Small to Big | Kenny Lao, Rickshaw Dumpling Bar

“We’d never had a cash crunch before”

As told to John Tozzi

The chicken and Thai basil is a New York favorite

PHOTOGRAPH BY VICTOR PRADO FOR BLOOMBERG BUSINESSWEEK

2005 Opens Rickshaw Dumpling Bar

2007 Sales reach $2.8 million

2008 Expands by adding food trucks to keep overhead low

2011 Hits a cash-flow crunch after opening a new store in Midtown plus a kiosk in Times Square

2013 Lao expects sales to grow to $4 million or $5 million

Kenny Lao worked at some of Manhattan’s best restaurants before opening a dumpling joint with business partner David Weber. Then they peddled the quirky brand throughout the city in the early years of New York’s food truck craze. Rickshaw Dumpling Bar now serves millions of dumplings each year.

We were one of the first branded mobile food trucks, and we were definitely one of the first to actually go from a restaurant to a truck. In 2011 we opened up a new store on Lexington, as well as a kiosk inside a shipping container in Times Square. We ended up being really tight on operating cash. The challenge for a lot of companies is making enough top-line revenue to be able to pay for the corporate expenses that some large companies are able to spread over 200 to 300 restaurants.

We’d never had a cash crunch before. It really freaked me out that we were having trouble paying our bills. I was sitting down in the restaurant when we realized this. We were closing one of our really, really great days. Immediately we got in touch with our investors and just wanted to give them a heads up. They’re like, “Don’t be stressed out, this is how it happens. Just try to manage your vendors effectively.”

It’s really about the time value of money, even when you’re dealing with something as tangible as a dumpling. I can place an order on Nov. 1 for $5,000 worth of duck meat. I’m not going to have to pay that bill until Nov. 30. You want to stretch that out as long as possible. You’re not paying interest for those 30 days. You’re able to use the product, turn it into dumplings, sell it, grab that money, and pay them back that five grand for the meat.

When cash is tight, nothing is really very fun in the company. My goal is to make payroll on Friday. I was really hesitant to go to our vendors. I was scared to talk to them, because I felt like I was letting them down. Communicating is the best thing you can do.

You could definitely hear the “Oh no, I’m really worried” on the phone. But they realized I’m being transparent with them. A lot of these people stepped in and said, “OK, Ken, what do you need? You guys have always paid and always been current.”

Since then, I’ve realized that a lot of companies run this way on a week-to-week basis, and it’s just a level of stress that people have to be ready to deal with, especially through growth phases.

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