And it's a really interesting take on how to look at hospitality.
Speaker 3:Definitely, and one of the things that I think is such a challenge in hospitality. You know, anyone who's ever opened a hospitality business knows that everyone around them said you know you're crazy. Opening up a bar or restaurant is a terrible business decision and what we're trying to do is take out one of the worst parts of that equation, which is your funding, both because it's difficult to get and also because the terms are so bad that they set your business up to fail. If we can remove that, then suddenly it's not a bad decision to open up a bar or restaurant. It's actually a really good one for you and for your family, to build your own wealth and the wealth of your employees and the longevity of everyone involved. So I feel really strongly about that and I hope that when we look back 10 years from now at the impact that we've had, it's to move the needle in that direction that owning and being a small business entrepreneur is something that's, you know, an economically viable and great decision to make.
Speaker 2:That would be nice if, 10 years from now, everybody just got into that mindset, because I'm right there with you where it's the what changes? Communities, especially small communities, and if we talk about, you know, rural areas and things are the businesses that exist in those communities Totally. Communities, and if we talk about, you know, rural areas and things are the businesses that exist in those communities totally, and it's uh, it's important that people have gathering places and that people have access to just small stores and amenities in the where they live, rather than having to drive a long distance to get some for sure now, you did bring up funding, so let's, let's go in that direction real quick.
Speaker 2:but before we get into like new market and what you For sure to come up against is, they have an idea, they have a dream, they have all this and then they go. All I need to do is get the money. And I don't know about you, but when I hear somebody say all I need to do is get the money, I go, oh shit, because that is not like that's a really easy sentence to say, but a very difficult thing to obtain.
Speaker 3:Yep, Totally, and the difficulty right now is getting harder. I'm excited that we've got to meet some and I'll talk about some of these throughout the podcast some other tools and other people who are making things easier. But the sort of traditional ways of going about getting funding for a bar, for a small business, are getting harder and they really, right now at least in my estimation fall into three main categories. I would say bank or institutional funding, government SBA loans, and then the third I'll put in kind of an umbrella category are cash advances, and that's a relatively new thing. And then the category I didn't mention is more like new market type stuff. So we'll hold that off on that for a second, but right now, interest rates. We're recording this in the summer of 2024. Interest rates are so high.
Speaker 2:Just so amazingly high.
Speaker 3:Yeah, I mean, if you're really lucky you might find a reasonable rate right now at, let's say, 15%. You're probably not going to find that. I mean, I do a ton of research on this just to see what our customers are facing on a day-to-day basis. And there are companies who are with a straight face, or at least a straight, you know, a straight laced website saying we'll get you a 35% to 55% annual rate loan and you'll get it fast. That is just out of control. There is no business, no small business on the planet that can sustain paying back. Let's say, you know, $155,000 on a $100,000 loan in one year. That is just out of control. That's even if you can get access to that.
Speaker 2:Banks are often not set up to loan to small businesses. They're set up to loan to new POS system. I said, hey, can I borrow 12 grand? And this was like 2012. So money was. You know, we were coming off the the the housing bubble, but money was flowing all right. And they go sure, we'll give you a loan for 12 grand, but you need to put 12 grand in a CD for the time of the loan. And I said, wait, so you want to me put? I put 12 grand in your bank. You pay me like 2% and I pay you 5% for the money I already put in your bank. And they go yeah and I go well, no, I'm not doing that.
Speaker 3:Totally. It almost feels like they're banking on you, just not knowing enough. And that's how they make their money, and I think they do. And how can you blame people like us who, you know, opened up cafes and bars and restaurants? That's what we know and what we want to do. We're not accounting experts. That's why you know your work is so important, Chris, that you're helping people figure out and navigate this world, which is set up for you to not understand it, and they try to catch you on something like that. That's crazy. You know you give us $12,000, we'll give you it back, but you pay us back more. It's out of control.
Speaker 2:And that was again we're talking. I don't want to admit it, but like 12 years ago now, when it wasn't as difficult to get funding as it is today.
Speaker 3:Right you were like 16 years old, then something like that I was to be honest with you.
Speaker 2:I was 24. Okay, I bought a bar at 22. I'm one of the weird ones and that I funded I will tell you right now through family. I went to the three Fs right Family, friends and fools and luckily, family was able to give me a decent rate, although I will say for the record, I got a loan at 6%, which was great, only because my dad's LOI was at 3%.
