← How I Built My Small Business
How I Built My Small Business
Chris Smith - What it really takes to run Award-Winning SONOMA PIZZA CO.
00:31:22
Loading summary
Transcript55 lines
- [00:01]
A
Welcome to How I built my small business. I'm Ann McGinty, I live in Northern California. And today's guest is someone who built a beloved spot just 15 minutes from my home. Chris Smith is co founder and co owner of Sonoma Pizzico, an artisan pizzeria in the tiny wine country town of Forestville, California. Chris launched Sonoma Pizzico in 2022 with his wife Etta after spending over three decades in San Francisco's nightlife and hospitality scene, running well known venues like the Pawn Shop, Monarch, the Great Northern, and even the iconic record label OM Records. But after years in nightlife, Chris felt the pull towards something different. He had trained with legendary pizzaiolo Tony Gemignani and alongside executive chef Carl Shelton, developed a sourdough pizza dough from rooted in Michelin level technique. Sonoma Pizzico is now known for its naturally leavened sourdough crust, cold fermented for 72 hours and crafted with organic, locally sourced ingredients. In just two years, the restaurant was named one of Yelp Elite's Top 50 Places to Eat in the Bay Area and voted best pizza in Sonoma county by Visit Sonoma. In this episode, Chris is very transparent about what it's really like running a restaurant in wine country.
- [01:29]
B
My background is in the music industry in San Francisco, so I did that for 30 years and I just kind of was ready for a change. But I had become really interested in pizza. About 20 years ago I was living in Oakland and I was going to Zachary's all the time Chicago deep dish place. And it really just something just, just resonated with me. I got really excited about making this amazing product and just seeing how the business ran and it just intrigued me. So I started studying the pizza business and the craft of Pizza about 20 years ago. And then in 2019 I kind of got more serious about it. I had known Tony Gemignani, who's like one of the world's best pizza makers, just happened to be in San Francisco and he would come to some of the music venues that we operated. And so he had a little class that he would do, an international pizza school. And so I did his school and then he kind of helped me get going. He taught me the basics, him and another woman, Laura Meyer. You know, I got the crash course in making Neapolitan wood fire pizza. So learned that and bought an oven and just started kind of practicing the craft. And then meanwhile I had bought a house in Forestville a few years before and I was coming to Forestville all the time. And I was Airbnb the house on the weekends. And then my wife and I were just like, we want to move up here. We got to get out of San Francisco, you know, so we started looking for a place to do this idea back in 2018. And then Covid hit and we just moved up here. We were already in the process, but we just moved up here and. And then the building in Forestville came up for sale. And I was like, that's the place. This is the place. We've gotta do it. Even though it was not a restaurant previously, so it was a major redevelopment of the property. You know, it didn't have any of the services it needed. Gas, didn't have correct water lines or power. It took a year just to switch the use of the property. It was a whole thing. It was a huge project and extremely expensive. The budget that we originally envisioned for it, we. It was not even close to enough to do what we needed to do to get this thing off the ground.
- [03:46]
A
Forestville is a pretty small wine country town.
- [03:49]
B
Like, yeah, you know, that was, you know, when we originally were thinking. We were thinking, oh, we'll do this in Healdsburg, or we'll do somewhere with some more people in Sonoma County. So that's where we were looking. But when the building came up for sale, you know, I realized Forestville is really kind of in the middle of nowhere, but it's right in the middle of everything. So it's a 15 minute drive from all these other communities. So my gamble was if we made the place and we made it awesome and just put a ton of love into it, that people would drive from all over the county to come in, and then tourists who are visiting on the weekends would come. And that definitely. It definitely worked.
- [04:27]
A
It definitely worked. I feel like it's always busy. Can you walk us through your planning process of, like, what that was like, from idea to opening day? I mean, you had mentioned it took at least a year just to repurpose the property for what you intended to use it for. Like, what was that whole process like, going from idea to opening day?
