2020 Quarter 3

Introduction

East Fork exists to make pottery, yes, but also to offer thoughtful, engaging work set on a foundation of good wages and benefits that allow our employees—who now number more than 100—to build stable, optimistic lives for themselves and their families. We measure our success by the degree to which we can create a workplace that’s compassionate, complete with work that is satisfying, challenging, and ever-changing. On the floors of our factory and retail stores and in our offices, you will find people who started doing one thing, moved on to several other things over time, got promotions, learned new skills—technical, managerial, both—and stay engaged by what they do.

 

We want to tell you these stories but we want to do it fully. And that means talking about the money that’s behind, well, all of it. When we talk about hiring more employees, tell you about people living happy, fulfilling lives, people being happy at work and in our communities, not for the day or the week but for the foreseeable future because they have found avenues for support, growth and stability of all kinds, at the heart of it all is money: what we bring in from sales from our pottery and other items, what we spend on our operations, salaries, and wages, and what is passed on to nonprofits and grassroots organizations in the form of funds raised through raffles and other contests, auctions and premium pricing in which the donations are built right into goods we sell.

 

Each quarter, on this page, we’ll update you on the money that came in and went out of the business. Now, we know money talk makes lots of people feel squeamish. We get that—we’ve been conditioned in our society to keep all that hush hush, like it’s unseemly to share your economic realities or to care about someone else’s. Let’s reframe that and, as our CFO and co-founder John Vigeland put it in a talk he gave a few years ago, let’s find a deeper and more complicated understanding of the reality in which we find ourselves. Let’s delve into the details and see what story the numbers tell.

Our Expenses

John Vigeland, East Fork's CFO and co-founder

"Simply put, our expenses are the costs our company incurs to generate revenue. And there are a lot! Think payroll, capital expenses (machines, building improvements, cameras), rent, materials, insurance, consultants, software, discount budget, and more."  

 

– John Vigeland, CFO

Expand to learn about our expenses...

Manufacturing Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority of our money gets put in this bucket. Our manufacturing costs include:

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

 

Variable Selling Costs

As the name implies, variable sales costs change with the amount of items we sell. The more pots we sell, the more boxes we need, for example. Our variable sales costs include:

 

      • Credit card processing fees (wah!)
      • Supplies for the fulfillment team like packing materials
      • Shipping costs (pots are heavy and expensive to ship and we usually pay more for shipping than we charge our customers)
      • Wholesale goods that we purchase from other manufacturers and sell on our website and in our stores

 

Administrative Costs

Oh so many unglamorous sounding, kinda “hidden” but absolutely essential costs of running a business at scale fall into this bucket. Some of it’s pretty obvious—insurance, rent, cleaning costs—and a lot of it is less so.

 

      • Salaries for members of our Culture & People Department and Finance Department
      • Professional development ie managerial training, equity training, equity and business coaching for the executive team, nonviolent communication training
      • Legal and consulting fees
      • Software subscriptions ie recruiting and hiring software, data management software
      • Kitchen equipment and staff meals
      • An endless litany of other line items

 

Sales Costs

We present our goods online and in two stores, one in Asheville and the other in Atlanta. Some of the expenses associated with running these outlets are static, meaning they do not fluctuate with the amount of sales we make. Our sales department expenses include:

 

      • Wages and salaries of team members in our Sales Associates, Retail Team, Customer Care Team, and Fulfillment Team
      • Website hosting fees and software
      • Rent on the two stores

 

Marketing Costs

Historically our smallest departmental budget, which is a pretty wildly different paradigm than most competitors or colleagues in the “home” space, especially the D2Cs.

 

      • Salaries for our Marketing and Creative Team including
      • Supplies for photoshoots and content creation
      • Printed brand collateral like little recipe cards we’d stick in your order or a print catalogue
      • Affiliate discounts
      • Print, broadcast, and digital advertising

 

 

 

Manufacturing Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority of our money gets put in this bucket. Our manufacturing costs include:

 

• Wages and salaries of team members in the Production Department
• Workers Compensation Insurance
• Clay for the pots, plaster for the molds, dozens of materials
that go into making our glazes, etc

• Fees incurred from research and development
• Gas and electricity bills incurred from firing the kilns and running the machines
• Tools and equipment—you need a lot of it for manufacturing
• An endless litany of other line items

 

 

Fixed Sales Costs

We present our goods online and in two stores, one in Asheville and the other in Atlanta. Some of the expenses associated with running these outlets are static, meaning they do not fluctuate with the amount of sales we make. Our sales department expenses include:

 

• Wages and salaries of team members in the Production Department
• Workers Compensation Insurance
• Clay for the pots, plaster for the molds, dozens of materials
that go into making our glazes, etc

• Fees incurred from research and development
• Gas and electricity bills incurred from firing the kilns and running the machines
• Tools and equipment—you need a lot of it for manufacturing
• An endless litany of other line items

Variable Sales Costs

As the name implies, variable sales costs change with the amount of items we sell. The more pots we sell, the more boxes we need, for example. Our variable sales costs include:

 

• Salaries for members of our Culture & People Department and Finance Department

• Professional development ie managerial training, equity training, equity and business coaching for the executive team, nonviolent communication training

• Legal and consulting fees

• Software subscriptions ie recruiting and hiring software, data management software

• Kitchen equipment and staff meals

• Life insurance for founding team

• An endless litany of other line items

 

Administrative Costs

Oh so many unglamorous sounding, kinda “hidden” but absolutely essential costs of running a business at scale fall into this bucket. Some of it’s pretty obvious—insurance, rent, cleaning costs—and a lot of it is less so.

 

• Salaries for members of our Culture & People Department and Finance Department

• Professional development ie managerial training, equity training, equity and business coaching for the executive team, nonviolent communication training

• Legal and consulting fees

• Software subscriptions ie recruiting and hiring software, data management software

• Kitchen equipment and staff meals

• Life insurance for founding team

• An endless litany of other line items

 

Marketing Costs

Historically our smallest departmental budget, which is a pretty wildly different paradigm than most competitors or colleagues in the “home” space, especially the D2Cs.

 

• Salaries for our Marketing and Creative Team
• Supplies for photoshoots and content creation

• Printed brand collateral like little recipe cards we’d stick   in your order or a print catalogue

• Affiliate discounts

• Print, broadcast, and digital advertising

2021 Q2 Overview

2021 Q2 Overview

East Fork 2021 Q2 Expenses

We hit most of the marks we needed to in Q2 to stay on track with annual goals: we grew revenues, increased our production output, and had a successful presale of seasonal glaze Taro followed quickly by a record-setting collaboration with the Momofuku restaurant group. That said, we posted a loss this period, which was not our intention. From a top level perspective, I'm not too concerned with the miss, as most of it can be attributed to timing nuances and accounting methodology, not underlying business fundamentals.