Speaker 3:There you go.
Speaker 2:Yeah, so he got to make some points on me. Yeah, so I mean, and that is another option, right, it's always family and friends if you can get money there, but I know for most people that's not really an achievable goal some of the time. So you have banks, you have family, then you have the SBA. I mean, the SBA gets talked about all the time as here's this wonderful funding source. The government's going to back it. It's easy to get money With what you do and your experience in the funding space with hospitality. How often is that actually true?
Speaker 3:Yeah, not often true, unfortunately. I think it's easy to get down on the government for not operating as best as it can. I will say that it's gone in waves. There have been times when loans are easier to get, and when I say easier, I mean paperwork involved, things that are asked for, and then time. I think the biggest thing that we hear is that it takes a lot of time and there's a lot of different heard all kinds of stories of different things that the SBA has asked for. You know, I get it. We definitely don't want our tax dollars to go to something fraudulent by any means. But let's say, you need, like you did, chris, you need $12,000 to buy new equipment. You probably can't wait eight months for that, or six months or three months. So yeah, the SBA is really difficult if you can get it right, because you're going to get a better rate from the government than you are from the banks. But I haven't heard too many stories recently of we started down the SBA path and we're so excited that we did.
Speaker 3:Which brings us to speaking of timing, the third option, which I feel comfortable now saying is one of the worst for most businesses, and I say most here because there are some scenarios in which it makes sense, and that's sort of the cash advance businesses and these can be the most sort of sharky of the group where some of the payment processors and technology tools that have access to how you are taking in and putting out money for your bar, for your restaurant or business, will front you cash in exchange for a percentage plus of the business that you do over the next few months, and so they might give you an interest rate of something that they call 15 to 20% or some variability within that or outside of that, so they might give you that interest rate, which sounds reasonable given how fast you're going to get the funding Sometimes it's the next day, but you're paying that back, often in a couple months. So your effective interest rate is a multiple of that. Right, it's not 15%, it's a lot higher. And the revenue that you are counting on from sales. If you don't project correctly with the help of someone like Chris, a lot of that's going to be going to the people who gave you that cash advance.
Speaker 3:For some businesses it's incredibly necessary because you've just got to meet payroll that month. You just need to do that one thing that's going to open up the floodgates for your business and you need the money right now. But for most, I get a lot of calls from people saying, hey, we're kind of in the hole with this. What should we do now, would you?
Speaker 3:say that's accurate, chris, because you're much more on the numbers side.
Speaker 2:I would say that's 100% accurate, because there are definitely scenarios where it makes sense, right. I mean, I don't think that there's a funding product out there that does not make sense in certain situations. But to me, when you start talking about the funding that's essentially cash advances you can fall in the same trap as, say, a payroll cash advance right From a check cashing place. Where you're, you never get ahead, you're just always there.
Speaker 3:Yes.
Speaker 2:And if you don't project it out to your point it's, there's a lot of potential pain. On that one, yeah, definitely.
Speaker 3:And the whole is the hard part, right, that's what you just mentioned. You're always trying to dig out of it, always trying to dig out of it, and I think a lot of business owners face this, and when you're operating from a whole and operating from scarcity, like you've only got this amount of time or this amount of money that you can put towards things that you need to, we're going to get worse bars and restaurants and we are our worst version of ourselves, right Like I. When I'm facing some type of scarcity, especially related to money. That's all my brain is occupied by. It's how do I make this work? How do I make this work Versus? How do I get the best beer for? You know my bar? How can I change up my cocktail list? How can I make sure that the people who walk through these doors have the best experience and that my staff is trained to provide that for them? We just don't have that capacity. No one does. That's a very human thing.
Speaker 2:It is, and it's something I think on the finance end like whether we're talking about just the bookkeeping and the numbers, or digging into data or funding or really any piece that goes around the accounting space, if you will there is a lot of stress involved.
Speaker 3:Yeah, yeah.
Speaker 2:And there's a lot of emotion potentially involved, especially when things aren't going well. That has a lot of I don't know the right way to put this because I'm just coming up with this talk, but it's kind of like it's a downward spiral of events.
Speaker 3:Yeah, definitely.