- [04:47]
B
Yeah, it was pretty wild. I mean, we had a vision of what we wanted the whole property to be, but we didn't have any money. So my wife is my business partner, so we did this entire project together. Her name's Etta. And so we were like, we want to buy that property. We want to start this new business. We have zero dollars in the bank. So it was kind of a. We had to, like, will it into Being every step of the way. And the first thing we did was we were able to pull a line of credit on our house and use that to make the down payment on the restaurant just to get. Just to get that going. Then we had our basic plan of what we were going to do. I made a pitch deck, and I went out to, like, friends and family and started raising money, and people miraculously gave us money, and we were just blown away. We remember when we got our first check, we were like, no way. And then a couple more came in, and we're like, this is going to happen. We're going to get this money. So it was really just, like, going around and kind of talking to everyone I knew and begging for money. So there was that aspect of it. And then we found an architect, and he helped us kind of draft up the basic plan of the division. And the space has a huge backyard area, but we were like, well, we'll save that for phase two, and we'll just do the restaurant. We'll just do the. The main restaurant area. But then as we kept going, we kept getting a little bit more money and a little bit more money, and we're like, okay, let's do that now. Let's do that now. We work. We kind of just tried to get almost all of it done at once. And we're still actually. Still kind of working on it. There's still little improvements we're doing, but so, yeah, it was really like, oh, we got some more money. Cool. We can do this now. Oh, we could buy those chairs. So when we look back on it, you're like, wow. Like, how would anyone even do that with nothing? We pulled it all together somehow. You know what I mean?
- [06:39]
A
Well, and you didn't just pull it together. I mean, the place is. It's like you thought about everything. At least that is how it feels as a consumer. I've never worked in hospitality.
- [06:49]
B
We did think about everything. We had time to think about everything because it took so damn long to get even, just the permits or this or that. So we had, you know, year and a half in before we even broke ground on it. So we did put a lot of thought into it. My wife is a really great designer, and she's got a great eye. We did the core design concept for the property and then worked with our architect to realize that. And then we did all the interior design ourselves. We picked out all the finishes and kind of just did the whole thing.
- [07:16]
A
You had mentioned that your budget completely blew out of the water. Can you Give us an idea. So was it like twice as much as what you were expecting?
- [07:24]
B
It was three times as much. But it was also because we decided to do more. We were like, well, we think we can get more money, so let's. Let's do the backyard development now. Because that's really. We really wanted that. It's a huge part of it. So that was not in the original budget because we didn't think we would ever even come close to getting what we needed to do it. But we actually got a grant from the restaurant revitalization fund for Covid because we landed right in the middle of. We weren't open yet, but we were going to open and we could apply to get a grant for money to build outdoor dining space. And we did. And so we got $300,000 from that.
- [08:05]
A
Sweet.
- [08:06]
B
And just so just like, little things like that just like, kept happening to make. We were like, the universe wants this project to happen. You know, I feel like with any project, if you want to do it bad enough to where you just take the first step and then you keep taking steps and keep taking steps, you. It will probably come together for you. I'm not saying it will for sure, but I think most likely it will if you're at the point where, like, we're going to do it, we're going to do this, we're going to do this. That kind of energy behind it I think really carries it.
- [08:36]
A
Yeah, I think you're right. It's like just like the next little step. So again, like, with Forestville being such a small town, like staffing and sourcing, did this concern you at all or how did you address the need for that?
- [08:50]
B
Yes. So this was a huge, huge problem. We really wanted really cool people working there. And by, by cool, I mean people that are hospitality focused, people who care about hospitality or they care about the craft of making pizza and brand new restaurant Forestville, no one was interested. Like, it was. It was really, really hard to find people. I have two really good friends of mine from San Francisco, Reagan and Matias, who are restaurant veterans. They came up here and helped me get the restaurant open and lived at my house for a year to help build the team and build all the systems and like, basically everything. And if we didn't have them, we wouldn't. We'd be gone. We would never have made it. They. They basically, you know, helped us create the blueprint for this entire thing to make it run at the level we wanted to run it up.
- [09:41]
A
And then how did you handle the Development of the menu between, like, your taste and market demand. Like, how did you find the balance there?
