How We Scaled Down Our Expenses And Reached A 25% Profit Margin
This is a follow up story for Delicious Denver Food Tours. If you're interested in reading how they got started, published over 5 years ago, check it out here.
Hello again! Remind us who you are and what business you started.
Hello again! My name is Jessica Baumgart, and in 2017 I started a food tour company named Delicious Denver Food Tours in Denver, CO. At the time, I was also teaching private cooking classes in people’s homes, so I initially started my food tour as a side hustle to that business. However, as the food tour grew and gained in popularity, I decided to phase out my cooking business to focus on what was really working.
In 2017 I started with one tour, our Downtown Denver Food Tour. I approached award-winning, locally-owned restaurants in the downtown area and negotiated discounts on food tastings for my tour groups. Once I had relationships built and a tour route and script set, I built a basic SquareSpace website (the same one I use today!) and started listing my tours on OTAs (online travel agencies), which are third party sites like Viator and Airbnb Experiences, that sell tours while taking a cut.
In 2018 and 2019, my tour business grew exponentially. I started with 100 guests/month and quickly grew to 650 guests. I hired a team of part-time tour guides and launched new tours across downtown Denver (a cocktail-focused tour, a food and craft beer tour, a corporate route).
In early spring of 2020, I was staffing up and getting ready for the busiest high season (summer for us) of my business to date. Then of course the world shut down in March 2020 due to COVID outbreaks across the U.S. I had to furlough my staff, several of them brand new and just learning the tour script and restaurant stops. I had no information for weeks/months on how we could re-open and when, but I knew I planned to tread water and wait for the pandemic out. Luckily, my tour guides were part-time staff (not contractors), so they immediately benefited from unemployment support and so did I.
My business also has extremely low overhead, so I scaled down every expense that wasn’t necessary (canceled AdWords, paused email marketing subscriptions, etc.) and got my expenses down to under $500/month so I wasn’t bleeding cash in the months that I wasn’t bringing in any revenue. Then I started applying to every city and state grant that applied to women-owned businesses, small businesses, and businesses particularly affected by COVID (we’re both food and tourism so hit twice) as well as loan programs like the PPP. Finally, I looked at other streams of income. I often get contacted by other food tour operators around the U.S. looking for business consulting as they launch and grow their food tours in other markets. I started working with several operators on an hourly basis to share my expertise and help them with their food tour businesses. I plan to continue this side work as the food tourism industry continues to grow.
In June of last year, city restrictions allowed for us to re-open with small tours. I brought back two staff members and had a decent summer before shutting everything down again in the fall when COVID cases spiked. Again after Christmas, we re-opened in January and have been running tours daily ever since.
At the moment, we’re ramping back up and preparing for a busy summer as COVID vaccines are becoming more widespread across the U.S. and travelers begin to head back to Denver.
At present, we’re seeing between $30,000 and $35,000 in sales each month with a profit margin of about 25% after paying for food/bev costs, staff, marketing, insurance, etc.
Tell us about what you’ve been up to! Has the business been growing?
We’ve both grown and taken a huge hit since we talked last. From 2018 to 2019, revenue doubled as tourism grew in Denver, and word-of-mouth (through review sites like TripAdvisor) and SEO drove more and more traffic to our website.
In 2020 everything ground to a halt when I had to shutter the business for almost 6 months. Like so many other foodservice and tourism businesses, the goal shifted immediately from growth to staying afloat and making it through.
During those down months, I focused on long-term projects that had fallen away in our busiest time. All of a sudden, I had time to work on the business rather than in it. I wrote a lot of blog content, setting myself up with posts for months when we re-opened.
I also did a full SEO audit and hired a consultant, which was a risk at a time that I was scaling back expenses and tightening my belt. But I felt like an outside consultant’s perspective could pay off in the long run, and I all of sudden had plenty of time for long calls to review financials, analyze my numbers and take a hard look at what tours were selling well and which I needed to shift my focus from.
Now that tours have resumed, I’m back in a growth focus, hiring new staff, opening up new tours, and building partnerships so I can handle what I assume will be a very busy summer for us.
My primary marketing focus remains on SEO as I build new blog content and review every page on my website to optimize everything from load speeds to keywords. I use social media but have not resumed my AdWords as my SEO paid off last year resulting in my business being the #1 ranked search result for my category.
What have been your biggest lessons learned in the last year?
Like so many other businesses in my category, I never expected a pandemic. I was prepared for competitors and changes in the market when it comes to appetites for food tours, but it never occurred to me that something so global and quick could shut my business down immediately.
My biggest takeaway from the pandemic from a business perspective was to keep overhead as low as possible. I think business owners spend in a lot of categories that aren’t really essential. So taking a hard look at every expense and making sure it’s contributing to your business’s growth is key.
Secondly, I think prioritizing people makes a big impact. When we re-opened, my guides were obviously desperate for work but sales were slow. My biggest days are weekends, so it made the most business sense to just run on Fridays - Sundays to maximize profits and avoid break-even week-day tours. But knowing my staff needed the income and fearing losing them for lack of hours, I opened up 7 days/week and took losses on some midweek tours to ensure they had the hours they needed to get by coming off of unemployment benefits. I tried to be as flexible as I could with staff, giving them the days/hours they needed first and then filling in myself when the business required.
Finally, like a lot of people, COVID put into perspective what’s really important. I will always stress about my business like any founder, but the pandemic also made me appreciate the little things in life not tethered to the business. For the first time since I launched my business, I had time to take walks, be with my family, and truly relax without the background worry of tours running and things moving smoothly. I had a baby in 2019 and ended up being able to spend the first year of her life at home with her, which was certainly not my plan as a working mom and founder. Ultimately, as hard as everything was staying afloat in those months we were closed, I wouldn’t trade the time I got.
What’s in the plans for the upcoming year, and the next 5 years?
Our short-term plan this year is to get back to where we were in 2019. I don’t expect growth coming out of the pandemic this year, but I am planning for a busy summer and fall as tourism resumes.
You will run into roadblocks and have to figure them out as you go, but don’t let the unknown keep you from taking that first step and getting started today.
The more 5-year plan is to grow my staff and create pathways for existing staff to grow into bigger roles. I think this is essential in retaining good staff, which I’m lucky to have right now.
I also plan to open up new tour routes and specifically will be focusing on expanding products for corporate groups, as this was a big piece of my business pre-pandemic and is a profitable area for us.
Have you read any good books in the last year?
I ended up reading a lot of pleasure this past year but read a few non-fiction books I found impactful. Billion Dollar Loser about the rise and fall of Adam Neumann with WeWork was an interesting look into how founders operate (and fall apart).
I also enjoyed Untamed by Glennon Doyle: not a business book but an impactful read for women founders for sure.
Advice for other entrepreneurs who might be struggling to grow their business?
My advice for new entrepreneurs is to keep your customer at the center of your business always. Support people, empower staff, but never lose sight of what your customer wants and what’s bringing value to their lives. I think too often entrepreneurs get tripped up in their own stories or their own interests and build businesses according to those while forgetting that the market will dictate your success.
I also see entrepreneurs waiting to know everything before moving forward. You will never have all of the answers, and waiting to get them may mean missing out on a great opportunity. Building a business is truly building the plane while flying it. You will run into roadblocks and have to figure them out as you go, but don’t let the unknown keep you from taking that first step and getting started today.
Are you looking to hire for certain positions right now?
Yes, I’ll likely be hiring part-time food tour guides this summer.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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