Speaker 3:Yeah, and it's a hard thing to turn around once you fall into that. Yeah, it's the funding trap. You know there's a if anyone who's listening has ever heard the term, the poverty trap, it's a really instructive one for me and the things that I really like to research of. Well, I won't nerd out too much on the poverty trap, but basically, you know, an example would be if you don't have enough money to buy food, you're not going to have food that you need in order to go out and work to get money so that you can buy food, and you get caught in this trap.
Speaker 3:And I think that the funding trap is a real thing as well, where you're either digging out of a hole or you don't have the things that you need in order to dig out of that hole and start to get on top of the mountain with your business. But there's there's optimism and hope. This is I'm not saying that we're all in this, all in this trap forever. Chris, you and I have had a lot of conditions around or we've had a great conversation, I should say around. You know some of the optimism here and things that people like us can do well, thank you for that.
Speaker 2:um, now, one of the other things, as we're thinking about funding, that I think we should spend a little bit of time on is the sec. So you can't. If you're starting a business, you can kind of get money from anybody up to a certain amount and you're all right, but if you have an existing business and you're trying to bring in additional funding, a lot of government regulations can come into play and you have to worry about things like accredited investors, which, if we go back to the family and friends version of funding, not all of us, as a matter of fact, not many of us, have family and friends that are a lot of accredited investors. So I'll let you go ahead and define what accredited investor is, but let's have a little conversation around that and kind of some of the issues that present when you just have somebody that's like oh yeah, I'll help you out, I'll give you $10,000.
Speaker 3:Yeah, yeah. Well, a couple of terminology things here. I've made this mistake in the past SEC meaning Securities and Exchange Commission, not the Southeastern Conference for sports and college sports.
Speaker 2:True.
Speaker 3:Yeah, I've had a lot of times and I went to a big college football school too, so I get it. Yeah, the accredited investor piece is an important one. It can basically have kind of. You can become an accredited investor two ways. You can train for it, there's certifications, things like that or you can have a lot of money and that's pretty much it.
Speaker 3:If you have I forget what the exact number is this year, but let's say over $200,000 in income every year, or insert big number of liquid wealth or not liquid wealth, excuse me, just overall wealth and you're going to be able to make a credit investment. So for nearly everyone that we know, you're not an accredited investor. That leaves everybody else Everyday, people like us who go to work, who want to go to bars, who want to go to restaurants, and maybe they want to support those bars and restaurants. And, chris, what you're getting at is a lot of those people can't because of federal regulations on investment. You know rules that come from a really good place to try to protect us but in a lot of instances can prohibit business owners from raising money from real people. You know people in their lives, people who are their customers and people that they know.
Speaker 2:For sure, and I think, as you were talking, I was thinking how the easiest way to explain an accredited investor and thinking through the actual numbers of what it takes. Basically, are you a millionaire? Yeah, I mean, if you're not a millionaire, you're probably not an accredited investor. And if you're a millionaire you probably are, but maybe not, yeah, so it's a very high bar for who is allowed to write you a check for your business and who's allowed to invest. Now, I know one of the benefits kind of switching on to that fourth option of crowdfunding is you get around that accredited investor requirement.
Speaker 3:Yeah, yeah.
Speaker 2:And so how does that work?
Speaker 3:Yeah, there was a regulation a little over a decade ago now, if I'm getting my numbers right, called the JOBS Act, which opened up equity crowdfunding for different types of smaller businesses or really any business actually. It just opened up crowdfunding to non-accredited investors and what that means. You can put smaller amounts of investment into those businesses and get an investment return. So there's very specific regulation. Open this up.
Speaker 3:So you might be a small real estate project, it might be a technology company like mine, and then different platforms started to pop up to help businesses in acquiring investment from non-accredited investors through those new regulations. Some of those have been incredible, from everything from investing in farmland to, as I mentioned, apartment buildings, to different types of small business projects and things like that. We are not in those regulated crowdfunding categories because we're not an equity crowdfunding platform, but there are a lot of great ones out there. If you're curious and you're listening, two of the bigger ones for all types of companies a lot of technology companies are Republic and WeFunder, so they'll allow you to essentially buy a piece of technology companies in a way that carries some high risk but also has often some and so you mentioned you're not in the equity side of crowdfunding.
Speaker 2:So let's, let's dive into that a little bit.
