A Chat With Paal Gisholt, President/CEO, SmartPak Equine

CS: What was your biggest challenge in the first few years of running the business?
PG: The biggest challenge for us was that we couldn’t charge the same kind of premium for our product, which is custom and uni-dose packed, as other custom-packaged products. If you think about yogurt, for instance, in little individual packs compared to yogurt in big tubs, it’s probably a 50 to 100 percent premium to go to the little packs. Same thing with juice, water and soda. All of these are products the costs of which go up when you make them in convenient portion sizes. By the same token, when you go into something that’s customized for an individual customer, whether it’s a custom suit or riding boots, you’re going to pay a lot more for those things. In our case, because the person who’s paying the bill is usually the boarder, and the person who has their feeding chore dramatically simplified is the barn manager, we couldn’t charge a big premium compared to what people were paying to buy these products in buckets, which is how they’re typically sold. So we had to come up with an economic model and get our efficiencies to a place where we could make a profit without charging our customers a big premium. So for the first year and a half or two years, we were earning at a negative gross profit margin on every package we sold. We felt like we were stapling a $20 bill to every order. We had this very scary notion that the only way we were going to dig ourselves out of that was by substantially increasing our volume. So we had to sell a lot more and lose a lot more money in order to cross through that valley of death to profitability.