- [09:51]
B
Well, so I'm not a chef, but I had studied pizza a lot at this point and had made a lot of pizza. But I realized I need to go out and hire a real chef to make this what it needs to be. And so we hired an executive chef, Carl Shelton, who came on board, you know, about six months before we opened. And he and I R and D all the dough and all the sauces and just kind of like we made cheese pizzas for like two months straight, just testing different hydration levels on the dough and different fermentation techniques and different sauces and cheese blends and whatnot. So there was a pretty extensive process to come up with what is our signature dough. That was kind of that. And then we didn't really consider market demand for our menu. We just kind of made the menu that we thought was awesome. We wanted to use primarily all local Sonoma county ingredients. Yeah, we just thought, let's just make this awesome and everyone else will love it.
- [10:54]
A
That seemed to work. Was there a first moment when you thought, okay, we made it, like, this one's gonna do great. It's gonna survive. It's gonna be awesome.
- [11:03]
B
You mean the restaurant as a whole?
- [11:05]
A
Yeah. Yeah.
- [11:06]
B
I'm still waiting for that moment, actually.
- [11:08]
A
Really?
- [11:09]
B
I mean, it's so hard to run a restaurant. And even, like, we are really, really doing well, and we're barely making a profit now. And it's because it's so expensive to operate. The labor in California is insane. All the taxes. You know, it's a brand new property, so everything is being taxed at the highest property tax level. And then, you know, we're in a very fire danger area. So our fire insurance goes up, you know, by $5,000 every year. You know, it just keep it. So it's just like, it's really, really tough. So I don't think we've made it yet, to be honest. I think we're still here and we're going to be here. We're not going anywhere. But I'm not sitting back going, oh, yeah, okay. We're making a 10% profit margin now, and cash flow is just rolling in. It's not like that. It's a constant cash flow struggle, Constantly moving money around, trying to keep everything working. And that's with a restaurant that's doing really well, you know, and we're not a cheap restaurant. Our prices are high, but they reflect what it costs to be here, to exist as a restaurant.
- [12:14]
A
So what, what are healthy margins in the restaurant business? Because I hear numbers all over the place. Some people have said their margins are as low as 3%, and others have said they're making 25%. So what would be comfortable, I think.
- [12:26]
B
For us when we hit the 10% margin mark, that's the first benchmark of, okay, we're on our way. We obviously want to be at 20%. That's really where you should be as a business. But we're not there yet, and we're going to keep working our way there. This year is our first profitable year. So, you know, I think we're going to get probably close to the 10% margin somewhere near there, hopefully. But it's a really, really challenging environment to operate in. And just also what you have to pay people, you know, the cost of living in California is so insane. I mean, we pay our books and our servers very well, and, and I see what they all make, and I'm like, wow, that, that isn't even that much to live on. But we're, we're paying more than anyone is paying. And it's like you have to have enough servers and enough cooks to make the thing hum and provide the service that you want to provide. But when you have exactly the team that you need, you're spending too much money. So that's, that's kind of the, the challenge of the restaurant.
- [13:31]
A
So that's a, that's a big predicament. So what are the solutions?
- [13:36]
B
You have to become more efficient, tighten your systems up, become more efficient with your scheduling. And, and you have to have the quality of people working there. You have to have very high quality people. So the quality of our team is getting better and better and better and better. So it's allowing us to become more efficient. We're tightening our cost of sales. You know, we were running at 35% cost of sales. Now we're down to 27%. So we're doing all the right things, but it takes time. The kind of playbook for a restaurant is generally you want to be running 30% labor cost, and that's all in salaries, hourly employees, taxes, insurance. You want to be running a 30% labor cost, you want to be running a 30% or less cost of sales for your product, so your food and beverage costs, and then you want to be running at 20% operation costs, which then leaves you with 20 profit. That is a recipe for success financially. Very difficult to do in California just because the cost of everything is so expensive here. So we have another layer of challenge being in California because we're, you know what our minimum wage is, what we have to pay people because it's so expensive live here. So that's the sort of blue book. So you're really trying to hit a prime cost. A prime cost is your labor plus your, your cost of sales. And you want to try to hit a 60% prime cost, 65, be the top end and anything above that, you would look at the business and go, this business is not really profitable. So that's what you're working for.
- [15:05]
A
It's really interesting to me because, well, again, I don't have any experience in the hospitality industry and when we go there, I just think, wow, this place is, it's humming, right? So to hear what's really happening behind the scenes is just, it's very eye opening.