Speaker 3:Let's talk about new market and, essentially, what makes you different and what is your model yeah, well, that's the things that there's a pretty big distinction between what businesses want in their long term. So some of those businesses that are in the equity crowdfunding side whether they're real estate or they want to often want to do one of two things. They want to sell sell their businesses to someone else at a much higher number than you know the investment that they put in, or they want to go onto the public stock market where, if you're an investor in those businesses, you're going to get a really high return if, and only if, that happens right. If it doesn't happen, you're likely not to get your money back, essentially, or your money back with a return.
Speaker 3:With bars and restaurants, I don't have too many friends or customers who own bars, restaurants, cafes, who, when they started it, think I want to sell to Google or I want to sell to Amazon or anything like that. They're like I want to do something great, make good money, provide for my family and do something good for my community. I want to have a solid, sustainable business. Or maybe I make a lot of money, maybe I make good money, but you're not waiting to, you know, ring the bell at the stock market and say you know, chris's bar is now public.
Speaker 3:So often investing from an equity perspective in those businesses doesn't make sense because you're not going to get that big event. For us, what we do is we're credits-based crowdfunding. So whether you're friends and family or a customer or an admirer or a fan of a business, you can, in that business, get more back than what you put in, but as credits to use towards drinks at the bar, food at the restaurant or vice versa Basically anything the business is selling. So you are a huge driver of their future and their success and you're getting credits returned to you to use at that bar. So you become a big funder and then you're also their most important customers in the future.
Speaker 2:So in that way, just for everyone listening, to make sure that we're all on the same page a credit. Essentially, what we're talking about is a gift certificate, right?
Speaker 3:Yeah, I mean you can definitely think about it that way. What we do is we issue a code to all of your funders that gets entered into your point of sale system and essentially draws down on the check, and we distribute those credits monthly. So more value gets added on to that code over time and it's as simple as using a gift card, really. You kind of just show your thing to the team at the bar at the restaurant and they plug it into their system and and you're done okay.
Speaker 2:So just to, because I want to run everybody through a scenario real quick, just to to make sure, because I know I'm sure you've come across this as well. A lot of times we can get into finance stuff and it's way more complex than we necessarily realize because we live in that kind of finance space. So I have a bar and let's just do really stupid easy math here. I need to raise a thousand bucks, so I raise a thousand dollars and how much in credits is going?
Speaker 3:20% more, so you'd be giving out $1,200 worth of credits.
Speaker 2:And that's those get distributed monthly over a year.
Speaker 3:Six months.
Speaker 2:Six months. Okay, so so I sell $1,000, I'm giving out $1,200 worth of credits, and it's $200 a month for six months, so it's not like that can all hit in the first month. This is open.
Speaker 3:Exactly, exactly.
Speaker 2:And I'm assuming, and I'd be curious if you have any data on this do you find that when people come in to use those credits, that they spend more than the credits?
Speaker 3:Yeah, have that data. The answer is yes. By the way, if anyone's listening and wants to talk about what the numbers might look like for their business, we've got a nice little calculator in-house that we can help. And, Chris, I should share that with you, now that I say that out loud. Yeah, so what we find, especially for brick and mortar businesses bars, restaurants most of the people who were probably listening is people spend about 1.5, 1.6 above their credits.
Speaker 3:So there's two important aspects here. If I have $10 in credits, it's likely I'm going to come in and spend $15. So your funding essentially leads to incremental revenue, right? Instead of you paying back a bunch of cash to a bank, you're getting paid to take on funding, essentially. And then the other key piece here is that you know when you're paying back the credits. You're not paying back cash. You're essentially delivering back on your cost to produce. So I come in, I've got $20 in credits and I go to a bar and I was, you know, just recently in New York. So a cocktail is going to be $20. I'm excited because I've got $20 in credits to use at that cocktail bar, but the owner of that cocktail bar might be paying, let's say, $6 to make me that martini or that Negroni or whatever it is. So for them they're excited because they just captured all of that margin as part of their funding.
Speaker 3:Right Again, you're essentially getting paid to take on funding, and that's where I think the real beauty of this is. It's this mutual value. I come in as the funder and I'm excited to use my credits, and then the business owner is excited because their funding just led to essentially profit.
Speaker 2:Right. So if we go back to that $1,000 example so I borrowed $1,000 dollars, I'm giving 1200 in credits but it's actually my cost. So as long as I'm not firing incremental labor to cover it, it's my food or beverage percentage. So if that's 25, that thousand dollars actually only cost me that 1200. I should000 actually only cost me that $1,200,. I should say, only actually cost me what? $250? No, $300. I don't know, math is hard when I'm talking.
