Your Business's Magic Pill, Part 1: Startups

Often, a business can get overwhelmed by the dynamic nature of delivering a product or service while also performing all requisite tasks for its delivery - i.e. the business part of your business. 

I was recently joined by over 250 entrepreneurs and executives from all over the world interested in uncovering the Magic Pill in their businesses- that perfect formula that could take their organization to new heights.

Participants fell evenly into three categories: those at the helms of startup, those running small and mid-sized established companies, and those looking to innovate large existing businesses.

To begin each was asked if there was a difference between what they're good at, what they like to do (or believe that they're doing), and what makes them money.

They wondered how can they align corporate performance with consumer expectations all while growing profits?

Come along while we work to deconstruct their businesses and distill the few items that matter most and those that can make all the difference this year and for years to come. You may recognize some tactics that could impact your business…

First, The Startups.

What are some of the key elements in commerce that you have learned through your experience in retail ops and consulting for businesses in the past? @Chloe

Commerce is defined by the activity of buying and selling -especially on a large scale- as well as the sharing of ideas, opinion, or sentiment between people.

Inherently, commerce requires the constant production of goods, services, and ideas to meet a changing set of demands. For a company to exist in a relatively free market, they must meet a need in the marketplace and continue to innovate the solution that they provide.

Additionally, they must:

• develop and maintain customer relationships, use data and feedback to enhance their solutions and drive for operational efficiency.
• develop messaging and branding materials that tell their story and highlight the value of their product or solution.
• analyze and manage human performance and become proficient in how the human element of their team can be enhanced with technological advancements that simplify, scale, or automate activities.
• know where capital flows from, where it must flow to, how to generate resources when needed, and to invest surpluses for sustainability.

Some measurable factors of good business management include but are not limited to: increased gross sales & revenue, optimal customer engagement and satisfaction, productive product and business relationships, productive ecommerce performance and analysis, and peak employee performance.

Some of the more intangible elements include: great attitude, quality workmanship, on-time delivery, excellent systems and controls, excellent location and curb appeal, and access to additional capabilities, new data, and emerging marketing strategies.

How do you address a specific need today, while building the foundation to solve many related needs tomorrow? @Koushick

Identifying a market need is a mix of common sense, inspiration, strategy, and plain luck.

There are those who are gifted with the ability to easily, and frequently, identify a simple or worthwhile solution. They are truly blessed. Many of us must wait to those moments of serendipity or clarity where we can suddenly see the perfect fix for a market gap or everyday problem.

To address a specific need today, you should be perceptive to common complaints or stumbling blocks. Be constantly on the lookout for ways to simplify or remove friction in people’s lives through innovative product development or by bringing efficiency to, and/or removing extraneous parts and steps from, a system or process.

Indeed, systems and lifestyle analysis can be key components to the mindset of the solutions inventor.

Social proof is also important, so be prepared test, test, test and to proactively seek opinion and critique, learning and refining at each step.

To fill the needs of tomorrow, you’ll need to apply some creative and educated guesswork. Read and follow futurists like Ray Kurzweil who understand the speed at which innovation and tech integration is moving product development forward (read the Law of Accelerating Returns, Singularity, etc.).

Also, look to what people with means (the rich) are spending their time, attention, and money on. Items like the TV, personal computer, mobile phone, air travel, and even cars were cost prohibitive to the general market in the early years after each launched. Today, the costs have dropped enabling the average consumer to afford and access them all. Logic would dictate that there are specific items that, today, appear out of reach of the average consumer that will enjoy more general use before too long. Find which devices, methods, or lifestyle interests are popular among people with means and build a model for scale once the tech or materials drop in price. Or develop a complementary product that can piggy back as that product builds broader reach.

Dream big my friend!

What would you say are the top three skills needed to be a successful entrepreneur? @Nomedz

Your question is one that I spend a lot of time on while working with clients and in my own day-to-day. I’ve worked with startups and done consulting work with established, multinational corporations and I’ve found some common themes in successful entrepreneurs and intrapreneurs.

Patience for the process is a must. There will be ups and downs, moments of uncertainty, and those that seem altogether hopeless. An entrepreneur must be able to move steadily on through the calamity. You’ve got to be able to go to sleep with some bills unpaid and some fires still burning, do the little things well, and keep focused on taking care of your customer and yourself. You started your business for a reason and that shouldn’t come into question because you’ve hit a couple road blocks, or when some resources dry up. These challenges are (almost) inevitable. Trusting that you have the passion for your product and that you are the solution for your customer can lead you through the tough times.

Curiosity and creative thinking is the spark that lights the fire of innovation. And not just from a technological standpoint, but in looking to improve, automate, or simplify systems; to challenge assumptions and to ask Why not?. Curiosity is also an unbelievably attractive trait that can inspire your team and engage investors and clients. Don’t lose the charm of a dreamer and forever-learner. Have fun with the questions still unanswered or you’ll find yourself easily confounded and frustrated. Keep moving forward.

