Coffee Roasting Business: From Christmas Gift to Six-Figure Revenue

[00:00:00] Sanjay Parekh: Welcome to the Side Hustle to Small Business podcast powered by Hiscox. I'm your host, Sanjay Parekh. Throughout my career, I've had side hustles, some of which have turned into real businesses. But first and foremost, I'm a serial technology entrepreneur. In the creator space, we hear plenty of advice on how to hustle harder and why you can sleep when you're dead.

On this show, we ask new questions in hopes of getting new answers. Questions like, how can small businesses work smarter? How do you achieve balance between work and family? How can we redefine success in our businesses so that we don't burn out after year three? Every week, I sit down with business founders at various stages of their side hustle to small business journey.

These entrepreneurs are pushing the envelope while keeping their values. Keep listening for conversation, context, and camaraderie.

Today's guest is Dawn Kennedy, the CEO of Convoy Road Coffee Roasters. Dawn's husband, Mike, received a roaster and some beans for Christmas in 2020, and after tasting his coffee, Dawn bet him she could sell it on Facebook. It worked and now has transformed into their own roastery. Dawn, welcome to the show.

[00:01:15] Dawn Kennedy: Thank you so much for having me on here.

[00:01:18] Sanjay Parekh: So I'm excited to have you on. I don't know that we've had that many or not any, coffee roaster people on the podcast. So, hopefully we'll get to dive into some kind of the nuances of coffee roasting, but before we get into that, give us a couple of minutes about your background and what got you to where you are today.

[00:01:37] Dawn Kennedy: So, I'm Dawn Kennedy. I am an attorney, actually. CEO is like my second job and I'm also an author and a podcaster and I am somebody who has touched a lot of industries over the years. I enjoy business as a whole and given the opportunity to start another one, that is exactly what we did. So, I have a military background, so does my husband. We traveled a lot, moved around a lot, and put our roots down really starting when our kids were in high school. And we've been back in my husband's hometown for about seven years now.

[00:02:14] Sanjay Parekh: That's awesome. So, a lawyer as well, background wise, has that helped you at all in terms of starting the business?

What kind of law do you do?

[00:02:23] Dawn Kennedy: So I'm a business law attorney and also it's some administrative stuff, which was actually very helpful because what we do is food production, manufacturing — it's pretty highly regulated once you get past a certain point. So coffee, interestingly, starts out as what you would call a cottage food, meaning you don't need all the licenses, but to become a business, you do.

[00:02:45] Sanjay Parekh: Got it. Got it. That's interesting. So, I wonder like your perspective on that. It's funny because my first startup, one of my co-founders was a lawyer and it saved us an incredible amount of money in legal fees. Do you feel like it's helped you out in that way? It saved you money?

[00:03:00] Dawn Kennedy: So, I actually am from that old adage, right?

Like somebody who uses himself as a lawyer's a fool. So we didn't use ourselves for necessarily like legal things. We have a business attorney that we use, but we did get the benefit of being able to research different things, and the right questions to ask. So, where I think it saved us was more in the money of implementing all the regulatory things because we didn't make a lot of mistakes. Like we knew ahead of time what we were going to have to invest in and the licenses we were going to need.

[00:03:36] Sanjay Parekh: Oh, that's interesting. That's interesting. So, you mentioned, this is an opportunity to start another one. So, this is not the first time you've started something entrepreneurial?

[00:03:45] Dawn Kennedy: No. So we actually had a consulting business way back in 2011, and we did that for a couple of years and did really well. We enjoyed it. But my husband had near fatal accident in 2013, and we actually lost the business. Had to dig out of all that and reset ourselves. So, this business, Convoy Road Coffee Roasters, we started it in 2021 and it's the comeback story, if you will, particularly for my husband, because this is his passion.

[00:04:14] Sanjay Parekh: Yeah. That's interesting. I'm glad things are better now. But it probably puts things in perspective when things like that happen and you've got to come back through that.

What are some of the lessons that you took with you from that first, could have been successful, but because of outside forces, ended up getting shut down? What did you take from that to into this new business?