Speaker 3:I was just thinking about a different math equation, as you say that and I'm saying but then I'm like teacher. Can you repeat the question please?
Speaker 2:The point is it's 25% of $1,200. And even if you included labor in there, right, even if you said, okay, I'm going to have so many credits, I have to include incremental labor. Essentially then it becomes prime cost. So you're looking at 55%, 60%, 65%. So you're getting money but saving money, making money, kind of all at the same time.
Speaker 3:Exactly. It's one of those things where we're doing our best to try to take all of what we feel like are 15 things that are great about this and distill it down into one thing. You know the one thing for this could be you know you take on $10,000 in funding on a new market from your customers. You're going to pay back, let's say you know, $5,000 of that conservatively to your customers as opposed to paying $15,000 back to a bank. So that's a pretty big difference. You know that's a $10,000 difference on $10,000 in funding.
Speaker 2:Well, and the other part about it that's huge is, if I borrow money from any other source and I'm paying it back, that doesn't generate repeat gas. Yeah exactly Right, because in the business we know somebody comes in one time, they're like I think it's 30, some percent likely to return. They come in twice, it's like 40. They come in three times, it jumps to like 75 or 80.
Speaker 3:So so you're essentially guaranteeing this person comes in six times whether they come in six times, three times or 20 times it's probably more times than they would have without having that emotional ownership over what you're doing, right, they point at the sign and say I did that.
Speaker 3:They walk in and they say I want to hear the updates. You know what did, what did? What we did as a community do for your business and I love that I got to admit I did not intend to do when we started New Market a few years ago was become a marketing tool. But that's kind of part of what we're doing now, which is, you know, every month when they get that notification to use their credits it's built in marketing that again, you didn't pay for, you're essentially getting paid for in a certain way. So we're getting better at all those different things.
Speaker 3:I definitely don't think we're perfect right now in that marketing piece, but I still think it's really special whenever I get the email every month for campaigns I contributed to with an update from Chris at Chris's Bar saying hey, we've got some new stuff on tap, you know, thanks to you, because we opened our new yeah, there's a lot of power in those emails, I'm sure, and it definitely creates a connection with guests that most places otherwise wouldn't have, because they, to your point, they have some skin in the game.
Speaker 2:they feel like they're a part of. They have some skin in the game. They feel like they're a part of not just visiting the bar, but the back end of the bar as well, the existence of the bar, definitely. Now I do want to talk about marketing some, because there's the piece that you just mentioned where you're sending out these credits every month that create some marketing. But also one of the problems a lot of folks run into when you just talk about crowdfunding as a whole is marketing, because it's. I mean, it's impossibly hard to go raise a hundred grand from one person because you have to find somebody that's willing to give you a hundred grand, but in some ways, it's easier to find one guy to give you $100,000. But in some ways, it's easier to find one guy to give you $100,000 than 100 people to give you $100. So how do you go about helping folks actually reach their goals when it comes to raising money and getting that out there?
Speaker 3:Yeah, a lot of different ways, and I think one of the things that we're most proud of with our work and that we enjoy the most is how hands-on we are with every one of our customers in terms of creating the right types of strategies for your campaign. I mean, there's no getting around that. There are three different ways mainly to be able to reach people right now, and that's, you know, the basics of email and text and things like social media is the second, and then the third is in person and, you know, really being part of the community, and we've got a ton of different resources, examples, templates, things that we help to design and deliver to our customers to reach people in those places. You know, chris, I actually kind of want to chat.
Speaker 3:I get what you're saying, that it's harder to get 100 people to give you 100 bucks, but I do think that we found some of the flip with what we're doing, because those 100 people might be the same 100 people who have come into your bar two or three times in the last year or come in every week or, you know, come in once a year. So if you've got 100 people who in the past have said I love Chris's place. Those are the types of people that we're going to help you from day one to be able to reach. What I also love is that we can help with the people who have never heard about your bar or who you know. Maybe they drove past it a couple of times, or they live around the corner but never went in, because they've been going to you know something else a couple of towns over or something like that, and so we help you with those strategies and they fall in those three categories I mentioned social media, email, text and then in-person stuff.
Speaker 2:Well, that's huge because it's eliminating a blocker, which is essentially what not raising money is in this case makes it so that these folks can actually achieve their goals and reach what they're going for. Now something else I know that you see a lot in crowdfunding and I don't believe you guys do, but I just want to double check is the concept that if you don't reach your goal, no money changes hands.