 

However, this quarter taught me that things like timing nuance and accounting methodology really do matter in the grand scheme of the system in which we operate. So ideally going forward we’re paying attention to all of it: business fundamentals and the unintended consequences of the imaginary-but-real boundaries fiscal periods. To explain, let’s talk about the concept of deferred revenue. STRAP IN.

 

Accounting principles say that you should record revenue on your books to the time period when you really earn it. This moment is defined as when the goods and services are actually delivered--not promised or planned or intended or even paid for, but signed, sealed, delivered. This is pretty obvious in “normal” transactions. Say it’s a warm spring day in April and a customer walks into our store and buys a bowl that they want. We record that revenue to April, case closed. But what about transactions where the time between money being exchanged and goods being delivered is more significant than the few seconds in the previous example?

 

Say we’re launching a presale that same warm spring day in April, with a promised delivery lead time of no more than 8 weeks. A customer navigates to our website and pre-orders a mug in Taro. They give us money when they proceed to check out, but we don't ship their mug until early June, almost 8 weeks later. Proper accounting would say that we have not earned any revenue in April from that pre-order, kind of the opposite in fact. Money collected from customers before we deliver them goods in exchange for it is recorded as a liability—the same as if we had borrowed money from a bank. We only earn that revenue if and when we ship that mug in June. Until then, we owe the customer—either a mug or their money back.

 

This all lines up with common sense when you think about it: you don’t own a car until you get the title to it. You might have prepaid for the privilege of owning it in the future (think cyber truck) or more likely, you are paying for it long after you got the title, via a car loan. But the transaction happens when ownership changes hands. So let’s take this hypothetical example’s logic back to our Q2 actuals.

 

We released our limited edition Momofuku color colab on June 27th, 3 days before the end of the quarter. We only fulfilled a small fraction of those orders in the last 3 days of the quarter (we project it will take us until early August to get them all out), so the vast majority of the revenue will be recorded to July and August, even though we took all the cash for the orders in June. All of this adds up to contribute to the loss we recorded on our books for the 2nd quarter—though we had strong sales (in particular at the very end of the quarter) the revenue we recognized was lower than those cash sales. By not recognizing all that revenue in June, we didn't have enough gross profits to cover our operating expenses, and thus the loss.

 

Because this is a timing issue, I expect that we will more than cover this loss from Q2 in July and August and it’ll shake out to the same outcome at year end. But with an eye towards forming partnerships with bigger lending institutions or investors—I’m realizing that posting strong monthly and quarterly financials is a key piece in building our financial “brand” for lack of a better word. Pitching investors or lenders on our financial health is a lot more effective when it doesn’t come with an 800-word explanation about the timing of revenue recognition. What might seem like calendar games ends up having an impact on our ability to secure funding to pursue our mission in the world. So accounting matters! And don't be surprised if we start running some of our bigger sales moments in the first half of the month going forward.

Money Reinvested

In Q2, a total of $32,812 was donated to two organizations. (In the visual here, we’ve rounded it up to $33,000 for simplicity’s sake.) Our customers bought $25,355 in tickets for two raffles we held, all of which went to Asheville’s YMI Cultural Center, one of the oldest Black cultural centers in the United States, which offers educational, cultural, civic and social activities as well as leadership and economic development programs. The other $7,457 was generated by a 10% upcharge on pots glazed in Pinto, our collaboration with Samin Nosrat. All of this went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by Samin for their food justice and youth empowerment work.

2021 Q1 Overview

2021 Q1 Overview

East Fork 2021 Q1 Expenses

To me, the big financial event of the first quarter at East Fork was our minimum wage increase to $20/hr. This shift in our payroll is the biggest operating expense change we’ve ever committed to: it’ll add about $1.2M to our payroll. We’ve spent most of the first quarter planning and analyzing this choice, and trying to find the right spot to balance the added risk to the business and our mission and vision. I think we’ve found the right spot—our growth in production capacity and customer acquisition allows us to absorb the hit to our gross margin in the short term, and we should be able to reclaim similar margins in the medium term.

 

It’s also one of the reasons we’re scaling in the first place: we’ve got our eyes on creating advanced manufacturing wages at our dinnerware company so that it can be used as a potent tool for economic justice here in our community. One tactic we’ve taken as a company is to publish our big intentions to the world somewhat unreservedly, and then use that grand statement like a sail, now full with the expectations of the community we just shared our vision with, to help pull us across whatever sea we’re crossing at the time. And I think this minimum wage decision is a great example of that effect in play.

 

We’ve spoken to our priority around financial wellness for our entry level employees going back quite a ways. Because of that expectation-setting, as we got closer to our annual raise cycle, a mood of advocacy and accountability drifted over the company. Folks in management, on the executive team, and in entry-level positions all spoke up to the opportunity we had here to live into our values. We had set an expectation and that expectation was now drawing us into change.

 

It’s been lovely seeing a community regulate itself in that subtle way here. My personal realization through this process was that our mission and values guide us to live up to our ideals now and always, not in some future where everything is perfect and easy. Balance that notion with some pragmatism and good cash flow projections, and I think we’re really onto something.

Money Reinvested

In Q1, $67,000 went to organizations that are working for equity in their communities. A 10% upcharge on pots in our seasonal glaze Pinto along with 10% of the sale of a collection of kitchen and tabletop goods totaling nearly $39,000 went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by our collaborator Samin Nosrat for their food justice and youth empowerment work.

 

Just over $27,000 was raised by our customers who participated in a raffle for custom-glazed pottery, benefitting PODER Emma, a grassroots organization based in Asheville that creates and sustains networks of cooperative ownership and action in Emma, a semi-rural, working class neighborhood that has a significant immigrant population. East Fork donated pots and made some smaller donations that totalled approximately $1,000.

 

2020 Q4 Overview

2020 Q4 Overview

The big financial event in the 4th quarter of this year was our decision to increase our prices. We really grappled with this one, and only time will tell if we made the “right” decision. But I wanted to take this opportunity to talk through some of the considerations. Pricing is the result of a whole realm of factors: a market-based economy, brand identity, values and long-term vision. It’s math and it’s emotion, the reality of what is and the vision for what could be, and notions of fairness trying to orient in a system not known for its fair results. For much of our company’s young life, we have had the fortunate problem of the demand for our work outstripping our capacity to make and supply it. That won't always be the case, but it has been for now. This has led to a lot of frustrations externally: new colors selling out in moments, customers having to wait months to assemble a complete dinner set, unending stockouts.

East Fork made 68,650 pots in the 4th quarter of 2020, and sold 75,316 pots.

