How We Started A $150K/Month Contract Manufacturing And Copacking Business
Company name: KO-Pack
Revenue: 150K/ Month
Hello! Who are you and what business did you start?
Hi Everyone! My name is Payton LaCivita and I am one of the co-owners at KO-Pack along with co-owners Loren Scott, Ken LaCivita, JP Patchett, and Rachel Kubel we operate our contract manufacturing, private label men’s grooming, and fulfillment services business.
KO-Pack is an industry-leading contract manufacturing and copacking company that specializes in men’s grooming, haircare, skincare, aroma therapy, and natural household products. Whether you want to launch a new brand and order a few units from our private label program with no minimum order quantity or you are a large brand distributed in Walmart, Kroger, Costco, etc. we can help create, batch and blend, package, and distribute your products.
We take pride in becoming valued partners in any brand’s supply chain and our diverse partners reflect our commitment to working with businesses big and small.
We started our business in May of 2020 (yes… everyone shut down and we opened our doors) and have been steadily growing since then by 40-60% YoY growth. Each new month has been our best month since opening and we average $150k per month and growing.
What’s your backstory and how did you come up with the idea?
I’ve been an entrepreneur since I was about 6 years old. I would sit outside my dad’s office and sell paper airplanes and drawings to anyone that walked by. I used this money to open my first bank account and have been hooked ever since.
I grew up in an entrepreneurial family. We owned (and still do) restaurants and my dad would start other companies in different industries including transmission shops, tile and granite stores, and different types of restaurants. Being a business owner is essentially in my blood and I knew this is what I would do my entire life.
Good news or bad news, client partners want communication and good communication is crucial to running not only our business but our clients’ ability to run theirs as well.
In college, I had a couple of ventures with friends. They mostly made enough money to pay bills, some school fees, and for social life activities.
Shortly after college, I teamed up with a friend to start our brand. We did well online and in some brick-and-mortar stores but I taught myself Amazon and we started to take off on the platform. While growing that brand I began to consult for other brands and their growth on Amazon. One of my Amazon clients was not happy with their fulfillment center and knew that I had my warehouse and asked if I’d be interested in storing/shipping their products as well. That’s when our fulfillment company started!
Maybe a year after that, another Amazon client connected me with their co-packer/supply chain representative and we began talking. That turned out to be Loren and we had a lot in common, including going to the same small college in California at separate times as well as the idea to start our contract manufacturing company.
Our ideals aligned and we began planning. We felt that the market was outdated and falling behind when it came to the processes that new e-commerce and fast-growth brands were needing.
We also knew that most copackers and manufacturers hardly even pick up the phone when a new potential partner calls. The small guy had nowhere to go and the big manufacturers were always months behind schedule. Plus, we could vertically integrate the business by offering fulfillment services for the e-commerce brands we would be manufacturing for – this would turn our warehouse (typically a strict expense) into a revenue center for the business.
With this all in mind, we put together a business plan and raised enough capital to do a build-out in a brand-new facility in Chandler, AZ.
Take us through the process of designing, prototyping, and manufacturing your first product.
As I mentioned earlier, we opened our doors in May 2020. We started construction on our 18k sq ft manufacturing facility in October of 2019 to target partners in the health and beauty space.
We designed the facility to our exact needs as a contract manufacturer with room to grow. We have multiple enclosed and climate-controlled production rooms. We can give full facility tours without the need to “gown-up” thanks to the strategically placed viewing windows.
Our multiple growth phases allow us to develop an onsite lab and formulation room, larger batching and blending tanks, and multiple in-line automated filling machines.
Our equipment setup allows us to produce up to 25k units in a shift (with room to grow) and includes an auto-filler, auto-capper, induction seal, lot code, labeling, and tamper-evident bands. Essentially, we can drop the bottles or jars on one end and pick up finished products on the other end with little need for putting our hands on the packaging process.
Describe the process of launching the business.
After our grand opening, our state “shut down” and people didn’t shower for a year while we were trying to sell shampoo and body wash. These were tough times but we were able to pivot and produced whatever we could, hand sanitizer, room sprays, etc.
In hindsight, this worked out in our favor as it forced us to crawl and walk before we ran. We are a bit behind our projections but over the last 6-10 months we’ve hit the track that we set out to from the beginning.
Over the last two years, we’ve also found our place in the market. We began to take on a lot of products in the men’s grooming space including beard oil, balms, wash, shampoo, and conditioner.
We’ve also found several products missing in health/beauty categories that have allowed us to develop custom formulations to offer to our partner brands that are now distributed in big box retailers all over the country.
Finding partners including chemists, equipment manufacturers, packaging suppliers, and raw material distributors has been vital to our growth. Without these strategic partners, profitability in this industry would be impossible since everything runs on thin margins, to begin with.
Our current position is primed for growth and we are adding new client partners every week while maintaining faster-than-average completion dates on our projects.
Learn from how others are doing things… use resources like Starter Story.
Since launch, what has worked to attract and retain customers?
Since our launch, the most important thing we have done as a company is find the right customer fit. We had to work hard to figure out what products we were best at producing and who needed those products.
About 12 months ago we also made a shift from selling a “service” to selling “products”. What I mean by that is that instead of calling brands or customers and asking them if we can fill their products or if they need filling services, we began calling brands and offering them a product that we made that they weren’t already offering to their customers.
This was game-changing because it wasn’t asking someone to change something that may or may not have already been working for them. Instead, it was about providing value that allowed them to share more with their customers. We would find products that complemented the products in their catalog that they were already offering.
Once we found this strategy, we began to develop ad programs on Google Adwords and build out landing pages. We found our target customers and began to ask what their biggest needs or headaches were when it came to launching or growing their brands.