Speaker 3:Yeah, yeah. So this is an interesting one, because our first campaign one 2022, sometime during the COVID era we had an all or nothing model. We don't anymore, and there's a couple of reasons why the all or nothing model tends to protect against stuff not getting off the ground For businesses who are working with us. They're already doing something. It might be you're doing a pop-up bar, pop-up wine night, stuff like that. It might be you already have a location. It might be you have two locations, and so we're really helping to get financing for those businesses, not financing projects.
Speaker 3:If you're thinking about building a skateboard that does something totally different than skateboards in the past, you should probably go with Indiegogo or Kickstarter. But if you're a restaurant or a bar who's been in the neighborhood for a couple of years, or 10 years or 10 months, then we're there for you. And if your goal is $20,000, and you raise $19,000, I don't think there's a bar owner out there who's going to say, you know, with $19,000, we can't do anything, but with $20,000, we'd really start soaring. So we changed that pretty quickly to be much more in tune with what our customers really need be much more in tune with what our customers really need.
Speaker 2:Well, and that's really huge right, Because it's not enough. People necessarily think through when they're looking at something like crowdfunding. I'm going to put all this time and effort into it, but with traditional crowdfunding, there's a real chance that you put all that time and effort out and you get nothing. Yeah for sure, and to your point, the difference between. I mean even I want to raise 20, I raised 16. You're still, in a way, better spot than if you had zero.
Speaker 3:Totally yeah, exactly. I mean think about how many businesses out there would say, if $5,000 appeared tomorrow, what they could do with it to get payroll out on time, to get better ingredients for their food or for their cocktails, and if they had $30,000, they might buy that new piece of equipment. That would really help them. But $5,000 also really helps, and so we've seen a little bit of everything also really helps, and so we've seen a little bit of everything. You know maybe you really wanted $190,000 and you got 110, or you really wanted $8,000 and you got 12,000. You know every business and every campaign is different. It is certainly not a science.
Speaker 2:For sure, just out of curiosity, what is kind of the normal amount that people raise through your platform?
Speaker 3:I shouldn't say just up, but I'm saying just up because of what they're about to build. It's a pickup window for bagels in the Boston area and they're opening a more full service. You know, breakfast and lunch sit down, sit down restaurant adjacent to the pickup window and they're up over $100,000 right now. You've got, you know, the pop up. That's permanent nine bar bakery that raises $30,000. We've got the been around for, you know, for six, seven, eight years restaurant that raises $200,000. We've got the. I've been baking cakes or making drinks out of my home and now I want to start doing more regular delivery. That's at $10,000. So we've got a lot of different examples and different needs.
Speaker 2:As you were going through those, I was thinking about it. It appears that the amount of money someone can raise scales with what their base is when they're starting.
Speaker 3:Yes and the and is how do I put this? Are you real with your customers? The best campaigns we see are when, chris, you own a bar.
Speaker 3:I know you knew your customers by first name and when people walked in, you knew what their order might be. Those are the types of business owners that are going to do super well on Newmarket because people are going to want to support you emotionally and they're going to want way more of your bar and of your restaurant. We're not a good fit for you and we're super real about that with our customers. This just isn't what we're here for. We're here for the real community businesses, the ones who really want to do good things for their people, for their customers, for their team.
Speaker 2:That's awesome Now with that, because I feel like we've almost come full circle in our conversation. Right, we started talking about social entrepreneurship and community and then we went all through the financing and now we're back to the financing creates community and social entrepreneurship. So, in that way, because if we really think about funding, getting a loan from a bank does not build a community and an SBA loan is never going to give you community. A cash finance place is definitely not building a community. So with that, how do you promote that community for everybody involved? I guess?
Speaker 3:promote that community for everybody involved. I guess, yeah, let me give kind of a funny example and then I'll give a real testimonial. So funny example would be I get a call from one of my customers a couple of years ago and they say, hey, we've got a problem and I'm thinking, you know, the technology broke down or something, something's happened. And they said somebody's parked in the fire lane in front of our restaurant right now. They won't leave, and they keep coming in and saying no, no, no, it's cool, you know I contributed through Newmarket, so I really you know I own this place.