 

But it also builds a ton of stress internally—quick pivots to try to meet demand, heightened anxiety around any process hiccups, the sense that we can’t afford a mistake. Were supply-and-demand economics the only factor determining our prices, the invisible hand would have upped them a while back. But price isn't just supply and demand. Or cost plus margin. Price is a loud signifier. A $250 price tag on an Hermès Limoges porcelain dinner plate says a lot about what kind of brand you’re dealing with, and the intended audience—placing both firmly in the “luxury” category.

 

Though we are certainly no Hermès, nor do we aspire to be, we have always recognized that the pottery we make and sell is something of a luxury. In a country where almost half of us reported that our households couldn’t handle an unforeseen $400 expense, our work can’t be understood as broadly affordable. It wouldn’t be at half the price.That said, we do intend for our brand to embody approachability, and for our pricing to signal that. We want to put our prices in a place that makes the work available to the widest audience, without compromising on our other goals like financial stability for all our employees. Moving our prices up would be in tension with this goal of approachability.

 

The concept that kept surfacing for me as we considered the pricing question from a values-based perspective was the notion of urgency. It’s something we’ve been discussing a lot internally this year: that urgency is a mechanism by which white-supremacy is maintained in organizations. If we as an organization feel urgent and threatened, we will not take time to engage in actual anti-racist work like improving our hiring practices, or building out policies and resources that address the socio-economic imbalances that exist in our workforce. With equity and anti-racism as stated values of our company, we have that work to live up to. If our high-demand paradigm drives urgency, and a price increase could potentially slow the pace slightly, would that not be in line with our values?

 

All of this came to a head at the end of last year as we wrestled with how to finance our next investment in production capacity. As you read last quarter, we had gotten to a place of generating our own modest cash flows, but haven’t been in that paradigm long enough to build up a cash reserve that we could re-invest in machinery. We needed to grow our capacity to meet demand and lessen the tension on our inventory, but we still didn’t have the free cash flows to do it ourselves. Furthermore, this would come with added overhead in the short term. So we discussed another round of selling equity in the business to new investors, trying to borrow money as debt, a kickstarter, a crowdfunded equity round.

 

These all came with their complications and drawbacks, and some even seemed to impinge our long term vision for the company. The risk that we finally chose to take was to have confidence in the value of what we are pursuing, and confidence in our customers’ support of that pursuit. Financing our growth through our own revenues links our success with our customer’s approval completely, and a price increase doubles down on our responsibility to make something worth the price we charge.East Fork made $93,000 in donations in the 4th quarter of 2020

 

In economic-speak, the space between what it costs to make a thing and the price people are willing to pay for it is the “value” created by the business, or gross profit. The experiment we are excited to pursue is to see what could happen if that value is not just accumulated in the hands of the few, but allowed to flow back into social justice movements and community building.

 

To see if we can use business as an engine to mobilize resources, not to extract them. Value shared with all the hands that went into making it, reclaimed by groups from whom it was taken--for the common good and the grossest profit. I have more confidence than ever in the abilities of the people working together at East Fork to pull this off, and our customers’ desire to see us succeed.

2020 Q3 Overview

2020 Q3 Overview

A pie chart of East Forks expenses in 2020 Q3

By the third quarter of 2020, we had found a tentative new equilibrium. Our COVID protocols had become more routine, and save for our Asheville store, all of our locations were open and running. Internally we were getting more used to operating our ecom channel in a presale format, and it seemed our customers were also adapting to the big change—even expressing their preference for it sometimes. We were discovering how lucky we were—that so many of our customers were still interested and able to buy our pots, that we were taking care of each other and staying healthy, and that we weren’t operating in an industry that was harder hit by the circumstances of the moment.

 

We were making things work from a financial perspective: for each month coming out of our 8 week shutdown in the spring, we have been able to make and sell enough pottery to cover all our core expenses and even keep us slightly cash flow positive in some cases. For context: since we took on the big growth project of moving into our new factory space, we have been operating at a loss, knowing we’d make it up down the road. In fact, we had targeted 2020 as our breakeven year. At first we thought COVID might have shot that all to hell, but here we were—everything kind of clicking in the eye of the storm.

 

East Fork launched two glazes in 2020 Q3: Panna Cotta and Amaro

So what are the numbers telling us? I see it as a win—that we mostly hit all our marks, met or exceeded goals, effectively broke even for the period and set ourselves up to recoup some earlier losses with a strong 4th quarter. In terms of the breakdown you see here, there aren’t really any huge surprises or big changes in how we spent money in the 3rd quarter.

As always, our biggest cost center was the making of pottery (36% of all the dollars we brought in), followed by our other variable selling costs (19% of revenue). Our Sales and Admin departments spent about the same amount of money (15% and 14% respectively) with our small but mighty marketing department in the rear at 8% of revenues. We spent 3% of our income servicing our debt, and reinvested $121k or 6% of income into community non-profits. All of this is mostly in line with historical trends in terms of the relative proportion of those expenses (save for the donation budget which was larger as a % of revenue this quarter than in the past). The positive change however is that all these expenses got a little bit smaller as a % of revenue—we made and sold more and spent less doing it this quarter than last.

 

If you’re like me and you were adding up those %’s as we went along—you’d get to 101%. So we spent 1% more than we sold this quarter—thus the $18k loss. This didn't feel like much of a bummer considering that this was inline with expectations, and if you look at the quarter on a cash basis as opposed to accrual (perhaps a topic for another time) we were actually cash positive each month in Q3, even though we had a slight net loss. Sounds contradictory? It sorta is—accounting is large and contains multitudes.

 

You may be wondering what happened to the 6,179 pots we didn’t sell by the end of September. Many were Mugs we set aside to be sold beginning on November 9th and some were new Amaro and Panna Cotta pots sent to the Atlanta store to serve as displays to help customers decide what to buy in the monthly pre-orders we offered for year-round glazes starting in September. If you are wondering about the Asheville store, it did not reopen until October and that, my friends, is Q4.

Money Reinvested

In Q3, $121,895 was donated to a total of four organizations in Asheville and Atlanta. In July, we donated $70,705 to the Campaign for Southern Equality to support their tireless, full-spectrum fight to support lived and legal justice for LGBTQ+ Southerners. $58,115 came from an upcharge on the retail costs of pots glazed in Lapis, and $12,590 came from an auction of items made by artists across the country.

 

2020 Quarter 3

Introduction

Introduction

East Fork exists to make pottery, yes, but also to offer thoughtful, engaging work set on a foundation of good wages and benefits that allow our employees—who now number 90—to build stable, optimistic lives for themselves and their families. We measure our success by the degree to which we can create a workplace that’s compassionate, complete with work that is satisfying, challenging, and ever-changing. On the floors of our factory and retail stores and in our offices, you will find people who started doing one thing, moved on to several other things over time, got promotions, learned new skills—technical, managerial, both—and stay engaged by what they do.

