22 Ask Norm

Getting down to business with one of America’s greatest entrepreneurs

In his new column and video series, Inc. columnist and legendary entrepreneur Norm Brodsky visits with founders and helps them solve challenges. Here, he and Shlomo Birnbaum, founder of Newark, New Jersey– based Single Serve Beverage Distribution—an Inc. 500 company that this year will sell 100 million pods of ground coffee that pop into coffee machines—wrestle with expansion and rising labor costs.

NORM: You pack, you sell, you collect. How can you have a problem?

SHLOMO: With all the new products that we’re bringing in, we want to be as efficient as possible. The question we have is where we should move our factory to allow us to do that. How many employees do you have? About 35. Have you talked to them? Would they move with you? I’ve spoken with a few key employees. Some of them would be interested in going. Others, we’d probably need to incur some expense to entice them to move. So what’s holding you up? With labor costs going up, the question is whether staying in New Jersey is the best option. Labor costs? So you’re going to ask your employees to move so they can get less money? The key employees I’m not concerned about. It’s the lower-skilled employees. I understand that. I own fast-casual restaurants, and we have the same type of problem. We try to keep our current employees as we grow without bringing in new ones.

One method we use to keep our labor costs down is to put in different pieces of equipment and outsource a lot of things. Have you thought about doing that? Like robotics? Exactly. Automating is going to save you a lot of money. You’re going to lose some employees, because some of them are not going to move anyway. So it’s a perfect time. You don’t have to let the employees go; they’ll leave on their own.

It’ll help you get to twice your current size, which I’m guessing is what you want to do. At least. I’ve never met an entrepreneur who wants to do less business. Because we’re growing so fast, we need more space. Right now, we have 25,000 square feet between two floors. And what do you think you need? Probably around 60,000. The funny part is that, most times, entrepreneurs overestimate their growth. They think they’re going to do quicker, better, more. At the same time, they always take less space than they need. Because it’s expensive. I don’t understand why. But I see moving as an opportunity for you to overcome the problem that you have. You know what that problem is? Tell me. You’re really good at doing stuff online, and promoting stuff. That’s the 21st century. But your operation is in the 19th century. What do you know about automation? Not much. Let me ask you something: How much did you know about coffee when you started this business? Nothing. Most entrepreneurs really don’t know a lot about their chosen businesses beforehand. They learn through trial and error. You have two choices. One, you can learn it yourself. Or two, you can meet with an expert.

People are more than glad to help you, especially if they think there may be something in it for them. Call up some people who sell automation equipment. They’re going to give you an education. They don’t charge for this help? No. Why would they charge? They think you’re going to buy equipment—and you are going to buy equipment.

At the same time, you should get input from key employees, which might help you figure out how far away you’re going to move. Think about what incentives and other help you’re going to offer them. Sounds fair. You can look for a facility, too. But you shouldn’t sign any leases until you’ve determined how much space you really need. Otherwise, you’re making the decision before you have the knowledge, and that’s a road to disaster.