TE 25: Wicked Good Cupcakes with Tracey and Scott Noonan

Today’s guests were featured on the hit ABC TV show, Shark Tank. For those who aren’t familiar with WickedGoodCupcakes, the three-year old company’s trademark packaging (in a Mason Jar), sets them apart, and lets them ship their baked goods nationwide.

Tracey and Scott are here today to talk about their company, their visit with the entrepreneurs on Shark Tank, and a bit about their past that helped them reach the success they’ve achieved today.

BEFORE WICKED GOOD (1:20)

Tracey was developing a career as a writer, with an agent in Beverly Hills. She had started the company with her youngest daughter Danielle after going to a cake decorating class.

Scott was working in Boston at a software company as a managing CTO officer, with no experience in baked goods. Both he and Tracey have some experience as entrepreneurs.

Scott started a software company, Tracey has been a photographer, photo-stylist and  even an animal talent agency, before starting Wicked Good Cupcakes.

PROMOTING CUPCAKES (4:45)

Tracey started posting images of cakes, and other baked goods on their Facebook pages, which quickly attracted business from others who wanted birthday cakes, or other holiday baked goods.

Scott says the company started with $30,000 to outfit the kitchen and the initial shop. They then seeded the company with $20,000 for operating funds, “and when that was gone, then the experiment was over. We would not borrow money. We would not raise money. We would not go into debt.

He says it was important to the family do not go into debt or raising investment. “We could have done all kinds of great, extravagant stuff, but that wouldn’t have kept us as tied to the bottom line as we wanted to be.”

“It was to the point where Scott and I would have some lively discussions over whether or not our little shopping bags would be printed or not. That’s how tight we were with money,” Tracey says. “I can remember in the beginning being really jealous of these other bakeries that had beautiful packaging, but a lot of those bakeries no longer exist.”

A GOOD PRODUCT SELLS ITSELF (8:00)

Tracey says she wanted to have a beautiful bag, but it came down to the decision, “Do I want to have pink tissue paper or do I want to have the best dairy I can by? And it all went right into the product.” All of the money the family had went right into the product.

I tell the two that their product “proves itself.”

AN EXPERIMENT IN FINANCE (9:00)

Scott says he had a good job that could provide the family’s income, so the baked goods wouldn’t have ruined the family, but the money from the savings would have hurt, but not ruined the budget.

“The expectation in the beginning was really, Tracey is the person who looks out her front door and says ‘where’s the biggest mountain and how can I go climb it?’ So, even though we were just opening as an individual bakery in the town of Cohasset, the goal was to ‘take over the world,’” says Scott.

He admits the goal was a lofty one, but that they really had no idea where that would take them, or how they would get there.

STARTING A BUSINESS WITH A LINE OUT THE FRONT DOOR (10:32)

Business was so good that Tracey quit on the first day. With family and friends in the back of the store washing dishes, there was still a line going out the front door. “It becomes so crazy, about 2 in the afternoon, Tracey went out back and said, ‘I just can’t do this. I quit.’ Then, two minutes later she was right back in the fray again.”
The sales were good, with the story well located, even with competition nearby.

SET YOURSELF APART QUICKLY IF YOU WANT TO SELL (11:30)

Scott offers some great business advice, “everyone can say, ‘our product is the best’… from a marketing perspective. I think our biggest differentiator was the custom work that we were abel to do and the artwork we were able to do to cakes and cupcakes.”

To support that decision, the team hired artists to decorate cakes, not culinary-trained cooks. “We hired people with art background and then we got them their food service training.”

“Because of that, we were able to do very ornate and really interesting work with cakes and cupcakes that other companies in our area couldn’t do,” says Scott.

A BUSINESS PLAN THAT CHANGES EVERY DAY (14:00)

Tracey says her business model has changed so much since the start of the business, that their current model and the first model wouldn’t be noticeable next to each other.

“It’s really different ever day,” says Scott.

The family has their own tasks in the company, Tracey is now in the product development and marketing, while Danielle manages the physical facilities and the employees, while Scott handles the operations side: managing supply chain, managing inventory, customer service and the technical aspects of the company.