 

We want to tell you these stories but we want to do it fully. And that means talking about the money that’s behind, well, all of it. When we talk about hiring more employees, tell you about people living happy, fulfilling lives, people being happy at work and in our communities, not for the day or the week but for the foreseeable future because they have found avenues for support, growth and stability of all kinds, at the heart of it all is money: what we bring in from sales from our pottery and other items, what we spend on our operations, salaries, and wages, and what is passed on to nonprofits and grassroots organizations in the form of funds raised through raffles and other contests, auctions and premium pricing in which the donations are built right into goods we sell.

 

Each quarter, on this page, we’ll update you on the money that came in and went out of the business. Now, we know money talk makes lots of people feel squeamish. We get that—we’ve been conditioned in our society to keep all that hush hush, like it’s unseemly to share your economic realities or to care about someone else’s. Let’s reframe that and, as our CFO and co-founder John Vigeland put it in a talk he gave a few years ago, let’s find a deeper and more complicated understanding of the reality in which we find ourselves. Let’s delve into the details and see what story the numbers tell.

2020 Quarter 3

Our Expenses

Our Expenses

"Simply put, our expenses are the costs our company incurs to generate revenue. And there are a lot! Think payroll, capital expenses (machines, building improvements, cameras), rent, materials, insurance, consultants, software, discount budget,

and more."

- John Vigeland, CFO

Expand to learn about our expenses...

Manufacturing Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority   of our money gets put in this bucket. Our manufacturing costs include:

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

 

Fixed Sales Costs

We present our goods online and in two stores, one in Asheville and the other in Atlanta. Some of the expenses associated with running these outlets are static, meaning they do not fluctuate with the amount of sales we make. Our sales department expenses include:

      • Wages and salaries of team members in our Sales Associates, Retail Team, Customer Care Team, and Fulfillment Team
      • Website hosting fees and software
      • Rent on the two stores

 

Variable Sales Costs

As the name implies, variable sales costs change with the amount of items we sell. The more pots we sell, the more boxes we need, for example. Our variable sales costs include:

      • Credit card processing fees (wah!)
      • Supplies for the fulfillment team like packing materials
      • Shipping costs (pots are heavy and expensive to ship and we usually pay more for shipping than we charge our customers)
      • Wholesale goods that we purchase from other manufacturers and sell on our website and in our stores

 

Administrative Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority   of our money gets put in this bucket. Our manufacturing costs include:

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

 

Marketing Costs

Historically our smallest departmental budget, which is a pretty wildly different paradigm than most competitors or colleagues in the “home” space, especially the D2Cs.

 

      • Credit card processing fees (wah!)
      • Supplies for the fulfillment team like packing materials
      • Shipping costs (pots are heavy and expensive to ship and we usually pay more for shipping than we charge our customers)
      • Wholesale goods that we purchase from other manufacturers and sell on our website and in our stores

Expand to learn about our expenses...

Manufacturing Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority   of our money gets put in this bucket. Our manufacturing costs include:

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

 

Fixed Sales Costs

We present our goods online and in two stores, one in Asheville and the other in Atlanta. Some of the expenses associated with running these outlets are static, meaning they do not fluctuate with the amount of sales we make. Our sales department expenses include:

      • Wages and salaries of team members in our Sales Associates, Retail Team, Customer Care Team, and Fulfillment Team
      • Website hosting fees and software
      • Rent on the two stores

 

Variable Sales Costs

As the name implies, variable sales costs change with the amount of items we sell. The more pots we sell, the more boxes we need, for example. Our variable sales costs include:

      • Credit card processing fees (wah!)
      • Supplies for the fulfillment team like packing materials
      • Shipping costs (pots are heavy and expensive to ship and we usually pay more for shipping than we charge our customers)
      • Wholesale goods that we purchase from other manufacturers and sell on our website and in our stores

 

Administrative Costs

Oh so many unglamorous sounding, kinda “hidden” but absolutely essential costs of running a business at scale fall into this bucket. Some of it’s pretty obvious—insurance, rent, cleaning costs—and a lot of it is less so.

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

 

Marketing Costs

Historically our smallest departmental budget, which is a pretty wildly different paradigm than most competitors or colleagues in the “home” space, especially the D2Cs.

 

      • Salaries for our Marketing and Creative Team including
      • Supplies for photoshoots and content creation
      • Printed brand collateral like little recipe cards we’d stick in your order or a print catalogue
      • Affiliate discounts
      • Print, broadcast, and digital advertising

"Simply put, our expenses are the costs our company incurs to generate revenue. And there are a lot! Think payroll, capital expenses (machines, building improvements, cameras), rent, materials, insurance, consultants, software, discount budget, and more."  

 

— John Vigeland, CFO

Expand to learn about our expenses...

Manufacturing Costs

Our manufacturing costs are the costs incurred as a direct result of making our pots—getting them from drawings on a sketchpad to fully-formed, sanded, and quality controlled vessels ready to be sent off to our fulfillment team to ship out to you. Quarter to quarter, the majority   of our money gets put in this bucket. Our manufacturing costs include:

 

      • Wages and salaries of team members in the Production Department
      • Workers Compensation Insurance
      • Clay for the pots, plaster for the molds, dozens of materials that go into making our glazes, etc
      • Fees incurred from research and development
      • Gas and electricity bills incurred from firing the kilns and running the machines
      • Tools and equipment—you need a lot of it for manufacturing
      • An endless litany of other line items

Variable Selling Costs

As the name implies, variable sales costs change with the amount of items we sell. The more pots we sell, the more boxes we need, for example. Our variable sales costs include:

      • Credit card processing fees (wah!)
      • Supplies for the fulfillment team like packing materials
      • Shipping costs (pots are heavy and expensive to ship and we usually pay more for shipping than we charge our customers)
      • Wholesale goods that we purchase from other manufacturers and sell on our website and in our stores.

Administrative Costs

Oh so many unglamorous sounding, kinda “hidden” but absolutely essential costs of running a business at scale fall into this bucket. Some of it’s pretty obvious—insurance, rent, cleaning costs—and a lot of it is less so.

 

      • Salaries for members of our Culture & People Department and Finance Department
      • Professional development ie managerial training, equity training, equity and business coaching for the executive team, nonviolent communication training
      • Legal and consulting fees
      • Software subscriptions ie recruiting and hiring software, data management software
      • Kitchen equipment and staff meals
      • An endless litany of other line items

Sales Costs

We present our goods online and in two stores, one in Asheville and the other in Atlanta. Some of the expenses associated with running these outlets are static, meaning they do not fluctuate with the amount of sales we make. Our sales department expenses include:

      • Wages and salaries of team members in our Sales Associates, Retail Team, Customer Care Team, and Fulfillment Team
      • Website hosting fees and software
      • Rent on the two stores

 

Marketing Costs

Historically our smallest departmental budget, which is a pretty wildly different paradigm than most competitors or colleagues in the “home” space, especially the D2Cs.