Speaker 3:Okay, well, that's a hazard of people having a strong emotional ownership in their neighborhood or community businesses. But on the more serious side I'm thinking about, you know, people can leave testimonials about the business and the business owners on the campaign pages. And I just pulled one up on the campaign pages. And I just pulled one up and it says you should give to this business because the people who are local, united and striving to make a better world, in part by making a better bagel, which in my opinion they have done, and it goes on.
Speaker 3:Now you might argue that making better bagels makes the world better or worse. For this person it did, and that's pretty real. And so I think that if we can open up financing that gives longevity and sustainability and profitability to bars, to restaurants, to real businesses, we're just all going to be better off. And the thing that, chris, I would love to hear your thoughts on too, is you hear the old adage that restaurants operate on razor thin margins when it comes to producing food and drink. I don't think that's true. I think they're actually really good margins. But when you think about the margin in total, when you have to pay back the bank every month and when you have to pay for really high real estate costs and when you have to do all those things outside of just getting food and drink in and out the door, that's where the big problem is, and we're trying to take a chunk out of that and say don't pay back the bank, do something that actually helps your business.
Speaker 2:Well, and I agree with you. I mean it's hard for bars and restaurants to make money because so many of them are not set up well. And I mean and I hate to say it that way almost because it's almost not fair to the hard work and the struggle and the effort people put in. It's almost not fair to the hard work and the struggle and the effort people put in. But it is true that, you see, you know, they say the average restaurant is somewhere around 5%. The average bar is a little bit more than that. I know for a fact.
Speaker 2:There are people out there in the market making 20, 30, almost 40% of their revenue just straight to net profit. And so some of it's about how they're set up. Some of it, I think, is lack of education. This is an industry that, for whatever reason, attracts a lot of people that don't have experience in the industry. Right, I've never known anybody to set up a CNC shop that hasn't used a CNC machine, random example. But it's kind of true in that way where there are a lot of people that go to restaurants, go to bars. But it's kind of true in that way where there are a lot of people that go to restaurants, go to bars and they're like, hey, I want to own one, but I've never worked in one. But I don't think personally that there's any requirement that we have razor-thin margins in this industry, absolutely not.
Speaker 3:Yeah, there's a lot of room and there's a lot of ability to make profit. I think, and that's why I think this podcast and your work is really important, where I hope we're also taking a chunk out, which is doing just that taking a chunk out of the things that we wouldn't know going into a business for the first time and then also taking a chunk out of the options that are available that aren't good ones, and I think you're helping steer people in those directions and we're helping to try to create something that you can steer people towards. You know, help out those margins and help out the longevity of the business.
Speaker 2:For sure, and one of the things when we first started talking that I know you and I both connected on quite a bit that I just want to share with the listeners is it's education. Right, we both have a passion for, you know, obviously selling things and doing our work. We're out here trying to make money, not going to lie about that, but also educating people.
Speaker 3:Yeah.
Speaker 2:And because we back to the social entrepreneurship part we all get better when we share information and we collaborate and we connect.
Speaker 3:Totally. We call it sort of a mutual value model, and I think your business is in this as well, where someone contracts with you, chris, they're going to be paying you, but they're going to be pulling out more than what they put in. And the same for you, right? By engaging in that transaction, you get more than what you put in Everyone does. And with our model, it's the same for you, right? By engaging in that transaction, you get more than what you put in Everyone does. And with our model, it's the same thing. And the education piece is such a big one by you sharing something, it's going to really change a business. And same for us, right? If we find something from you that's really going to help our business, we get a ton of value out of it. And unfortunately, there's a lot of people who gatekeep that information, and we really don't want to.
Speaker 2:Well, and I think that's not to get on anyone older than me, but gatekeeping and hospitality has been a thing for a long time. Yeah, I don't get it.
Speaker 1:I don't get it.
Speaker 3:I don't get it. In the small business and hospitality world there are, you know, people often talk about who are your competitors. I'm like there's thousands and thousands and millions of small businesses and potential customers out there. There's no way that we could serve every single one. You know what competition. What would you be gatekeeping? Open it up. Let more options be out there. Let awareness be out there so that, chris, you don't have to be the only one educating everyone on how they can set up their bar to be profitable and sustainable. There's just so much opportunity out there for all of us.