- [15:20]
B
Well, yeah, it is. I mean, and it is humming and it's pretty fine tuned machine at this point, but it needs to be even more finely tuned. I mean, I'm sure you've seen lots of restaurants that have been humming and doing great and super busy and awesome and they go out of business. Yeah, they're not making any money. So it's like you, you have to really be all over the finances and micromanaging them in this industry. You have to be good at a lot of things to run a restaurant.
- [15:45]
A
You know, I can definitely see that. I wouldn't have the first clue how to do it. So from the very beginning, just acquiring the property, to opening, to going through Covid and now trying to get your margins better. Like, what have been the hardest moments for you as a business owner?
- [16:04]
B
God, there's so many. I think that the hardest thing generally has always been around access to capital and money. And as a new business starting out, your options are limited. We did get a loan from a bank, but I was able to leverage property that I already owned as collateral. We were able to get an SBA loan. It took a year to get the loan done. It was an arduous, insane process, but we were able to get an SBA loan. So that part of it, just trying to get money to bring your vision to life is always, I think, the most challenging thing as an entrepreneur and definitely for us for this project. Beyond that, the second most challenging thing is you have a standard that you want to uphold for your food, your hospitality standard and training and motivating your team to uphold that standard. And then when, when you see it not being upheld and dealing with those situations, it can be disheartening. And draining, but it's kind of the job. That's the culture that you create at your company is what is the standard that you aspire to and do you uphold it and how do you uphold it? So we have been really lucky in that we haven't had the challenge of, oh, we have to figure out how to get people in the door. We were kind of like, if we build it, they will come. That was our model, and it worked. A lot of other restaurants have the additional challenge of we're not busy enough.
- [17:38]
A
We're.
- [17:38]
B
We're dying. We need more people. We need more people. We haven't even had to deal with that yet.
- [17:43]
A
With your standards not being held, for example, or with the turnover in the industry that it's kind of known for, what is your approach to hiring and keeping your staff there, like, beyond payment?
- [17:56]
B
Our approach is to try to hire slow fire, fast. Really try to find the right people that kind of buy into the vision that what we're trying to do. And then people that we actually really connect with and that we. We want to work with and we think are going to be a good fit for the team, you know? Cause you could have. You got one bad apple in the crew. It really can. It can really throw things off. So it's like, we definitely went through some bad apples. We've had some great apples, too, but we went through some bad apples. And now we really try to be super careful about who we hire. And I always tell this to everyone that works there. This is a really, really hard job. If you're a cook, it is a very, very difficult job. People that never worked at a restaurant don't really understand how hard it is. It is a grind that people work extremely hard. And then if you're a server, you know, you're talking to people and really engaging and you're giving a lot of yourself all day long. It's a tough job. So I always tell people, you know, you have to really love it. You got to really enjoy it. And if you don't, like, this is what I told myself. If you're. If you don't feel that, go do something else. I'll support you in your transition, help you find something else. But life is short, so you got to really enjoy this work if you want to do it well.
- [19:12]
A
And that's part of the success, right? It's like, it's not all financial. It's really. You're like a community center at this point, like the place where people gather. And I imagine that the reward comes from more places than just the money.
- [19:24]
B
Well, we are, we are community center and we also. This is another thing I always tell my staff. We think about people coming to the restaurant for dinner or for lunch. Most people's lives are pretty challenging and pretty stressful and exhausting. They're making a choice to take what limited free time they have and come to our place to have dinner. They're not just coming for food. They're coming to have an experience, to have a little escape, have some fun. And we need to really think about that. That's the service that we're providing. And it's important, you know, so when someone walks in the door, we need to really treat them well because they're giving us their time and their money and we really respect that. So we try to embody that hospitality all the time. We don't hit the mark every time, but that's the goal and that's, that's it. That's where it's coming from anyway.
- [20:12]
A
Well, and I think I read in your bio that you've been in the hospitality industry for a quite a long time, right? Like you, you've owned bars in the city.