 

      • Salaries for our Marketing and Creative Team including
      • Supplies for photoshoots and content creation
      • Printed brand collateral like little recipe cards we’d stick in your order or a print catalogue
      • Affiliate discounts
      • Print, broadcast, and digital advertising

2021 2nd Quarter Overview

2021 Q2 Overview

We hit most of the marks we needed to in Q2 to stay on track with annual goals: we grew revenues, increased our production output, and had a successful presale of seasonal glaze Taro followed quickly by a record-setting collaboration with the Momofuku restaurant group. That said, we posted a loss this period, which was not our intention. From a top level perspective, I'm not too concerned with the miss, as most of it can be attributed to timing nuances and accounting methodology, not underlying business fundamentals. However, this quarter taught me that things like timing nuance and accounting methodology really do matter in the grand scheme of the system in which we operate. So ideally going forward we’re paying attention to all of it: business fundamentals and the unintended consequences of the imaginary-but-real boundaries fiscal periods. To explain, let’s talk about the concept of deferred revenue. STRAP IN.

East Fork 2021 Q2 Expenses

Accounting principles say that you should record revenue on your books to the time period when you really earn it. This moment is defined as when the goods and services are actually delivered--not promised or planned or intended or even paid for, but signed, sealed, delivered. This is pretty obvious in “normal” transactions. Say it’s a warm spring day in April and a customer walks into our store and buys a bowl that they want. We record that revenue to April, case closed. But what about transactions where the time between money being exchanged and goods being delivered is more significant than the few seconds in the previous example?

Say we’re launching a presale that same warm spring day in April, with a promised delivery lead time of no more than 8 weeks. A customer navigates to our website and pre-orders a mug in Taro. They give us money when they proceed to check out, but we don't ship their mug until early June, almost 8 weeks later. Proper accounting would say that we have not earned any revenue in April from that pre-order, kind of the opposite in fact. Money collected from customers before we deliver them goods in exchange for it is recorded as a liability—the same as if we had borrowed money from a bank. We only earn that revenue if and when we ship that mug in June. Until then, we owe the customer—either a mug or their money back.

 

This all lines up with common sense when you think about it: you don’t own a car until you get the title to it. You might have prepaid for the privilege of owning it in the future (think cyber truck) or more likely, you are paying for it long after you got the title, via a car loan. But the transaction happens when ownership changes hands. So let’s take this hypothetical example’s logic back to our Q2 actuals.

We released our limited edition Momofuku color colab on June 27th, 3 days before the end of the quarter. We only fulfilled a small fraction of those orders in the last 3 days of the quarter (we project it will take us until early August to get them all out), so the vast majority of the revenue will be recorded to July and August, even though we took all the cash for the orders in June. All of this adds up to contribute to the loss we recorded on our books for the 2nd quarter—though we had strong sales (in particular at the very end of the quarter) the revenue we recognized was lower than those cash sales. By not recognizing all that revenue in June, we didn't have enough gross profits to cover our operating expenses, and thus the loss.

 

Because this is a timing issue, I expect that we will more than cover this loss from Q2 in July and August and it’ll shake out to the same outcome at year end. But with an eye towards forming partnerships with bigger lending institutions or investors—I’m realizing that posting strong monthly and quarterly financials is a key piece in building our financial “brand” for lack of a better word. Pitching investors or lenders on our financial health is a lot more effective when it doesn’t come with an 800-word explanation about the timing of revenue recognition. What might seem like calendar games ends up having an impact on our ability to secure funding to pursue our mission in the world. So accounting matters! And don't be surprised if we start running some of our bigger sales moments in the first half of the month going forward.

Money Reinvested

In Q2, a total of $32,812 was donated to two organizations. (In the visual here, we’ve rounded it up to $33,000 for simplicity’s sake.) Our customers bought $25,355 in tickets for two raffles we held, all of which went to Asheville’s YMI Cultural Center, one of the oldest Black cultural centers in the United States, which offers educational, cultural, civic and social activities as well as leadership and economic development programs. The other $7,457 was generated by a 10% upcharge on pots glazed in Pinto, our collaboration with Samin Nosrat. All of this went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by Samin for their food justice and youth empowerment work.

2021 1st Quarter Overview

2021 Q1 Overview

East Fork 2021 Q1 Expenses

To me, the big financial event of the first quarter at East Fork was our minimum wage increase to $20/hr. This shift in our payroll is the biggest operating expense change we’ve ever committed to: it’ll add about $1.2M to our payroll. We’ve spent most of the first quarter planning and analyzing this choice, and trying to find the right spot to balance the added risk to the business and our mission and vision. I think we’ve found the right spot—our growth in production capacity and customer acquisition allows us to absorb the hit to our gross margin in the short term, and we should be able to reclaim similar margins in the medium term.

It’s also one of the reasons we’re scaling in the first place: we’ve got our eyes on creating advanced manufacturing wages at our dinnerware company so that it can be used as a potent tool for economic justice here in our community. One tactic we’ve taken as a company is to publish our big intentions to the world somewhat unreservedly, and then use that grand statement like a sail, now full with the expectations of the community we just shared our vision with, to help pull us across whatever sea we’re crossing at the time.

We’ve spoken to our priority around financial wellness for our entry level employees going back quite a ways. Because of that expectation-setting, as we got closer to our annual raise cycle, a mood of advocacy and accountability drifted over the company. Folks in management, on the executive team, and in entry-level positions all spoke up to the opportunity we had here to live into our values. We had set an expectation and that expectation was now drawing us into change.

It’s been lovely seeing a community regulate itself in that subtle way here. My personal realization through this process was that our mission and values guide us to live up to our ideals now and always, not in some future where everything is perfect and easy. Balance that notion with some pragmatism and good cash flow projections, and I think we’re really onto something.

Money Reinvested

In Q1, $67,000 went to organizations that are working for equity in their communities. A 10% upcharge on pots in our seasonal glaze Pinto along with 10% of the sale of a collection of kitchen and tabletop goods totaling nearly $39,000 went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by our collaborator Samin Nosrat for their food justice and youth empowerment work.

 

Just over $27,000 was raised by our customers who participated in a raffle for custom-glazed pottery, benefitting PODER Emma, a grassroots organization based in Asheville that creates and sustains networks of cooperative ownership and action in Emma, a semi-rural, working class neighborhood that has a significant immigrant population. East Fork donated pots and made some smaller donations that totalled approximately $1,000.