[00:04:40] Dawn Kennedy: A couple of different things. One is, you don't know what you don't know.

So, we had taken a lot of courses, and we had done some things, and we thought we knew what we were doing, but we didn't know certain things, like what is key man insurance, right? We didn't know those kinds of things because those aren't really discussed for startups, right? And they think it's just not part of that basic SBA training thing.

I don't know that it needs to be, but it wasn't. So, we didn't know that. And risk mitigation, risk management is something that we are much, much more confident or conscious of now where, we look at our bottlenecks and we predict a lot faster where things could cause issues. Which we, I think last time we were probably like a lot of new startup entrepreneurs, it's just growth without understanding capacity and things like that. And we're much, much more aware of that today than we ever were.

[00:05:40] Sanjay Parekh: Yeah. Yeah. That's an interesting kind of comment because I think you're a hundred percent right. Anybody starting a business, like you can start asking people about what you need to do. And there's always something nobody tells you about.

I remember my very first startup, nobody had told us that we needed a business permit. We opened an office, it was, we were in an office, and we were just typing. Like, we rented the place but nobody told us that and we had never started a company before. What did we know?

The only way we discovered this is when the Better Business Bureau guy came by to sign us up for free and asked us where our business permit was and we were like, it must be in the mail. And that day my CFO went and got us a business permit because, what do we know? And nobody had told us. So, it was an oversight, because of a lack of understanding.

So, I think you're exactly right in terms of that. So, let's talk about that, then in starting this. This is your second go around, you learned a lot the first time you realized there was a lot you didn't know that you didn't know. Was there anything else that made you nervous in trying this out the next time around?

[00:06:57] Dawn Kennedy: That's a great question because as you said, probably haven't had other coffee roastery people on here. Lots of people open coffee shops and they do really well. The margins obviously on a cup of coffee are much bigger than let's say a bag of beans. But generally speaking, the biggest thing that we had to take away was making the decisions in front of how we wanted to do this.

And I did not want to get up at four in the morning and make your coffee any more than I wanted to get up at four in the morning and make my coffee. So, some of our strategic decisions and the things that we decided we want to do were based on the fact that we had done this before we worked ourselves to the ground last time, and we weren't going to do that again.

So, we decided manufacturing production is where we wanted to go. And I don't think we asked ourselves any of those questions about, what could this look like if we make it a business the last time?

[00:07:56] Sanjay Parekh: Yeah. That's an interesting, analysis. They're not wanting to get up at 4 a.m. and make coffee. I'm with you on that. So then, how have you managed this in terms of life and how do you work the business? Because I think you mentioned that this was and still is maybe a side hustle. So how do you think about that?

[00:08:18] Dawn Kennedy: Well, maybe it's not a side hustle anymore, right? So, we have five employees.

We're in grocery stores. We focus more on the wholesale side because of the fact that it's manufacturing and production, but we're only open to the public a couple of days a week. We're very clear about what we do. Our lines of revenue are very distinct. We know who's managing what and doing what, but going back to your question about how did we maybe put our toes in the water?

This time I can tell you when we first started doing this, even though the market research was clear, there weren't a lot of other roasters and stuff. We leased our first roaster because I was too afraid to buy one. And I was like, I can write it off a hundred percent if we don't do this well. And those kinds of things.

[00:09:00] Sanjay Parekh: How much does a roaster cost?

[00:09:03] Dawn Kennedy: Depending on the roaster, they start between seven and nine thousand.

[00:09:07] Sanjay Parekh: Okay. Yeah. Yeah. Not an insignificant amount of money. So, okay. So, it got started like that. So just you and your husband at first, or were there other people involved?

[00:09:19] Dawn Kennedy: Nope. So, the very first thing he was roasting a pound at a time on a tabletop roaster, people really liked it and we were doing really well.

We were basically tripling sales every month and about four or five months in, we were like, we need to make a decision. And it was very funny because my husband and I, we had just started getting our packaging and stuff done a little bit. We were dipping our toes and seeing if there was really going to be sustainable demand.