- [20:20]
B
Yeah, well, I own a record label called Ohm Records, which is a dance music label that became pretty big and that in the 90s and 2000s. And from there we did, you know, hundreds of events and tours and festivals and so a lot, a lot of production. Then I became partners in San Francisco in a group. We own a couple of nightclubs and a catering company, a restaurant in San Francisco. So was a partner in that for 10 years before. I was like, okay, I'm ready to kind of transition out of the city now and move up to the country. And I thought, oh, you know, it'll be nice. We'll move up to the wine country, it'll be relaxing. We'll have a, you know, open a little restaurant. It'll be quaint and easy. This is way harder than any of the other things I've done. I also had a, my wife and I had a baby pretty much right when the restaurant opened. So we have a three year old. So that's was just an extra layer of complete insanity.
- [21:14]
A
Is there any sort of like game changing advice that you learned from that experience of just running all of those different businesses in the. I mean you've got music and then you've got a bar club. Like what did you learn from those parts of your journey?
- [21:30]
B
Don't do it, don't do it. Serious, you know, the nightclub Bar business is another thing that you need to be really passionate about. It's a grind and I just really became burnt out on it. You know, before I even had the bar, I was doing events like music festivals, club events in San Francisco and all over the world for 20 years before that. So if I had to go back in time, I probably would have skipped the owning the music venues portion of my career because it's really not a great business. And it was more almost like a hobby passion thing that I just wanted to do with, with some friends of mine that turned into like a whole, you know, 10 year aspect of my career. But, you know, I feel like one piece of advice I would have is I feel like one thing I've done in the past is I've done too many things, try to do too many things at once instead of focusing. And focus is important. And right now I have up here with this, with, with Sonoma Pete's company, this is all I'm doing. And it's like, it's my focus, raising my son and, and doing the restaurant, it's my focus. So I don't have four other businesses going simultaneously now.
- [22:45]
A
So if someone came to you for mentorship, like let's say somebody is like in their mid-20s or 30s or whatever, and they are like, I love the hospitality space, I really want to open a bar or restaurant. What would your step by step playbook look like for them?
- [23:01]
B
I would probably tell them to first go get a job at a restaurant and throw themselves in there and really see what it is. Because beyond the romance of it, a lot of people open restaurants and they have no, like me, I was involved in restaurants in San Francisco, but this one, doing it all by yourself, you really learn. Wow, this is insane. You know how crazy it is. So I know I would advise them to go work at a restaurant for a while and then try to articulate where their strengths and weaknesses are. And is this a chef driven enterprise that you have a food program that you want to explore or are you more the kind of hospitality side of things and you want to create an experience and go, who do I need to partner with to bring this whole thing to life? I don't think you can do it all. Some people try. I think you kill yourself. I realized I was really into making pizza and I realized I am not the chef. I am the hospitality business aspect of this and I want to help drive the food program, but I want to partner with someone who really got a Michelin background and knows what they're doing. So if you do all that and you're still like, yeah, I've been working in restaurants for years. I know the business and I love it. I really want to do this. At that point, I'd say, okay, well then put together your business plan. Put together a financial model. For me, it always starts with Microsoft Excel and coming up with like, here is my conceptual model of what I think this place can do on a Monday night, a Tuesday night, a Wednesday night, a Thursday night, and put that into a cash flow projection and some expenses and kind of create a model of what do I think it's going to cost to start it up, what it's going to cost to operate, how much revenue do we think we can do? And is it really look like this could work? And then from there, still excited about.
- [24:54]
A
It, you take the next step in those conceptual models. I mean, I know a lot of it is really just sort of guesstimating. It's like, well, if I can do this on a Friday and a Saturday, then I think I could do this on a Sunday. Okay. But then on a Tuesday and Wednesday, it may be extremely slow. Like, how accurate can you really get on those numbers?
- [25:13]
B
I have a projection for every day of the year through the end of next year. So I have like a working model and it's pretty accurate. Now. My projections were way off. I under projected sales and I under projected expenses, which I feel like is pretty much what I do every time. But you still have to make a projection. This is where a lot of people get hung up because they're like, well, I don't know, I don't know. And like, you just gotta do it. You just gotta make it up and go, it's a Sunday night, it's September. How many people do we think are going to come in the door? We think it's going to be 65, and that's our number. And we think we're good, you know, and you have to. You have to take whatever knowledge you have and make the best possible educated guess that you can to create some sort of a projection for whatever it is that you want to do. If you want to start a surfboard company, like, how many surfboards can I make? Where am I going to sell them? How many I think I could sell in a week or a month? And you just have to take that step of making a model that you created based on what you think you can do. And then you just keep tweaking it and keep it, you know, as you get more information, you Keep making it better and better and better. And for me, that's how that works anyway.