 

2020 4th Quarter Overview

2020 4th Quarter Overview

The big financial event in the 4th quarter of this year was our decision to increase our prices. We really grappled with this one, and only time will tell if we made the “right” decision. But I wanted to take this opportunity to talk through some of the considerations. Pricing is the result of a whole realm of factors: a market-based economy, brand identity, values and long-term vision. It’s math and it’s emotion, the reality of what is and the vision for what could be, and notions of fairness trying to orient in a system not known for its fair results.


For much of our company’s young life, we have had the fortunate problem of the demand for our work outstripping our capacity to make and supply it. That won't always be the case, but it has been for now. This has led to a lot of frustrations externally: new colors selling out in moments, customers having to wait months to assemble a complete dinner set, unending stockouts.

 

But it also builds a ton of stress internally—quick pivots to try to meet demand, heightened anxiety around any process hiccups, the sense that we can’t afford a mistake. Were supply-and-demand economics the only factor determining our prices, the invisible hand would have upped them a while back.

But price isn't just supply and demand. Or cost plus margin. Price is a loud signifier. A $250 price tag on an Hermès Limoges porcelain dinner plate says a lot about what kind of brand you’re dealing with, and the intended audience—placing both firmly in the “luxury” category. Though we are certainly no Hermès, nor do we aspire to be, we have always recognized that the pottery we make and sell is something of a luxury.

 

In a country where almost half of us reported that our households couldn’t handle an unforeseen $400 expense, our work can’t be understood as broadly affordable. It wouldn’t be at half the price.That said, we do intend for our brand to embody approachability, and for our pricing to signal that. We want to put our prices in a place that makes the work available to the widest audience, without compromising on our other goals like financial stability for all our employees. Moving our prices up would be in tension with this goal of approachability.

 

The concept that kept surfacing for me as we considered the pricing question from a values-based perspective was the notion of urgency. It’s something we’ve been discussing a lot internally this year: that urgency is a mechanism by which white-supremacy is maintained in organizations.

 

If we as an organization feel urgent and threatened, we will not take time to engage in actual anti-racist work like improving our hiring practices, or building out policies and resources that address the socio-economic imbalances that exist in our workforce. With equity and anti-racism as stated values of our company, we have that work to live up to. If our high-demand paradigm drives urgency, and a price increase could potentially slow the pace slightly, would that not be in line with our values?

All of this came to a head at the end of last year as we wrestled with how to finance our next investment in production capacity. As you read last quarter, we had gotten to a place of generating our own modest cash flows, but haven’t been in that paradigm long enough to build up a cash reserve that we could re-invest in machinery.

 

We needed to grow our capacity to meet demand and lessen the tension on our inventory, but we still didn’t have the free cash flows to do it ourselves. Furthermore, this would come with added overhead in the short term. So we discussed another round of selling equity in the business to new investors, trying to borrow money as debt, a kickstarter, a crowdfunded equity round. These all came with their complications and drawbacks, and some even seemed to impinge our long term vision for the company.

The risk that we finally chose to take was to have confidence in the value of what we are pursuing, and confidence in our customers’ support of that pursuit. Financing our growth through our own revenues links our success with our customer’s approval completely, and a price increase doubles down on our responsibility to make something worth the price we charge. In economic-speak, the space between what it costs to make a thing and the price people are willing to pay for it is the “value” created by the business, or gross profit.

 

The experiment we are excited to pursue is to see what could happen if that value is not just accumulated in the hands of the few, but allowed to flow back into social justice movements and community building. To see if we can use business as an engine to mobilize resources, not to extract them. Value shared with all the hands that went into making it, reclaimed by groups from whom it was taken--for the common good and the grossest profit. I have more confidence than ever in the abilities of the people working together at East Fork to pull this off, and our customers’ desire to see us succeed.

2020 3rd Quarter Overview

2020 3rd Quarter Overview

By the third quarter of 2020, we had found a tentative new equilibrium. Our COVID protocols had become more routine, and save for our Asheville store, all of our locations were open and running. Internally we were getting more used to operating our ecom channel in a presale format, and it seemed our customers were also adapting to the big change—even expressing their preference for it sometimes. We were discovering how lucky we were—that so many of our customers were still interested and able to buy our pots, that we were taking care of each other and staying healthy, and that we weren’t operating in an industry that was harder hit by the circumstances of the moment.

 

We were making things work from a financial perspective: for each month coming out of our 8 week shutdown in the spring, we have been able to make and sell enough pottery to cover all our core expenses and even keep us slightly cash flow positive in some cases. For context: since we took on the big growth project of moving into our new factory space, we have been operating at a loss, knowing we’d make it up down the road. In fact, we had targeted 2020 as our breakeven year. At first we thought COVID might have shot that all to hell, but here we were—everything kind of clicking in the eye of the storm.

So what are the numbers telling us? I see it as a win--that we mostly hit all our marks, met or exceeded goals, effectively broke even for the period and set ourselves up to recoup some earlier losses with a strong 4th quarter. In terms of the breakdown you see here, there aren’t really any huge surprises or big changes in how we spent money in the 3rd quarter.

 

As always, our biggest cost center was the making of pottery (36% of all the dollars we brought in), followed by our other variable selling costs (19% of revenue). Our Sales and Admin departments spent about the same amount of money (15% and 14% respectively) with our small but mighty marketing department in the rear at 8% of revenues. We spent 3% of our income servicing our debt, and reinvested $121k or 6% of income into community non-profits.

All of this came to a head at the end of last year as we wrestled with how to finance our next investment in production capacity. As you read last quarter, we had gotten to a place of generating our own modest cash flows, but haven’t been in that paradigm long enough to build up a cash reserve that we could re-invest in machinery.

 

We needed to grow our capacity to meet demand and lessen the tension on our inventory, but we still didn’t have the free cash flows to do it ourselves. Furthermore, this would come with added overhead in the short term. So we discussed another round of selling equity in the business to new investors, trying to borrow money as debt, a kickstarter, a crowdfunded equity round. These all came with their complications and drawbacks, and some even seemed to impinge our long term vision for the company.

The risk that we finally chose to take was to have confidence in the value of what we are pursuing, and confidence in our customers’ support of that pursuit. Financing our growth through our own revenues links our success with our customer’s approval completely, and a price increase doubles down on our responsibility to make something worth the price we charge. In economic-speak, the space between what it costs to make a thing and the price people are willing to pay for it is the “value” created by the business, or gross profit.

 

The experiment we are excited to pursue is to see what could happen if that value is not just accumulated in the hands of the few, but allowed to flow back into social justice movements and community building. To see if we can use business as an engine to mobilize resources, not to extract them. Value shared with all the hands that went into making it, reclaimed by groups from whom it was taken--for the common good and the grossest profit. I have more confidence than ever in the abilities of the people working together at East Fork to pull this off, and our customers’ desire to see us succeed.