Grit is perhaps the greatest asset of the entrepreneur. Be resilient enough to be laughed at, rejected, and taken for granted while still pushing forward. Eventually, you will gain traction. Success has been said to be holding on after all others have let go. Churchill said that success is moving from failure to failure without losing momentum. And this was a man who lead his country through one of the bleakest moments in its history. Grit and the will persevere are essential tools for the entrepreneur.

How should you identify the products you sell? Do customers come to you or you go to them? @Alexander

Great questions @Alexander. I’d recommend a combination of both! With our first portfolio at American Reserve Clothing Co., we needed to do some creative guesswork that was informed by research, personal preference, and a small sample of target customer surveys. We made some great buys and some mistakes.

Now that we’re armed with more familiarity of how each product performed, our buying is much more dialed in!

We also choose to work with product partners who both inform us about how their products are performing along other platforms and allow for some flexibility after the fact. In many cases, they’re willing to work with us to manage stock selection and levels. The type of relationships can be tough to identify or develop, but you need to understand that you offer the value of an alternative distribution channel and should look to leverage that value into mutually beneficial product agreements.

At the end of the day, you’ve got to make the best choices with the information that you have and then get creative to make it all work for you. Good luck!

Do you have brands that are easier to sell than others? If so, how can you increase sales in the slower moving brands? @Mark

Hey @Mark, yes, we do have a number of brands that move more quickly than the rest. In most cases, these are brands that are more well established and are generating additional consumer demand through both product performance and their own investments in brand awareness.

We’re honored to represent brands whose value is understood and stable in the marketplace. We’ve found that when merchandised alongside our less well-known brands, these lines act as anchors, lending their perceived quality and value to the others.

The one downside can be that because of the marketing budgets behind these brands, the wholesale costs can be higher and less likely to be volume dependent or open to negotiation.

As part of our business model, we buy form and represent high quality, small-batch manufacturers. Often, we are introducing our clients to a brand for the first time. If we have established trust or credibility with that client, we may be able to move a newly-introduced product based on recommendation alone. Other times, we need to work a little harder. When possible, it’s important that we allow a client to hold and interact with those products. We also need to be extremely familiar with the product and the brand narrative (see previous article on Corporate Storytelling). If we can demonstrate the value and express the backstory, we’ve done our jobs. After all, telling the brand story of our product partners, is our brand story. Once our client is empowered to tell that story, it becomes part of their brand story. Then their product selections become an element of self-expression.

Should you advise your suppliers on the interests of your consumers to increase sales? @Bea

Of course, @Bea! A good partner should always look to provide feedback that could improve product performance or meet a consumer demand.

Likewise, you should eager for their input on how to best position or market their products on your end.

If your relationships don’t allow for honest and collaborative dialogue, you may need to reevaluate some of your partnerships.

One last note: any suggestions from either are simply that and should not cause any friction if not implemented by the other party. Any hard rules and regs should be discussed and agreed to in advance.

What are some realistic goals for a business to have in their first year on the market? What strategy should it adopt in order to achieve them? @Naveen

Prepare yourself for an over-generalization @Naveen. Each new business ought to have its own parameters for measuring success in year one. Some may look to raise a certain amount of capital. Some may have sales goals or may measure units moved. Still others may be happy to still be in business as the calendar turns.

When we started our business, we aimed to stress test the assumptions that we’d made during the development of our business plan and launch strategy. We were committed to learning every step along the way and to keeping a level head through the darkest times. We didn’t intend to be profitable in year one as we planned to reinvest in inventory and marketing at every turn.

Commonly, sales growth quarter over quarter, new customer/account totals, or new employee hires are often the flashy or romantic benchmarks, but these may not be the best for your business.

If you’re committed to focusing on a few metrics, I’d try these.

One good measurable could be a lower customer acquisition cost each quarter through your first year. This metric is a ratio and as such, will not hamper your ability to spend/invest in growth- as opposed to simply watching your quarterly marketing expense. So, if your spending increases, but the impact and return for investment outpaces your spend, your acquisition cost will drop. Basically, you’re improving your tactics and learning. Good news in year one!

Speed of delivery and quality delivery are worthy stats to dial in as the first year progresses. Becoming more proficient and settling into your systems should mean better deliverables and customer satisfaction by yearend.

Another good goal may be to affect one major press interaction each quarter. Identify the publications or local business surveys that would make the most sense in reaching a broadening audience or earning some social proof that your company delivers a worthwhile solution. A mention in a ‘Best of…’ survey or ‘Best New Business’ title can help to drive some interest – as would a long form print interview (printerview?) or short form TV news spot. 

That being said, if your target market is not your city, shift your focus to trade publications and major podcasters in your space. I hope that helps. Congrats on the new venture!!

If your brand is your own name, how do you maximize its worth? @Daniela

The same way that you would with any other brand. Invest in product performance and in reaching new audiences, deliver value over and over again, and leverage user feedback to make improvements.