And so, people would like, he would meet people to deliver the coffee to them, or they would pull in the parking lot and he would meet them outside and I was like, I hope that the sheriff knows this is just coffee. I had visions of we didn't have the, a commercial roaster. We didn't have any of that. And we were just making the sales and I.

[00:10:10] Sanjay Parekh: Oh, out of the back of the trunk. That has all the hallmarks of an illicit deal of some sort.

[00:10:19] Dawn Kennedy: We had the proper labeling that the USDA requires. But other than that, we really, when I say we started little, there was capacity one pound at a time. And then he got a second.

I was doing two pounds at a time, and it takes so many minutes and he started getting to the point where he's roasting a couple of days a week, sometimes for 10 hours. And he used to laugh at it. He's like, "I push the button. I hit the timer." And he reads a book or whatever. And he was like, "Not so bad."

But we started tripling. So, the demand started growing. And then we had somebody say, "Could you put that in my store, in my deli?" And so, I was like, "Maybe there is more here, and we need to look at that."

[00:10:59] Sanjay Parekh: So, how did people find you or how did you find the customers initially? And how did that growth end up happening?

[00:11:06] Dawn Kennedy: Yeah. So, we found the customers originally on Facebook and the product is great.

[00:11:13] Sanjay Parekh: So, it wasn't just the first sale that you did. It was like.

[00:11:16] Dawn Kennedy: We sold 11 bags on that first post and I only had five of them to sell. So, we have our own profiles. We do single origin. We don't flavor our coffee.

It's all kind of medium. We have a medium dark. So we have a profile that's a little different. We don't do espresso roast or Italian roast and things like that. So, it was something different in this area and people just really liked it. The profile itself or the coffee profiles and stuff that we were doing, people were like, "Oh, this is great. I can drink it black and it's not bitter." And that's how that started going is we were very intentional about, no, we're doing this. If you want French vanilla, you add it yourself, or if you want pecan, whatever. So, we offered something that was different and there were no other roasters in the area.

So that gave us a chance to educate people about the roasting process and stuff. And they were interested, and it did just start growing organically. Our first year marketing budget was $35.

[00:12:23] Sanjay Parekh: $35. That's probably a pretty good ROI on that.

[00:12:27] Dawn Kennedy: Yeah. Yeah. That was our first year, but we went to events, and we did tastings, and we have a philosophy that you shouldn't buy something until you've tried it.

We didn't immediately just package it up and sell it. We went to events and did tastings and people can choose the ones they like the best. So, we did it a little differently. A lot of roasters that you'll see, like online, they roast and go straight to e-commerce. And even though they probably get a lot more sales that way, I'm always like, well, what if you don't like it?

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[00:13:21] Sanjay Parekh: Okay, so, I'm going to admit something. I'm actually not a coffee drinker. I don't know too much about it. So, I'm going to start asking you questions that are probably well known for coffee drinkers, but I'm going to be the dumb guy here in the room. What exactly is specialty coffee? And what you guys do, why is it so different and in demand in the area that you're in? You talked about how there's nobody else doing this roasting, has that also changed are there now other roasters near you? Talk about that a little bit.

[00:13:52] Dawn Kennedy: Yeah, there are some who are near us and there are some people who white label, right?

So, they have their brand on freshly roasted coffee. So, specialty coffee actually is, in the industry, anything that has scored a cup score 80 or higher. And anything that scores a cup score 79 or below is considered commodity coffee. There's nothing wrong with it. It's the Folgers and the things that you see on the shelf, but specialty coffee particularly is, harvest to harvest.

You can have a small grower that gets an 81 this year, but next year gets a 78. So, they're not eligible to sell in the same tier the next year. We actually forget sometimes that it's an agricultural product. It is available 24/7 on the shelves, but we do focus on the smaller farms. We focus on the smaller harvests.

And sometimes we even get what you would call a micro lot, or maybe a farm has done 1,000 pounds and you have to grab your share. So, we do focus on the higher cup score coffee. So there actually is a distinction in the industry.