2021 Q2 Overview

2020 Quarter 3

2021 Q2 Overview

2020 Third Quarter Overview

We hit most of the marks we needed to in Q2 to stay on track with annual goals: we grew revenues, increased our production output, and had a successful presale of seasonal glaze Taro followed quickly by a record-setting collaboration with the Momofuku restaurant group. That said, we posted a loss this period, which was not our intention. From a top level perspective, I'm not too concerned with the miss, as most of it can be attributed to timing nuances and accounting methodology, not underlying business fundamentals.

 

However, this quarter taught me that things like timing nuance and accounting methodology really do matter in the grand scheme of the system in which we operate. So ideally going forward we’re paying attention to all of it: business fundamentals and the unintended consequences of the imaginary-but-real boundaries fiscal periods. To explain, let’s talk about the concept of deferred revenue. STRAP IN.

East Fork 2021 Q2 Expenses

Accounting principles say that you should record revenue on your books to the time period when you really earn it. This moment is defined as when the goods and services are actually delivered--not promised or planned or intended or even paid for, but signed, sealed, delivered. This is pretty obvious in “normal” transactions. Say it’s a warm spring day in April and a customer walks into our store and buys a bowl that they want. We record that revenue to April, case closed. But what about transactions where the time between money being exchanged and goods being delivered is more significant than the few seconds in the previous example?

Say we’re launching a presale that same warm spring day in April, with a promised delivery lead time of no more than 8 weeks. A customer navigates to our website and pre-orders a mug in Taro. They give us money when they proceed to check out, but we don't ship their mug until early June, almost 8 weeks later. Proper accounting would say that we have not earned any revenue in April from that pre-order, kind of the opposite in fact. Money collected from customers before we deliver them goods in exchange for it is recorded as a liability—the same as if we had borrowed money from a bank. We only earn that revenue if and when we ship that mug in June. Until then, we owe the customer—either a mug or their money back.

 

This all lines up with common sense when you think about it: you don’t own a car until you get the title to it. You might have prepaid for the privilege of owning it in the future (think cyber truck) or more likely, you are paying for it long after you got the title, via a car loan. But the transaction happens when ownership changes hands. So let’s take this hypothetical example’s logic back to our Q2 actuals.

We released our limited edition Momofuku color colab on June 27th, 3 days before the end of the quarter. We only fulfilled a small fraction of those orders in the last 3 days of the quarter (we project it will take us until early August to get them all out), so the vast majority of the revenue will be recorded to July and August, even though we took all the cash for the orders in June. All of this adds up to contribute to the loss we recorded on our books for the 2nd quarter—though we had strong sales (in particular at the very end of the quarter) the revenue we recognized was lower than those cash sales. By not recognizing all that revenue in June, we didn't have enough gross profits to cover our operating expenses, and thus the loss.

 

Because this is a timing issue, I expect that we will more than cover this loss from Q2 in July and August and it’ll shake out to the same outcome at year end. But with an eye towards forming partnerships with bigger lending institutions or investors—I’m realizing that posting strong monthly and quarterly financials is a key piece in building our financial “brand” for lack of a better word. Pitching investors or lenders on our financial health is a lot more effective when it doesn’t come with an 800-word explanation about the timing of revenue recognition. What might seem like calendar games ends up having an impact on our ability to secure funding to pursue our mission in the world. So accounting matters! And don't be surprised if we start running some of our bigger sales moments in the first half of the month going forward.

Money Reinvested

In Q2, a total of $32,812 was donated to two organizations. (In the visual here, we’ve rounded it up to $33,000 for simplicity’s sake.) Our customers bought $25,355 in tickets for two raffles we held, all of which went to Asheville’s YMI Cultural Center, one of the oldest Black cultural centers in the United States, which offers educational, cultural, civic and social activities as well as leadership and economic development programs. The other $7,457 was generated by a 10% upcharge on pots glazed in Pinto, our collaboration with Samin Nosrat. All of this went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by Samin for their food justice and youth empowerment work.

2021 Q1 Overview

2020 Quarter 3

2021 Q1 Overview

2020 Third Quarter Overview

East Fork 2021 Q1 Expenses

To me, the big financial event of the first quarter at East Fork was our minimum wage increase to $20/hr. This shift in our payroll is the biggest operating expense change we’ve ever committed to: it’ll add about $1.2M to our payroll. We’ve spent most of the first quarter planning and analyzing this choice, and trying to find the right spot to balance the added risk to the business and our mission and vision. I think we’ve found the right spot—our growth in production capacity and customer acquisition allows us to absorb the hit to our gross margin in the short term, and we should be able to reclaim similar margins in the medium term.

It’s also one of the reasons we’re scaling in the first place: we’ve got our eyes on creating advanced manufacturing wages at our dinnerware company so that it can be used as a potent tool for economic justice here in our community. One tactic we’ve taken as a company is to publish our big intentions to the world somewhat unreservedly, and then use that grand statement like a sail, now full with the expectations of the community we just shared our vision with, to help pull us across whatever sea we’re crossing at the time.

Say we’re launching a presale that same warm spring day in April, with a promised delivery lead time of no more than 8 weeks. A customer navigates to our website and pre-orders a mug in Taro. They give us money when they proceed to check out, but we don't ship their mug until early June, almost 8 weeks later. Proper accounting would say that we have not earned any revenue in April from that pre-order, kind of the opposite in fact. Money collected from customers before we deliver them goods in exchange for it is recorded as a liability—the same as if we had borrowed money from a bank. We only earn that revenue if and when we ship that mug in June. Until then, we owe the customer—either a mug or their money back.

 

This all lines up with common sense when you think about it: you don’t own a car until you get the title to it. You might have prepaid for the privilege of owning it in the future (think cyber truck) or more likely, you are paying for it long after you got the title, via a car loan. But the transaction happens when ownership changes hands. So let’s take this hypothetical example’s logic back to our Q2 actuals.

Money Reinvested

In Q1, $67,000 went to organizations that are working for equity in their communities. A 10% upcharge on pots in our seasonal glaze Pinto along with 10% of the sale of a collection of kitchen and tabletop goods totaling nearly $39,000 went to Acta Non Verba: Urban Youth Farm Project, the East Oakland organization chosen by our collaborator Samin Nosrat for their food justice and youth empowerment work. Just over $27,000 was raised by our customers who participated in a raffle for custom-glazed pottery, benefitting PODER Emma, a grassroots organization based in Asheville that creates and sustains networks of cooperative ownership and action in Emma, a semi-rural, working class neighborhood that has a significant immigrant population. East Fork donated pots and made some smaller donations that totalled approximately $1,000.