Speaker 2:The other thing, too is, especially when it comes to the gatekeeping thing, there are people that I'm going to work with really well and there are people that I'm not. There are business. Whether it can be a personality thing, maybe they don't like me, maybe their business model doesn't fit the way I like to look at things and I'm sure you guys go through that too. It's the more options that are out there, the more people in this space, the more likely everyone is to find the best fit.
Speaker 3:Totally, Absolutely yeah. And on that note, if you're listening and you own a business and you just want to get pointed in the right direction, I know especially for us please reach out to me and us, Because if you're not a fit for Newmarket, we've got lots of friends and other different options out there. That would be a good fit and we'd love to send you their way. Or maybe you just got a business challenge and I can say you should really talk to Chris about this. You can reach out to Chris directly. You see him or listening to him here. But I know I'm looking forward to, in the future, sending a lot of different folks your way and different people in our ecosystem and trying to change that generational thing of gatekeeping and instead be a lot more.
Speaker 2:Well, and somehow we've been doing this for almost an hour now. This conversation has gone really quick, but because you said contact you, how can people contact you?
Speaker 3:Yeah, really easily. You can either just go to the website, which is wwwnewmarketco. It's N-U-M-A-R-K-E-T dot C-O. If you click for more info or to sign up for a campaign, you eventually get pointed directly to my calendar, so you would get on there and we could have a chat. You can also just email me. It's ross at newmarketco R-O-S-S. You can send a carrier pigeon. You can reach out to Chris and say who is this person. Can you put me in touch? But please do. I'd love to talk to you.
Speaker 2:Well, and as always, we'll make sure that all the contact information for Ross is in the show notes. So if you're listening notes, so if you're listening, just scroll down to the show notes and should have a couple of links there you can click on and get in contact with them. And with that, because we do kind of need to wrap up, is there anything that we have not discussed so far, Ross, that you think we need to hit on?
Speaker 3:It's a good question, I think because of the strong interest in things like social entrepreneurship, I often get asked the question you know, how do we balance our social goals with our profit goals? I'm definitely willing to talk about that with anyone privately and discuss. There's never a good answer. The best thing I would say to think about is is there a way that I could link the two? You know so for us, our two are linked. Every time somebody runs a campaign, more money goes to great businesses and stays in the community. We also make more money. So just a thought starter, that would be the one thing.
Speaker 2:Well, and that's a that's a big conversation too, and obviously we we could probably do a whole nother hour just there, because one thing that I like to tell people in that regard is you can't help anybody unless you make money. Yeah, exactly, you want to help the world and you're worried about making a profit Wrong. Make the profit and then go help people.
Speaker 3:You got to be open. That's the thing. Yeah, want to help people, you've got to be open. But I think that's where you know, chrisris, someone like you is so helpful, where, from the very beginning, you can set up the business for profitability, so that you can also set it up for the kind of impact that you want to have, as opposed to going back to what we talked about before the trap, you know where you're just constantly digging out of the hole and feel like you need to cut corners and things like yeah, well, with that, let's end on that, because I feel like that's a good positive note for us to end on.
Speaker 3:I was going to say sadly, but I guess, yes, positively, we can end there.
Speaker 2:Ross, again, thank you so much for being here. Really appreciate your time and helping break down some of this more complex finance side of things, Because that's a conversation that, frankly, we don't have enough, but also is like we've discussed one of the really big pain points for people throughout their business.
Speaker 3:Yeah, well, chris, thanks for having me on, thanks for opening up the conversation, thanks for doing the work that you do. Yeah, I'm excited to keep having this conversation with you and anyone who wants to. So, yeah, thank you for creating the forum.
Speaker 2:Again, I appreciate you being here. Just because it's, I agree it's. We just have to have this conversation more and more. But with that, guys, we'll wrap up for today. If you like the show, make sure you like, subscribe, leave a review. If you have not, go on to Facebook. Join our Facebook group, bar Business Nation, where we're getting all sorts of bar owners and managers in there to be able to communicate and bounce ideas off of each other, because we all build communities in our individual spaces, but we also need a community together that all the bar owners can talk and really learn from one another and swap ideas. So if you aren't a member, go join Bar Business Nation. All the links to get a hold of Ross will be in the show notes, so definitely check that out. And until next time, guys. We will talk again later and I hope you have a great day.
Speaker 1:Thanks for listening to the Bar Business Podcast. Make sure to subscribe so you don't miss any future episodes. Check out our website at barbusinesspodcastcom and join our Bar Business Nation Facebook group for more strategies and tips.