- [26:26]
A
So when you see other restaurants that are opening and you're sort of using your restaurateur mind, like, in evaluating how they're doing, like, what do you see are the most common mistakes that you see over and over again?
- [26:39]
B
Well, I see a lot of really good restaurants opening, and then I see them closing, and it's kind of scary. Especially when you go to a new place that opens and you're like, wow, this is like my favorite place. This is awesome. The service is great, the food is perfect, and then they don't make it. They close. And it would be one thing if you go to a place and you're like, oh, the food sucked and the service sucked, they're not going to make it. Those are pretty clear indicators that something is seriously wrong. You see other places where they seem to be killing it, and then, nope, they're gone. Part of it is you have to be willing to really fight. Once your business is up and running, you're gonna have to go to battle over and over again. And if you give up on the battle, you close. It could easily fail. But I'm not letting it fail. That's the difference, you know, so it's not like you can just open it up and we're here, we're open. You know, it's like, you know, you have to, like, you have to fight to. To keep it going. So that's pretty much you have good times and you have tough times, and then you finally get over the hub.
- [27:40]
A
Yeah, you're just, like, constantly putting out fires. Problem solving one thing after the other.
- [27:45]
B
That'S the job in business is solving problems. You know, you have to. That's. That's what it is when you're running it. When you're running a business, you're going to solve problems.
- [27:53]
A
Yeah. It's a mindset, though, right? So, okay, I've just got one more question for you, which is just if you could go back and talk with yourself when you were in your early 20s, what would that conversation look like? What would you say? Like what. What tips would you give yourself or heads up, would you share? And what sort of life wisdom?
- [28:12]
B
Wow, that's a big one. The number one tip I would probably try to give myself is don't try to do too much and try to focus more. Focus on one thing. In the beginning of my career, I've always been into music production and DJing and music. And then I started the record Label and got into that. Then I started something else. I just kind of, you know, you have to know what to say no to and filter things. And I always look back and I go, well, you know, I could have probably just DJed and made music and probably be making millions of dollars a year right now just from doing that. At the time, I was like, you want to do a record label and you want to do this too, and. Or I could have just done one thing. You know, if I go back in time, I'd say, yeah, just focus a little bit more and try not to do too many things.
- [28:59]
A
It's like narrow but deep.
- [29:01]
B
Yes, narrow but deep.
- [29:04]
A
Well, Chris, it's been really great to chat with you. Thank you for being so open and just transparent about everything. It's the best way to learn, I think, is when people can actually get the truth about, like, hey, how hard is it? And like, what's going well and what did you do right? What did you do wrong? So it's been really wonderful to hear your story. Thank you so much.
- [29:24]
B
You're very welcome. Thank you for talking to me.
- [29:30]
A
Today's key takeaways. Busy doesn't equal profitable until labor and food costs are dialed. A packed house can still lose money. Expenses will usually be higher than you forecast. Take your budget and then double or even triple it, and you may land at a more accurate number to work off of. The culture, the team, and the service all comes down to the people you hire. One toxic person can make it really hard. So hire slow and fire fast. Prime cost, which is labor plus cost of sales, needs to be around 60% or less. 55% is better. Any higher than 65% and it could be extremely difficult to achieve profitability. Hospitality can be a constant cash flow struggle. You have to continuously improve the quality of your team, get more and more efficient, all while tightening your cost of sales. If you want to enter hospitality in the food or beverage business, whatever your sector, whether that's a restaurant or a bar, for example, try the job first by working in that type of an establishment. Figure out your skill set. Or are you a chef? Do you thrive in hospitality? Then figure out who you need to partner with to bring your vision to life. Don't try to do it all alone when it comes to hospitality. Do it because you love it, not because you want to make tons of money. And finally, focus. Don't try and do too many things at once. Instead, keep your focus narrow but deep, and learn how to say no. That's it for today. I release episodes once a week, so come back and check it out. Have a great day.