 

2020 Q4 Overview

2020 Quarter 3

2020 Q4 Overview

2020 Third Quarter Overview

The big financial event in the 4th quarter of this year was our decision to increase our prices. We really grappled with this one, and only time will tell if we made the “right” decision. But I wanted to take this opportunity to talk through some of the considerations. Pricing is the result of a whole realm of factors: a market-based economy, brand identity, values and long-term vision. It’s math and it’s emotion, the reality of what is and the vision for what could be, and notions of fairness trying to orient in a system not known for its fair results.


For much of our company’s young life, we have had the fortunate problem of the demand for our work outstripping our capacity to make and supply it. That won't always be the case, but it has been for now. This has led to a lot of frustrations externally: new colors selling out in moments, customers having to wait months to assemble a complete dinner set, unending stockouts. But it also builds a ton of stress internally—quick pivots to try to meet demand, heightened anxiety around any process hiccups, the sense that we can’t afford a mistake. Were supply-and-demand economics the only factor determining our prices, the invisible hand would have upped them a while back.

 

But price isn't just supply and demand. Or cost plus margin. Price is a loud signifier. A $250 price tag on an Hermès Limoges porcelain dinner plate says a lot about what kind of brand you’re dealing with, and the intended audience—placing both firmly in the “luxury” category. Though we are certainly no Hermès, nor do we aspire to be, we have always recognized that the pottery we make and sell is something of a luxury.

 

In a country where almost half of us reported that our households couldn’t handle an unforeseen $400 expense, our work can’t be understood as broadly affordable. It wouldn’t be at half the price.That said, we do intend for our brand to embody approachability, and for our pricing to signal that. We want to put our prices in a place that makes the work available to the widest audience, without compromising on our other goals like financial stability for all our employees. Moving our prices up would be in tension with this goal of approachability.

 

The concept that kept surfacing for me as we considered the pricing question from a values-based perspective was the notion of urgency. It’s something we’ve been discussing a lot internally this year: that urgency is a mechanism by which white-supremacy is maintained in organizations. If we as an organization feel urgent and threatened, we will not take time to engage in actual anti-racist work like improving our hiring practices, or building out policies and resources that address the socio-economic imbalances that exist in our workforce. With equity and anti-racism as stated values of our company, we have that work to live up to. If our high-demand paradigm drives urgency, and a price increase could potentially slow the pace slightly, would that not be in line with our values?

All of this came to a head at the end of last year as we wrestled with how to finance our next investment in production capacity. As you read last quarter, we had gotten to a place of generating our own modest cash flows, but haven’t been in that paradigm long enough to build up a cash reserve that we could re-invest in machinery.

 

We needed to grow our capacity to meet demand and lessen the tension on our inventory, but we still didn’t have the free cash flows to do it ourselves. Furthermore, this would come with added overhead in the short term. So we discussed another round of selling equity in the business to new investors, trying to borrow money as debt, a kickstarter, a crowdfunded equity round. These all came with their complications and drawbacks, and some even seemed to impinge our long term vision for the company.

The risk that we finally chose to take was to have confidence in the value of what we are pursuing, and confidence in our customers’ support of that pursuit. Financing our growth through our own revenues links our success with our customer’s approval completely, and a price increase doubles down on our responsibility to make something worth the price we charge. In economic-speak, the space between what it costs to make a thing and the price people are willing to pay for it is the “value” created by the business, or gross profit.

 

The experiment we are excited to pursue is to see what could happen if that value is not just accumulated in the hands of the few, but allowed to flow back into social justice movements and community building. To see if we can use business as an engine to mobilize resources, not to extract them. Value shared with all the hands that went into making it, reclaimed by groups from whom it was taken--for the common good and the grossest profit. I have more confidence than ever in the abilities of the people working together at East Fork to pull this off, and our customers’ desire to see us succeed.

2020 Q3 Overview

2020 Quarter 3

2020 Q3 Overview

2020 Third Quarter Overview

By the third quarter of 2020, we had found a tentative new equilibrium. Our COVID protocols had become more routine, and save for our Asheville store, all of our locations were open and running. Internally we were getting more used to operating our ecom channel in a presale format, and it seemed our customers were also adapting to the big change—even expressing their preference for it sometimes. We were discovering how lucky we were—that so many of our customers were still interested and able to buy our pots, that we were taking care of each other and staying healthy, and that we weren’t operating in an industry that was harder hit by the circumstances of the moment.

 

We were making things work from a financial perspective: for each month coming out of our 8 week shutdown in the spring, we have been able to make and sell enough pottery to cover all our core expenses and even keep us slightly cash flow positive in some cases. For context: since we took on the big growth project of moving into our new factory space, we have been operating at a loss, knowing we’d make it up down the road. In fact, we had targeted 2020 as our breakeven year. At first we thought COVID might have shot that all to hell, but here we were—everything kind of clicking in the eye of the storm.

So what are the numbers telling us? I see it as a win--that we mostly hit all our marks, met or exceeded goals, effectively broke even for the period and set ourselves up to recoup some earlier losses with a strong 4th quarter. In terms of the breakdown you see here, there aren’t really any huge surprises or big changes in how we spent money in the 3rd quarter.

 

As always, our biggest cost center was the making of pottery (36% of all the dollars we brought in), followed by our other variable selling costs (19% of revenue). Our Sales and Admin departments spent about the same amount of money (15% and 14% respectively) with our small but mighty marketing department in the rear at 8% of revenues. We spent 3% of our income servicing our debt, and reinvested $121k or 6% of income intocommunity non-profits.

All of this is mostly in line with historical trends in terms of the relative proportion of those expenses (save for the donation budget which was larger as a % of revenue this quarter than in the past). The positive change however is that all these expenses got a little bit smaller as a % of revenue--we made and sold more and spent less doing it this quarter than last.

 

If you’re like me and you were adding up those %’s as we went along—you’d get to 101%. So we spent 1% more than we sold this quarter—thus the $18k loss. This didn't feel like much of a bummer considering that this was inline with expectations, and if you look at the quarter on a cash basis as opposed to accrual (perhaps a topic for another time) we were actually cash positive each month in Q3, even though we had a slight net loss. Sounds contradictory? It sorta is—accounting is large and contains multitudes.

 

You may be wondering what happened to the 6,179 pots we didn’t sell by the end of September. Many were Mugs we set aside to be sold beginning on November 9th and some were new Amaro and Panna Cotta pots sent to the Atlanta store to serve as displays to help customers decide what to buy in the monthly pre-orders we offered for year-round glazes starting in September. If you are wondering about the Asheville store, it did not reopen until October and that, my friends, is Q3.

Money Reinvested

In Q3, $121,895 was donated to a total of four organizations in Asheville and Atlanta. In July, we donated $70,705 to the Campaign for Southern Equality to support their tireless, full-spectrum fight to support lived and legal justice for LGBTQ+ Southerners. $58,115 came from an upcharge on the retail costs of pots glazed in Lapis, and $12,590 came from an auction of items made by artists across the country.