Taking that information and developing formulas that solved those problems combined with lower MOQs and fast turnaround times – we began to hit our stride. To stay ahead with this strategy, we are always on the lookout for the latest trends in skincare, haircare, and men’s grooming.
We have a goal to share 1-2 completely new products with our customers on a monthly basis. This way our client partners can stay ahead of the competition and time the market for product launches.
As a company, our motto has always been “Answer the phone.” This focus on customer service along with innovative products allows us to maintain our client partners and keep them coming back. Our team is also extremely experienced in a diverse range of topics. I have a deep understanding of Amazon and the difficulty of navigating the platform along with making sure that products are compliant with all of their changing rules and terms.
We do a ton of Amazon prep and large distributor prep for our client partners so we are well versed in all of the nuances that ensure there are no additional fees or product issues.
Our co-owners also have a ton of experience in the supply chain, distribution, B2B/B2C sales, and launching products/brands. We are constantly offering advice and solutions to problems our client partners experience – even if it has nothing to do with projects we are directly working on with them. Our theory is that if it helps our client’s partners grow then it will help us grow. It’s all about providing value!
How are you doing today and what does the future look like?
Today, we are very close to profitable but growth is expensive… and we are GROWING! Our growth is a result of cold outreach to brands as well as several websites that gather information on targeted leads looking for our services and products.
This has been very helpful because a company growing like we do not want to rely on 1-2 big client partners to keep the lights on. Because of that, we are adding new client partners each week and they range from small single-shop barbers to venture-backed Direct to Consumer brands to mid-size Amazon brands.
This leveling of clients and diversification gives our business a strong foundation for our future growth.
We plan to dig deeper into our private label program and hope to increase our hundreds of formulas to thousands of formulas and variations of formulas to be the ultimate supply chain/manufacturer partner to our clients.
Through starting the business, have you learned anything particularly helpful or advantageous?
Before launching KO-Pack, I mostly ran small teams for our businesses. We now have 20+ employees throughout the facility as well as a non-profit organization we work with that helps people with disabilities achieve independence.
Creating a team of that size has been a challenge for me to manage. I’ve had to transition from managing my work and results to working with people to take on those responsibilities to help us all grow together. Although it has been challenging it has been extremely rewarding.
Part of my “WHY” for being an entrepreneur was to build something greater than myself that provides an opportunity for others to build a career of their own. My goal is to create a culture and a team that stays with us long-term and grows as the company grows. This is extremely counter to the industry norms as most manufacturing companies experience high turnover in all aspects of the business.
Another major challenge has been navigating the “new norm” for our supply chain. Delays at the ports for raw materials or packaging have stalled several big projects we needed to push out early on. Even though everyone was experiencing these issues, we went through them when we are still very new and our customers expected better. Luckily, we were able to work through the delays and the issues and the majority of our clients understood. We’ve learned to be extremely transparent and open about what is going on and the timing of projects. Good news or bad news, client partners want communication and good communication is crucial to running not only our business but our clients’ ability to run theirs as well.
The last major hurdle for us has been our growth! It is such a good thing but also a difficult experience to manage. More staff (higher payroll), bigger projects (longer pay cycles), and larger purchases for ingredients/packaging is something we planned for but we’ve exceeded the forecast since we’ve found our sweet spot. Luckily, projects are much more consistent and our calendar is strictly booked so that we can turn on projects faster and have a great group of employees with the experience to produce a great product. We need all of these resources to maintain the cash flow required to operate and grow at the same time.
What platform/tools do you use for your business?
We love tools at KO-Pack and are always looking for ways to improve our tech stack.
Our websites are typically built on WordPress with a ton of plugins. We use the Divi Builder for quit design and customization. Woocommerce allows us to sell on the Worpress Sites and we use Unbounce for our forms to collect lead information.
From there, our leads go into the Nutshell CRM. This is an API connection with Unbounce. In Nutshell we keep track of our various pipelines and love the organization and reporting that Nutshell offers. We also use PandaDoc to make sure that all of our agreements, NDAs, and TOS are signed with each new client partner.
Our manufacturing documentation is stored in a few different places depending on the security requirements. These storage solutions include Google Drive, Dropbox, external hard drives, and an ISO 22716 Software Platform called Cosmetri.
When shipping parcels we process all of our orders via Shipstation and when shipping LTL that isn’t managed by our client partners we use Freightquote.com.
We also love selling on our Shopify sites, Amazon, eBay, Etsy, Faire, and Walmart.com which all integrate into our Shipstation account as well.
Our entire team communicates using Slack and we create unique channels for all of our fulfillment client partners so that we are always on top of anything to do with order fulfillment in as close to real-time as possible. Our project management and project assembly requests as well as Advanced Shipping Notices are managed on ASANA.
We post all of our job openings on Indeed and run payroll/HR through Gusto.
What have been the most influential books, podcasts, or other resources?
I love listening to podcasts and audiobooks and I’m not sure I could choose my favorite or most influential!
I’ve always been a fan of the Tim Ferriss Podcast but lately have been listening to Build with Rob, How I Built This and Impact Theory.
Pumpkin Plan by Mike Michalowicz is definitely a book I recommend to businesses still looking for their market fit and The Fish That Ate The Whale by Rich Cohen for a great story about growing a business.
Advice for other entrepreneurs who want to get started or are just starting out?
The best advice I can give to an entrepreneur is don’t stop going and keep innovating. Always launch fast and test everything. Use the data that you’ve gathered to make smart decisions that help move you forward. Be aware of time management and the difference between “being busy” and being productive. Finally, learn from how others are doing things… use resources like Starter Story.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!