SHAKE SMART: Maintaining Consistent Strategies for Growth

In late July 2010, Kevin Gelfand had just finished a workout at the Aztec Recreational Center, the gym on the San Diego State University campus. He was dreading the bland protein shake he was about to drink. Rather than repeating this ritual, Gelfand decided to start experimenting with protein shakes of his own. He teamed up with fraternity brother Marin Reiman, and the two started experimenting with shakes that combined fresh fruit, ice, nonfat milk, and other ingredients with the whey protein found in most shakes. The pair came up with more than 60 different blends and recruited friends to do taste tests for them. They finally settled on 15 flavors. In the nearby photo, Martin Reiman is on the left and Kevin Gelfand is on the right.

During this time, Gelfand and Reiman started thinking about their experimentation as a potential  business. They decided  to call the business Smart Shake, based on the nutritious ingredients they were placing in their shakes. The ideal place to sell the shakes, in their estimation, was right outside the Aztec Center, where students like themselves would be looking for a nutritious snack after a workout.

The two raised $50,000 from family and friends, hoping to set up shop near the gym. Getting approval from the university was no easy task. They spent six months plan- ning and jumping through the necessary hoops, and were finally approved. The Shake Smart kiosk opened on January 3, 2011, just outside the Aztec Center, and was the first permanent student-run business to operate on the San Diego State University campus.

To make a go of it, Gelfand and Reiman figured that they would have to sell 60 drinks a day. They averaged 120 a day and within 6 months, were employing 12 people. The shakes were healthy, delicious, and convenient—a rare combination. The shakes had a near ideal combination of protein, fiber, vitamins, minerals, and antioxidants, which made them much more than a snack. They were a meal replacement and at about $5 fit a college student’s budget. In August 2011, Gelfand and Reiman made a deal with San Diego State University allowing freshmen to pay using their meal plan.

Like most start-ups,  Shake Smart experienced some hiccups  early on. At one point  they launched a loyalty program  with  paper punch cards. The punch cards slowed down the line, which wasn’t good. Somebody got their hands on a puncher that was similar enough to the puncher Shake Smart was using that they were able to punch cards and redeem them for free shakes. Gelfand and Reiman finally caught on, and they switched to an approach that rewarded customers based on the dollar amount they spent.

In terms of growing the business, Gelfand and Reiman have proceeded steadily but cautiously. In spring 2012, Shake Smart opened a second location, just outside a 24 Hour Fitness Gym in the Horton Plaza mall. The Horton Plaza mall is not far from the San Diego State University campus. Since that time they have added four more locations, bringing the total to six. They now have two locations on the San Diego State University campus, one at Camp Pendleton, a nearby Marine Corps Base, one in an area LA Fitness center, the Horton Plaza location, and the first Shake Smart outside San Diego, in San Francisco’s Sports Club. A common theme across the six locations is that they are all in close proximity to people who are actively engaged with fitness. Along with adding to their number of locations, Shake Smart has also bolstered its menu. It now offers three categories of shakes: classic, specialty, and exotic.  The ingredient  combinations  are novel and enticing. For example, one of Shake Smart’s exotic shakes, named mea aloha, contains pineapple, banana, acai, apple juice, and protein. Shake Smart also sells smoothies, healthy snacks, and extra toppings for its shakes. one  of its snacks, the pb&b sandwich, consists of peanut butter and banana slices on whole wheat bread.

In expanding Shake Smart, Gelfand and Reiman have used their business edu- cations. Reiman graduated in May 2011 with a degree in integrated marketing, while Gelfand graduate in December 2011 with a management/entrepreneurship degree. while managing their first location, they carefully worked out and documented the operational details and made note of what went right and what didn’t go right as time progressed. They used those details and knowledge to create a blueprint for subse- quent locations. They stayed current on technology, and have a smartphone-based point of sale system that provides them real-time analytics on sales and expenses in all their locations, so they can instantly tell if anything is amiss. They are also ac- tive on social media to remain in touch with customers and continue to build the Shake Smart brand. Gelfand and Reiman are comfortable with Shake Smart’s pace of growth. They have grown at a pace that they believe has been in step with their ability to properly oversee and operate each additional location. At some point they may consider franchising, but they are not at that point yet.

on several occasions, Gelfand and Reiman have been recognized for their efforts. In november 2012, they won fourth place in the Global Student Entrepreneur Awards, sponsored by the Entrepreneurs’ organization.  More than 2,000 individuals from 28 countries entered the competition, which recognizes outstanding student-owned busi- nesses. In 2011, Gelfand and Reiman were recognized by Forbes as one of its nine All Star Student Entrepreneurs. The most impressive testament to Gelfand and Reiman’s accomplishments is Shake Smart’s ongoing success. The company is profitable and employs more than 80 people at its 6 locations.

Shake Smart plans new locations in both Southern and northern California. If the past is any indication of the future, Gelfand and Reiman will continue to grow Shake Smart by expanding their number of locations and experimenting with new menu combinations.

Shake Smart’s experience is not unusual. Many entrepreneurial firms grow by adding to their product lines and by expanding geographically. In this chapter, we discuss the most common strategies firms use to grow.

The growth strategies are divided into internal strategies for growth and exter- nal strategies for growth, as shown in Figure 14.1.

Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.

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