[00:15:04] Sanjay Parekh: So yeah. What is it that dictates that score?

And who's doing that scoring?

[00:15:11] Dawn Kennedy: Yeah. So, there are certified coffee cuppers. That's what they're called. And they're evaluators and just the like wine guys, they go out in the fields, they brew up a sample of the harvest and they cup it, they grade it on acidity, mouthfeel, flavor notes, there's different things.

I'm not a cupper. Also, I don't have that palette. So, I know that sometimes I like one particular origin over another. But if you were going to, say, did you get those blueberries? I'd be like, absolutely not.

[00:15:49] Sanjay Parekh: I definitely know what you're talking about. But I've never tasted the thyme in things and things like that, I'm just going to, I'm just going to have it.

This is super interesting to me. You talked about working with these farms and micro lots and things like that. So, are there a segment of farms that you already have relationships with, or is that changing from year to year? Like, how do you develop those relationships?

How do you make sure that you are able to grab whatever it is that you need to grab?

[00:16:20] Dawn Kennedy: Right so, we actually, I didn't really misspeak because we do work with the suppliers who have the contracts with those farmers. So, we have all the information about who the farmer is, how many acres, the elevations, we actually, as roasters, do not import the beans directly.

And there's some guidelines around that. But we have some phenomenal suppliers that have built these relationships over years. And, we can work with them and say, listen, we're looking for something from here, or they'll give us a listing of what they call a float coffee. So, they have contract relationships.

And they'll say, we have this, coffee from Finca San Josefina, which is a single farm. It's a single farm. And it may be a number of acres. But that is like the one place that it comes from. So, we just work with our suppliers very closely to make sure that we're being mindful. We love sharing the backstory.

We have a concept called origin of the month. So, I probably should have started with that. We do bring in one new, unique, exotic kind of fun coffee every month. And the growth has allowed us to because originally, we didn't have these relationships. We were too little. We weren't ordering enough. We were tiny. They were, the first time we bought a 135-bag pound bag of coffee, we were ecstatic, but we ordered it from East Timor. I had to look at a map. It's a little island north of Australia and they grow coffee. And we wanted to try it. So, we got big enough to basically tell people, we're chasing the perfect cup, come on the journey with us.

And we'll bring in different things if you'll share us, share with us this packaging because there's no way I'm going to let this guy order 135 pounds of coffee for us to drink at home.

[00:18:13] Sanjay Parekh: Yeah. So interesting. So, okay. So, you started with coffee. Selling 11 bags, even though you only had five.

How much are you now processing in terms of pounds of coffee a month, let's say?

[00:18:29] Dawn Kennedy: About a half a ton.

[00:18:31] Sanjay Parekh: Half a ton?

[00:18:32] Dawn Kennedy: So, we have two roasters going now. And depending on the month, we're going into fourth quarter soon, so it's going to go up a little bit from there. But, yeah, we can put through two tons, or one and a half tons, I think it is, a month through our little baby roaster. So, we do three pounds, small batch, but we'll add roasters if we need to.

[00:18:54] Sanjay Parekh: So right now, you've got capacity. You can still grow with the roaster that you've got. And then, I imagine this is running what, during just Monday through Friday? What's the business cycle like for you?

[00:19:07] Dawn Kennedy: So, we're only open to the public on Wednesdays and Thursdays. Legitimately, the rest of the time we roast, we can do over a hundred pounds a day. So, we don't have to have them roast in 24/7, 365 to make our current demand. I almost am embarrassed to say we roast probably 20 to 25 hours a week and it being production, we can do it anytime, day or night. Once you roast coffee, it has to rest 48 to 72 hours before packaging. So sometimes we'll roast on a Saturday if we don't have anything else going on. The way that we do it is everything is computerized. And so, once we get our roast profiles set, to make sure the quality is consistent, we just roast that particular coffee at the same roast profile consistently.

So, we don't have to stand there and watch it. It's almost, we're working hard, but not that hard, if that makes sense, the conception of it. We let the roasters do the work.