THE STORY OF THE MASON JAR PACKED WITH CUPCAKES (16:30)

Scott says the company came up with the idea of layers of cake and frosting in mason jars to ship their baked goods effectively a few months after opening.

“We came up we came up with this concept, had it tested, and put the product on the website to see what happens,” Scott explains. The response was very good, which led to a huge scandal with the TSA.

A student at Salem State University sent a few jars to a professor, who then took them to Las Vegas on Christmas break. The cupcakes made it through Logan Airport on the way to Vegas, but, on the way back, TSA agents confiscated it because it had more than 3 ounces of a gelatinous-like substance in a closed container.

The professor was a communications professor who was writing a book on PR and media. She took a photo, posted it on a well-known blog, and the image and story went viral. “The next thing you know,” says Scott, “we had requests, the very next morning, we were getting requests from all over the world for media about this incident of the TSA taking someone’s cupcake.”

And, to add more fuel to the fire, about two weeks after the publicity had died down, the TSA came out with a press release rebuttal calling the product “not your average, run-of-the-mill cupcake,” giving the company a great tagline and weeks more of free publicity.

QUALITY PRODUCTS IN QUALITY PACKAGING (20:30)

Tracey says the TSA publicity gave them a great proof-of-concept to understand that their idea was a viable product.

Scott says the cupcakes ship on 2, 4, and 6 packs, priced at $14.95, $28,95 and $42.95 in reusable mason jars and nice spoons to eat them with.

“From the giving perspective,” Scott says, “it sort of makes that nice presentation.”
I mention that I was very impressed with the quality of the jars, “actually, I still use the jars because they are high quality jars and just have different things inside them. So, it’s really, that’s also a big selling proposition.”

Scott says he things Wicked Good Cupcakes are leaders in the space of selling shippable baked goods. “Of course, since our national exposure, we’ve had a lot of people that have tried to replicate the idea and to the same thing. No one is doing it to the scale we’re doing it right now.”

He says the business is very difficult to scale, which is an advantage because it is very difficult for others to duplicate their work. “A lot of people have tried to replicate it, to duplicate it is a whole other thing. I think it is very difficult for someone to be able to do that at this point,” Scott says.

THE PROCESS OF GETTING CUPCAKES OUT THE DOOR (24:30)

I ask Tracey to give us an idea of the process it takes to get the cupcakes from the start to a customer’s door.

The cake is baked in the morning, around 4 a.m., stored in airtight containers, then shipped to a separate facility. “We have to keep our facilities separate so the handling of the glass and decorating is done in a separate room in a separate area.”

After the cakes are in the decorating facility, “the decorators then take the cupcakes, they peel the papers off, they disassemble them and they each work on a flavor at a time,” Tracey continues. “A cake is never opened and exposed. All day long, once it’s baked, it goes right in that jar, which is really important to us.”

From there, everything is layered with the proper fillings and toppings, the jars are sealed and then they’re sent for labeling and shipping.

EXPECT THE PAIN OF ENTREPRENEURSHIP (29:30)

Tracey and Scott discuss all the moving around to different locations for production until they found their current facilities. Then Tracey offers wise advice to Teenage Entrepreneurs. “There is a good amount of pain when you first start your business… [we] did not get paid for the first year and a half that we worked, because we needed help and those people had to be paid before us.”

Tracey says it’s funny when they go to college and high school entrepreneurial programs. “I think they picture us sitting on a tact somewhere eating bonbons, and in truth, we just finally started getting paid because all the money has to go back into the business.”

HOW CAN YOU WORK FOR FREE AND PAY YOUR WORKERS? (30:46)

I tell the two that I was surprised, even, to know that the two principal workers in the business didn’t get paid for the first 18 months of their business. So, I ask them, “Why do you think you were willing to do it so long without getting paid?”

Scott explains that you have to have goals and a purpose when you’re starting out. “Our goals from the beginning were to create… to take over the world. We’re looking for something. We wanted to be the Ben and Jerry’s of baked goods, and to have something for Danielle in the future.”

He says the company is a way for them to help their daughter in the future. “We could have… pulled a lot of cash out of the company when we started getting successful… but that’s not where we wanted to be in the future.”

