How do you take an idea and put it into practice? Elena Daccus is serial entrepreneur, founder and CEO with over 20 years of mergers and acquisitions experience and is the founder of the Bossy Heels club, a community for female coaches.
Elena was a guest on episode 14 of my podcast Start, Scale Succeed and shares how to take your business ideas from idea to investment.
If you have an idea for a business what is the best way of making it work?
Anything is possible at the moment, as long as you don’t go into a dying market like print newspapers. Naturally there will be challenges and obstacles, but you can make any idea successful.
A good sign that you should pursue your idea is if you feel like you can’t continue your life without pursuing this further. The worst that can happen is that it is not successful, which is much better than doing nothing and regretting it in years to come.
Don’t forget that for most entrepreneurs, especially women, your family won’t get it. They will tell you you’re crazy, don’t leave your job etc. If you are in this environment, you are not alone. The only people that can really tell you if it’s a good idea are your customers.
Don’t spend too much time in the fantasy land of development stage
The key is to get to the stage of people buying your product as quickly as possible.
- Test and validate your idea. Founders will get excited about their idea, spend weeks talking to manufacturers and on branding and packaging, but haven’t even tested whether the product works, or will retail. You can spend all that time, and then have the customer tell you that they don’t like the colour.
- Work out who your ideal client is. A real challenge for new startups is that founders want to create products for everyone. Emotionally they don’t want to exclude people from buying their product.
- You need to identify your ideal client because your packaging, your branding, your messaging, your tagline on the website, all of these will be created with a view of who you want to attract. You need to be clear about the problem that you solve, and what your solution is, and who it is for.
How to research your ideal client
If you are in a product based business, think about what else are they purchasing. If they are in a supermarket, what else are they putting in their baskets? If it is online, what else are they buying?
- Facebook Groups Find groups that would appeal to your ideal client, for instance fitness groups if you are a wellness brand. You can see what your customers are talking about, what brands they are recommending to each other etc.
- Amazon Look at customer reviews for similar products and what they are saying. See what customers like, don’t like and you can often find your gap in the market this way. Your product doesn’t need to be massively different, just a little bit better.
- Google Forums Look for active ones that people are posting regularly on and build up dialogues. Then you can always take it offline and ask people to test your product or get involved in a specific survey.
Making your product a reality
The next step is looking for a manufacturer. There are factories in the UK, Europe and China you can work with. A common challenge for startups can be minimum order quantities (MOQ) which provide a stumbling block.
The answer can be to start with a smaller manufacturer who can make it for you, who you can have a dialogue with, and go through various iterations, and then as you grow you can scale and find a bigger manufacturer with lower manufacturing costs.
This is better for your cash flow, you may be making less profit, but it gets you started. It means you can make tweaks and improve the product without having too much invested in the first order run. Use the test and repeat model. Place a small order, test, if it works, repeat again.
Where are you going to sell your product?
As soon as you have found a manufacturer you need to think about where you are going to be selling it.
Is is Amazon? Is it a big retailer? If it is the latter you need to be pitching to the buyers. Even if it is in the prototype stage contact the key buyers with all your pricing, label, brand etc to see what feedback you get. Gather a lot of information this way. Buyers know what works and doesn’t, and what they think will sell. Don’t be afraid to have those meetings and conversations, even if they say no, you will learn a huge amount and get incredibly valuable feedback.
How are you going to deliver your product to the end consumer?
Think about your logistics and supply chain. Big retailers will help you with this, for instance Sainsburys are really helping new brands because they understand you won’t know all the logistics.
The key thing is to make sure that you don’t over promise and fulfil retailers requirements on KPIs. If you fail them a few times you will be delisted. Make sure that you can deliver on time, in the slot that you are given.
Commons Problems to Avoid
Cash Flow Issues
- Working capital can be an issue as it is likely you need to pay your manufacturer before you get paid by the retailer. It is important to anticipate, and manage this, and work out how you are going to finance it.
- If you are selling to a small retailer like a boutique you can ask from payment up front. With a big business like M&S, John Lewis, Liberty etc you will be looking at 30 60, 90 days plus.
- Try to find out retailers discount terms before you start negotiating. Often they will ask for a discount on your cost price, so add this on to the cost price that you quote to them.
Don’t put all your eggs in one basket
- You may be happily stocked by one big retailer. But at any time a shiny new brand can come in with better ethics, better packaging, something that better meets the retailer’s objectives for category growth and you find yourself delisted.
- Think about how you can diversify and look to create a brand that isn’t dependent on just one retailer.
Similar products coming onto the market
- A product can become a commodity very quickly, and you find lots of other companies creating similar items.
- Focus on what you solve for your customers. For instance if you have a product that supports gut health what else can you help them with – can you share information via your email list of other solutions that may help. Wow your customers so that they like and trust you, and when offered a range of similar products will choose yours.
- Nurture you customers. There are all sorts of ways you can build a product brand with training, subscriptions, digital courses, and memberships. Build loyalty through your social media and podcasts, so you create raving fans.
Firstly get creative, and focus on self-funding methods to start with. You can use things like Facebook ads to scale your business, and set them up so that they are self funding.
Seeking investment doesn’t come for free, as venture capitalists will want to be involved in the management of the business, and put conditions on how you operate. These are sort of things will investors want to know:
- Where are you in your niche
- What’s your position in the niche?
- Are you dominating your category?
- Are you unique?
- What are your profits, your margins, your sustainability?
- What can you do with their money?
- What’s your growth potential?
- What return will they get on their investment?
Some investors will be looking for a fast turnaround, and to make their money in 12 months, others will be happy to work with you for the next 5-10 years. The percentage that investors will be looking for can vary widely according to your niche.
At some stage you will need investment to take it to that next level, to be a multi million figure business as you will need a board of directors for your company and that level of capability.
Thank you to Elena for all her insights into how to go from idea to investment. You can listen to the full podcast here.
I hope that this post helps you to continue on your journey to success and if you need any extra support then check out my free resources on my website, follow me on Instagram, subscribe to my monthly newsletter or get in touch at firstname.lastname@example.org
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