If you deliver a product or service and the name of the company is your name -Harvey Smith, D.D.S, or Tim’s Landscaping, etc.- you should focus on the deliverables that a company delivering a similar product or service would. Maximize the worth of the brand through outstanding service, great relationships, quality results, and smart spending.

Note: when looking to sell, the worth of the business may be established using your top line revenue, profits, EBITA, and customer satisfaction. Try to reduce owner contributions to each so that a new owner would see less negative impact when you step away.

If you are a personality -thought leader, podcaster, YouTube star, musician, etc. – you’ll need to push out content across multiple platforms to demonstrate value and build a following. The more thoughts, opinions, videos, and songs that you share, the more chances you’ll have to introduce your brand to new audiences. The more followers, the better your position when repping products, selling memberships, additional content, and ad space. You may want/need to invest in platform ads that help increase reach. You most certainly will need to invest in increasing your own performance and enhancing your presentation as you grow. Elicit constructive feedback to grow and develop a tough skin for the inevitable critique you’ll receive doing business in the public eye and leading with your own personality.

Give 10x the value while building your brand and you can leverage more value once established.

What are some of the instances that might cause a business to become overwhelmed? @Newman

Prepare yourself for a general answer as businesses become overwhelmed for reasons specific to their own situation. However, here are some common causes:

Failure to automate. The automation of redundant tasks, those with low impact, or ones requiring low cognitive capacity is beneficial to businesses of any size but can be essential for solo-preneurs and startups. Deep dives into the mundane or the minutia can be like stepping into a time warp that blasts you toward future obligations without the benefit of getting much of importance done. 

Not enough internal skills. Businesses that do not acquire or develop skills with specific purpose or educational tracks resign themselves to stumbling through tasks that could be easily handled by the properly initiated. Reading and drafting contracts, reconciling financial records, and marketing yourself without expertise can be not only tedious, but infuriating if you’re learning and executing in tandem in real time.

Not enough manhours to leverage. Businesses may be able to automate or apply specific skills to essential tasks but may not have enough hands for the heavy lifting. Trying to do it all will burn even the most resilient business leader. Not to mention, the constant transition between the 30,000 ft, big picture mindset and soldering through tasks at the ground level can be exhausting no matter how much you love what you do. It’s very difficult to see your company from both perspectives at once and leverage key opportunities accordingly, leading to compounding, and fatiguing small failures.

Too much success, too fast. Of course, if you do everything right, you may still be inundated with interest and order requests at a volume that you cannot sustain. The inability to scale quickly when needed can lead to overwhelm and an ineffective consumer experience that will compound farther down the road. And being aware of that fact that you are falling behind or delivering a substandard product or solution can only drain your energy reserves even further.

Do you think some startups fail, not because there is no market, but because of poor strategies? How can other businesses learn to bring about a change? @Atanasoksik

I would say that most startups that fail, do so because of poor strategy. While severe market shifts do occur, many startups enter a stable marketplace where conditions remain relatively unchanged from concept and planning through launch and their unfortunate demise.

And while many will externalize the factors that led them to failure, they most likely had opportunities along the way to innovate.

Now, poor strategies is a very general term. Many startups are simply underfunded. They cannot withstand the slow grind of organic growth. They cannot invest in marketing or attract new consumers. They cannot hire or retain talent and manhours and end up burning out the few key employees that they do have.

Other startups fail because they fail to drive supply chain efficiency. Perhaps they lack the negotiating leverage or volume to drive down wholesale costs. Perhaps they fail to build shipping partnerships or explore batch shipments which can lower their costs. Perhaps they are too focused on the customer experience to spend time innovating or organizing supply chain functionality.

Change for a startup should be (needs to be?) second nature. Existing businesses, however, can be lulled into an aversion to change once they’ve built initial sustainability. Leading change in these organizations can be tough but is often necessary for relevance and longevity. Be sure to promote creative thinking and emphasize the need for fluidity in approach. See a former article on Mentorship where I address just this thing.

Do you think all startups need to invest in someone to help them figure out how to avoid failure? @Amraly

I think all startups need a plan that helps them avoid failure. The lucky ones have someone involved from early on who has market knowledge, previous startup experience, or a consulting background.

For those who don’t, the umbrella of a mentor or incubator program can help those startups to foresee gaps in their business model or plan and may even bring relationships that can accelerate the budding business through challenges.

At times, a startup will need to invest in these insights. Many times, that investment comes in the form of an equity position instead of a retainer for contracted work. However, every startup should evaluate how much ownership to leverage for growth. 

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I hope that you've enjoyed reading along and that you'll allow me to bend your ear again in the chapters where we discuss small, medium, and large established businesses. 

I want to hear your feedback and I am eager to learn from each of you. Please don't hesitate to reach out.

The views expressed in replies are my own but have been influenced by years of collaboration with amazing people along with a willingness to fail and to learn.

Best,

Cliff Carey

Founder, American Reserve Clothing Co.

cliff@americanreserveshop.com | americanreserveshop.com

Follow our story @americanreserve