Tracey says that they also didn’t know how long it would be before they would get paid. “Honestly,” she says, “had I known it would be a year and a half, it would have made it a lot harder. It’s just you get up every day and go and work and eventually, you do start to pay yourself.”

She says Scott even helped motivate the two girls by eventually giving she and Danielle $50 each per week. She says it motivated them to make more money for the company, “there’s a hundred dollars you now have to make up because that’s not going back to the business and it does motivate you to work to replace that money you’re now taking.”

BAKED GOODS MAKE GOOD SHARK FOOD ON THE SHARK TANK (33:30)

I mention to Scott and Tracey that I’m a huge fan of the ABC hit show, Shark Tank. “I remember seeing you guys on there. How did the idea come about to do Shark Tank, and I’m sure many people think about doing Shark Tank, but, then they’re lik, ‘oh no, I will never be selected.’ Take me through that process from wanting to do it and then making it happen.”
Tracey says her family watched the show since day one. “I was alway fascinated with it. Scott, as well. Once we had the TSA incident and we had a little bit proof of concept, Scott kept very close tracking on our numbers and our growth. That April, I decided to apply. It was for season 4… it was three sentences. I think they ask like three questions.”

She says she knew there was only one shot, competing with thousands of applicants. I included a link to the news clip from the TSA story, and I included a picture of our cupcake jar. I went the extra step, because I figured we needed to get noticed.”

About five days later, Mindy from casting called. She remembered the TSA story, and the “Wicked Good” thing resonated with her, according to Tracey. “So, we sent a sample of products and then we got the package and we did our audition video.”

WOW! WHAT A PACKAGE! (35:55)

I ask them about the package. Turns out, the show’s producers sent them 100 pages of legal documents. Tracey says the package included a $5-million NDA (Non-Disclosure Agreement). “So, if you spill the beans, they, in theory, can come after you for $5 million. It’s crazy.”

The documents also described the type of video they were to create and send in. “The video should be three minutes and should just talk about how much you’re looking for, what you’re business does, no editing, just straight up talk,” says Tracey.

“We, of course, said ‘screw that, it’s a one-time deal, we’re going to edit the living crap out of this thing and make it really fun. So we did.” Tracey says she heard from one of the producers that Mark Burnett actually watched their video and loved it.

The video was turned in in May, three days after they received their package. And, still, with no guarantee they would make it to even tape a segment with the Sharks, the producers worked to keep information flowing. “They would work with you, call you, talk with you, sort of walk you though your pitch, hone down your pitch. Not knowing if they are even going to fly you out to film or not,” she explains.

Two months later, in July, the family were flown out to LA for five days. They met other entrepreneurs who were auditioning, but were not allowed to talk about their businesses. Then, you do a practice pitch in front of the network executives and a room of about 30 people listening to the pitch.

After the pitch, the executives then talk to the applicants, and “then you have to wait for a phone call to see if they are going to put you in the lineup.”

Once you’re in the lineup, you want to get in early, “you hope you get earlier in the day, because if they run over… and they run over time, that’s it. You’re bumped,” says Tracey. Luckily, Wicked Good Cupcakes got an ideal interview time slot. “We were the last entrepreneurs to pitch before the lunch break So, we had a food product, it just all worked in our favor, I have to say, “ Tracey says.

WALKING INTO THE TANK FULL OF BIG SHARKS! (40:00)

I ask Tracey what it was like to open those big doors and enter into the room full of sharks. “All I can say is, I honestly felt like I was going to fain standing back there,” she explains.

Her daughter Danielle was karate kicking an laughing and saying, “let me at those sharks,” according to mom, Tracey. “I was like, ‘I’m going to faint.’”

She explained that it is very scary. “All I can say is if anyone listening has the opportunity, make sure you know your pitch so well that it just comes out of your moth, without even thinking, and that’s what we did.”

Then, when you’re finished, “they start asking questions, and keep in mind, any stupid face you make, any stupid noise you make, it can all be edited in our out. So, you have to really be aware of your physical body, what you’re doing, faces you’re making. You’re exhausted by the time you get out of there,” says Tracey.

Tracey and Danielle was in with the sharks for about an hour. Producers edited that down to about 8 minutes.