[00:20:18] Sanjay Parekh: So all the hard work is on the front end and then it just does its thing. So, do you have any kind of approach or a way that you think about, how the business and the quality of the product and how do you remain competitive? Because now you're saying like there are other competitors in your region.

Do you think about it as from a price point or a quality point, both of these, something else, like, how do you think about that to maintain it for yourself?

[00:20:48] Dawn Kennedy: So, one of our big distinguishing factors is the fact that we bring in these origins of the month. That may be a small batch, limited edition that aren't going to be available forever. We have some standard coffees that we love, and we keep around in stock. We don't deal at all in flavored coffees. We have somebody here in town that will give you a butter rum or a Highlander grog. And I think that's amazing. We just don't do that.

So, we differentiate there. We also are mostly on the wholesale side now quite a bit in grocery stores. We build relationships in an area, we'll go into an area, we'll do some events. We'll do some tastings, we’ll be supported. And then once people start asking for us to ship a certain amount of coffee, we will approach a grocery store, maybe an IGA, an independent grocer and work with them and put it on the shelves there. So, we distribute that way. And we'll then promote that store to our customers. So, we do a lot of that organic, brand recognition first, and we'll move into an area with a lot of intention that if you really like us and you want to keep buying us, why would you drive all the way to where we are?

We're just going to put it over here. So, we have a 50-mile radius and then we have a distributor in another part that has a 50-mile radius. So, we're just very intentional about doing that. And then we figure, we have two kinds of coffee drinkers. The ones who just like something that is consistent, and they can rely on every morning, and they drink our blends.

And then we have the exotic coffee drinkers who are like, no, I'd really like to try something from a country that I have to look up on the map. Like Sioux Luisi, for example.

[00:22:32] Sanjay Parekh: So interesting. So, it's been four years now, basically on this. Coming up on four years.

Thinking back, when this all started, is this where you thought you would be in four years?

[00:22:48] Dawn Kennedy: No. Not only was it not where we thought we would be when I posed the question to my husband, is this going to just be a hobby or do you want to buy our first roaster? We wrestled with that because we remembered what it was like to own the other business and then to lose it.

So we actually had to overcome a lot of mindset and limiting thoughts and fear over certain things. And I think in some ways, that has helped us do this very intentionally. So, I didn't think we would be this successful. It's at year three or four, but really it was year one and two where our revenues just about doubled.

And I went, wait a minute, this is not going to be just a family little thing where we're just going to roast and have this. And it was an intentional decision to then build the business. So, everything from this point, I think it's not that we're expecting it to get this big. We've decided to go ahead and put that work in.

[00:23:54] Sanjay Parekh: Yeah. What was the annual revenue mark where it was like, oh, this is a real business? What, dollar amount made you think that?

[00:24:04] Dawn Kennedy: So, our first December we did $17,000 and in the six months of the year, we did $61,000. From the tabletop roaster to December 31st, we did $61,000. We went, "Wow!"

Then the next year, we just about doubled that and we went, "Okay, so we're over six figures." And then we started having to get employees and things and we went, "Okay, there really is a demand and our brand is doing well and no, I don't think we want to stop."

[00:24:34] Sanjay Parekh: So it's very much sounds like a market forced you into having this be a business.

It wasn't really like something that you thought that would happen in the beginning and you've ridden the ride so far at this point.

[00:24:48] Dawn Kennedy: So far, yes. And you're right. I think if we hadn't been selling as much as we were in those first three or four months, I would have been like, "Well, that's cute."

That is a side hustle kind of thing. Whereas it became something where it was like, "Oh, there's no more hours in the week for us to get on those little tabletop roasters? So, we have a decision to make."

[00:25:13] Sanjay Parekh: Did the two of you shed anything when you made that decision to go all in?

Were there other like hobbies or jobs or things like that you were doing that were producing revenue? That you got rid of?

[00:25:25] Dawn Kennedy: A little bit. I was consulting and working a little bit more as an attorney. So, I backed off of those a bit. I'm scaling them back up a little now because after the time investment we've made, a lot of this can operate without me necessarily being there all the time.

