Leading on from our last blog post on 5 Essential Start Up Questions, this updated post asks another 7 essential questions for starting the journey of taking your new business and product to market. All of this will form part of the business strategy map which we will be posting about separately.
But first lets consider:
1. What is the cost?
- Consider the full cost of the goods you are taking to market before you make them or buy materials.
- End to end cost from design to delivered product.
- We advise using a costing spreadsheet which details every last penny of the costs from inception to delivery. Make sure you include: design costs / raw materials / transit to you for materials if applicable / transit to factory / provision for currency change if manufacturing over seas or using overseas fabric or trim / transit from factory for finished goods / labelling / packaging / storage / distribution (pick and pack) / freight to customer / agent, distributor or retailer’s online or sales commissions / wholesale mark up / retail mark up.
- Consider any extra charges which may have been added due to Covid-19 impact on commerce for freight and due to Brexit for any importing of materials for your product.
- Build in some contingency when you first start manufacturing, you will be ordering low quantities to start with, which will cost you more until you can scale and negotiate with the supply base. Add in extra costs for sampling as most factories charge until you start ordering in bulk.
2. Can you make a profit?
- Do you fully understand margins and mark ups?
- Be careful not to confuse margin and mark up.
- Mark up is the amount by which you mark up the cost price to reach the selling price whether that is at wholesale or retail.
- Be sure to have mark ups for wholesale and retail if you are selling at retail.
- There are some new business models who go DTC (Direct to consumer) and these set out not to sell wholesale at all, making the final product cheaper for the consumer by cutting out the wholesale mark up. Everlaine is an example of this. BUT consider this carefully as if you are going to do this you can never add in wholesale later as all your prices to consumers will be too low to make a profit and give the retailer their mark up.
- Gross profit margin expressed as a % (some call it profit margin not to be confused with net profit) is the difference between the the selling price and the cost price (=gross profit figure) expressed as a percentage of the selling price (revenue).
3. Can you control the operating costs?
- Healthy growth in the early period will be critical and controlling operational costs is the key.
- Consider this when you buy first production and avoid buying a lot of stock if you do not have buyers for it ready as this will incur storage costs and tie up your capital.
- Of course there are ways of raising funds and potential seed investors to underpin growth plans, but no one is going to invest in you if your operational costs are out of control and not going according to strategic plans, no matter how good the idea.
- We advise setting up a business bank account (it may sound obvious but keep things simple). Ensure all the business expenses go through this account.
- Operate a cashflow forecasting system which will show clearly month by month and if necessary weekly what funds you have coming in and out and stick to your budgets.
4. How will this business scale in the future?
- This is critical as if it cant be scaled up in the future, it wont be worth the effort of getting it going and it may be unlikely to deliver enough profit without scale.
- Consider how the business can be expanded and scaled for growth and development in the future.
- Could you add other products to the range?
- Could you add sub brands?
- Could you target new and different markets with the same character of product?
- Make sure the market is not too small or limited to one country or sales channel which wont deliver the scale.
- You are more likely to attract investment if you demonstrate you can scale the business
5. Do you need training?
- Be honest about what you don’t know and seek help.
- Play to your strengths and recognise your weaknesses
- If you have a scalable idea, it will become evident very quickly that you need to be good at managing people and motivating them to be as passionate about your business as you are.
- Effective delegation is one of the most important parts of growing business – get some tips if you haven’t done it before.
- If there are aspects of the business you are not clear on, which may prevent you from making a clear strategy for growth, seek advice.
6. What are the quick marketing wins?
- Use social media to add traction for your brand with a good omni-channel focused marketing plan.
- Ensure you know how to measure promotional activity accurately for ROI (return on investment). If you do not know get help, otherwise you could waste money.
- Make a clear marketing plan and monthly activity calendar, even if you don’t have funds to spend on advertising or promotional events, you need to have a communications plan and include some brand awareness events.
- Make sure you can get the message out about your product through creative alternatives.
- Make a list of brands who are selling another product which is complementary to yours and targeting the same customer group and then make a plan to research and suggest collaborations with these like minded brands.
- Network and consider useful collaborators who you may be able to work with on a joint promotional project.
- SME’s are often willing to share data base information if they have the correct permission.
- Consider carefully which retailers could help you spread the word about your brand.
- Make sure all marketing activity is ‘on brand’ and in keeping with your desired brand positioning, there is nothing more confusing for a new brand than to be giving out mixed messages about who you are aiming at.
7. Consider Outside Expertise
- Consider taking on non executive directors with expertise in the market you are entering for focused guidance.
- There are many generalist strategic advisors but these will not help you any further than reading a book on strategy. The key is to have experts in your field who have done it before and know the pitfalls to advise, challenge and guide you in detail.
- There are Government funded schemes to help with accessing advice from experts from time to time, but make sure they know the industry you are aiming to enter well.
- The current business climate is supportive of new SME’s even post Covid-19 but consider carefully any loans and you’re a ability to earn funds to pay them back through your business.
Keep an eye out for our next blog post with more guidance for business growth. If you have any questions in the mean time please do contact us.
Picture source: Freda Thompson in a de Havilland DH.60G-111Moth Major,ca1935 Sydney Morning Herald via http://nos.twnsnd.co