STRIKING A DEAL WITH ‘MR. WONDERFUL’ (42:40)

I ask about how the deal with Kevin went down.

Tracey responds with, “the deal you saw on TV is the deal that we struck. He wanted that royalty, we agreed to id, and afar you walk out of the tank, Kevin’s team, their due diligence begins.”

Tracey says the team has to find out who you are, if you’re really making money, if you’re a legitimate company. They do criminal background checks… everything to protect themselves, because it is their money, their real legitimate money.”

Tracey and Danielle went into the tank wanting $75,000, willing to give up 20% of the company. “I don’t believe they showed it on air, but it’s a family run business, you can handle the business yourself. I don’t need to have equity, but he (Kevin) asked for a dollar a jar until we paid him back the 75 thousand, which we did in six weeks. And, then after that, he wanted 50 cents a jar in perpetuity, and we negotiated to 45,” says Shark-tamer, Tracey.

SO WHY DID YOU WANT THE MONEY??? (44:45)

Scott says they weren’t looking for an investor, “We were going on the show for the exposure that we could get. Being able to work with someone like Kevin and his team and what they could bring to us in terms of knowledge, network, infrastructure, all those things that we wanted to grow with.”
He says if the family had needed the 75-thousand, they could have gotten the money a number of different ways, “it wouldn’t have been as beneficial to us as doing a deal on national television with someone like Kevin.”

ALL THE ADVERTISING YOU WOULD WANT – FOR 20% (45:15)

“The money,” Scott says, “went towards really helping us prepare for launch. Getting enough inventory, product packaging to help expand our kitchen out and the large amount of orders we could be getting.”

I ask them what sales were like following their appearance on the Shark Tank? Scott says sales were huge the first week. “the night we aired, we did that week alone, almost what we did the entire prior year.”

Tracey brags a bit about their website, “we were actually the first website not to crash in Shark Tank history the night that we aired… even when you’re launching your business in general, you need to be ready… be able to execute, or if you miss an opportunity and you piss off a potential customers, they might not come back,” advises Tracey.

THE IMPACT OF KEVIN O’LEARY (45:40)

I ask them what kind of impact bringing in someone like Kevin O’Leary had on the company.

“Kevin’s awesome,” says Tracey. “He is literally an email or a text or phone call away… He’s a very interested and kind person, and he’s been a great mentor for us.”

“It’s a nice relationship,” she continues, “because I don’t fell like we have anyone who is standing over us, saying ‘you need to do this, this and this’,” Tracey says. Kevin and his team works with the family “as someone we can to go and say, ‘hey, run the umbers for this and tell us if this makes sense. We have a working relationship as well as a friendship,” she concludes.

WHAT WOULD YOU TELL YOURSELF IF YOU HAD TO LAUNCH AGAIN? (50:00)

“I think it might be what Tracey alluded to earlier… you get so wrapped up in your product and your business,  – particularly being, essentially, what we are not is an e-commerce company – you just tend to forget the post-sales process with your customers and don’t realize how much goes into that,” says Scott.

He explains some of the issues a company has to deal with from day to day, “my package is late, I need to change this address because the person is moving… questions that come after the fact when people get the product like can I refrigerate it, can I freeze it, how long is it good for, can you do custom flavors for me, how can I order 600 for an event? – all of that stuff comes along in that post-sales process and I don’t think we really thought that through well enough,” explains Scott.

Scott says customer service after the sell is “the thing that I would say we would do differently or that we would, as advice to give to ourselves, particularly in the digital age.”

WHAT WOULD YOU WANT YOUR LEGACY TO BE? (52:15)

Scott almost completely answers my question before I asked it. “we want to be that company who isn’t just running you through call centers and answering your questions, because on script number seven and line number 2 it says, ‘say this.’ We want people to have that personal touch and we are a family business and we do what we can.”

When I ask him about his legacy, he continues his answer, “we want to be known for a high level, quality product and we want to be known for high level, out of this world, customer services. We’ll never stop trying to get better. We’ll keep making mistakes, we’ll keep improving them them, but we never want to lose site of that goal.”

I conclude my discussion with them, “even though it is two cupcakes, it could be someone apologizing and the customer service you are providing and relating to your customers, that’s just you guys caring.”