And so, my job at this point is to empower, train employees, manage the resources, if you will, resource people and hold the vision and kind of guide the ship. So it did scale back for quite a while, but now, I'm not saying it's running automatically, but it's doing a lot more of that.

So, again, it's production and manufacturing. I don't need a barista to make lattes, which makes a difference, it really does.

[00:26:12] Sanjay Parekh: Yeah. Yeah. A hundred percent. So, this is, obviously, a family affair. You and your husband are in this. Let's talk about boundaries and what kind of boundaries you set up, because it's easy for us as entrepreneurs to let business blend into all parts of life.

And do you let that happen or do you not let that happen? And what do you think about in terms of those boundaries?

[00:26:36] Dawn Kennedy: So, my husband is the roast master and he is like the brand ambassador, and that's his role. So, he doesn't actually do the business side. I do. After his accident, he had a traumatic brain injury.

And so, these are the things that really give him some things to do, but his absolute zone of genius in this business is to get those roast profiles correct, to spend time researching the beans, researching the farms and roasting to the cup that is in a taste profile for our brand. And after that, pretty much I take over, which has been amazing.

So, we try really hard not to let this consume us. We have strict boundaries around when we're going to stop talking about it or timeline. Very intentional about doing, strategic planning 90 days at a time. And this is what we're sticking to. So, trying to manage shiny object syndrome.

We do try to make it so that it is not all consuming. My daughter does marketing, and my son manages, he has a background that allows him to help inventory management. So, they come in here and there I'll call them, but we don't talk about it at Thanksgiving dinner.

[00:27:57] Sanjay Parekh: Yeah, the challenge though is with the product you make is that all it takes is having a cup of coffee and a meal and you could slide right back into talking about business, right?

Because you're consuming your product, I imagine, right?

[00:28:12] Dawn Kennedy: Well, we do. We like coffee. Generally, my husband was stationed in Panama in 1987 and that's really when he discovered specialty coffee. So, he's been chasing this for over 30 years, but instead of me paying $65 a pound for some obscure thing, now I make everybody share with me, a big bag. But, yeah, this is coffee has been a big part of our life for over 30 years before we ever started the business.

[00:28:42] Sanjay Parekh: Yeah. One last question for you. If you could go back in time and do something differently, in the business, what is it and why?

[00:28:57] Dawn Kennedy: I think I would have managed our marketing a little bit better, when we first got to like that first fourth quarter kind of thing. I don't know that I would have gone any faster because there was a lot of mindset, confidence, boundaries, and things that we had to learn about what we could do in the business based on past experience.

So, I don't know that I would have gone faster by getting licenses or those kinds of things because you have to have the licenses to be able to ship out of state. There's some rules around it. I don't know that I would have done that faster, but definitely once we got those licenses, I think I would have had a little more confidence to ramp up sooner if I had known where we would be now.

[00:29:42] Sanjay Parekh: Yeah, I love it. Dawn, this has been absolutely fantastic. Where can our listeners find and connect with you online?

[00:29:49] Dawn Kennedy: So, if you want to learn about the coffee, we have all of our past origins and all the great stories around that. That's ConvoyRoadCoffee.com and you can find everything about that there. Me, you can find me on, Facebook and Instagram and that. And it's just Dawn K. Kennedy.

[00:30:10] Sanjay Parekh: I love it. Thanks so much for being on today.

[00:30:12] Dawn Kennedy: Thank you so much for having me. It's great chatting with you.

[00:30:17] Sanjay Parekh: Thanks for listening to this week's episode of the Side Hustle to Small Business podcast, powered by Hiscox. To learn more about how Hiscox can help protect your small business through intelligent insurance solutions, visit Hiscox.com. And to hear more Side Hustle to Small Business stories, or share your own story, please visit Hiscox.com/side-hustle-to-small-business. I'm your host, Sanjay Parekh. You can find out more about me at my website, SanjayParekh.com.