Start Up Blog

Not accountants, lawyers, engineers… Maybe they are your family and friends.

The best advice often comes form your auntie with zero business experience. An untainted world view. You need an army of advisors who are non-professional realists. I am not suggesting you go to them for strategic input. But how much of what you are really doing in your start up business is about strategy? The reality is that 90% of what you’re doing is managing opinion, ego and divergent objectives.

Certain friends and associates are great at dealing with certain issues. Knowing the skill base of you inner circle might be the best tool you have to avoid compound damage.

In a recent blog entry “4″  I described my version of must haves for any start up opportunity. One of these was was Theatre At Transction. While wondering through Melbourne I came across a perfect example. The store is called KoKo Black. 

They have been written up previously on Springwise. This small firm knows the leverage of the theatre.

At 11am on a Saturday morning there were more than 20 people watching a brand being built, literally. By the time I got my camera out the crowd had dissipated . But you can see the concept. Koko Black have managed to do what Cadbury couldn’t conceptualise.

They only do chocolate. That’s it. But they are the experts. Classic single minded proposition. All five senses in action at retail level. Eat in or takeaway. Breakfast lunch and dinner, chocolate is the only thing on the menu. Their retail concept is very clever. They have a viewing bay where you can watch the gourmet chocolatiers in action. After all old is the new new. The emotional connection is made in a way that can’t be done with TVC’s and interuption marketing.

The net result is a price of beyond $100 a kilo. While old world cadbuary languages at $12 per kg. Who do you think will profit in this category in the future,  the specialists or Mr Glass and a Half? In an obese world, the treat from the specialist will win every time.

If you’re in Melbourne go and check them out in the City, Carlton or Chadstone. A lot of great learnings for any entrepreneur.

You’re a smart person.

You don’t get duped very often.

You know a scam when you see when.

You’re even smart enough to know that $9.95 is really $10.00

See, I told you that you’re smart. Now, given the condescending nature of my tone here, do you think any of your customers wont be smart enough to know this? Now that you have answered this question please ask yourself why you would ever engage in such trick pricing for your customers.

At last, we’re entering the age of ‘authentic capitalism’, and $0.99 cents isn’t fooling anyone. In fact, you’re quite possibly embarrassing yourself on a commercial level and damaging your brand or start up. The threshold price point is the biggest hoax in consumer marketing.

My suggestion, is to have honest pricing.  Charge to the dollar. Make it simple and gain respect simultaneously. Your customers wont mind, really.

Who wants a pocket full of change anyway?

You know some things better than anyone. You know them inside out. In fact your knowledge in this area can rival anyone.

Maybe you’re paid to work in the area, maybe you grew up there, maybe it is how you spend your weekends, maybe you’ve studied it and have read every book on the topic.  Anything from motorbikes to goldfish to guitars…

This is your golden path. You have the knowledge, the passion, the contacts and know the channels.

Bug list it, then find the solutions and do something about it.

No doubt your new start up will face issues. Many of them will be people related. Some will be things simply not getting done or not working once you press the on switch. If issues arise and remain unresolved within 24 hours you will start to suffer Compound Damage. This is particularly the case with suppliers and staff. All things in life compound, it is just natures way.  Consider this with all problems and general stuff ups.

If you ignore them they will go away, along with your business.

We have recently come up with a revised strategy to launch our start up business and brand. The interesting thing about the strategy is that it lives on the precipice. Which means it could really boom and change our whole proposition and propensity for success, or it could really bomb and fail. In short we have adjusted our strategy for launch. Our contingency will now be the original strategy if the new ‘phase 2’ launch fails.

This created an interesting situation with our Venture Angel (seed funder). We re-crunched the numbers, spreadsheets, profit forecasts to revise the financial story. Turns out if this thing works everyone gets real rich, real quick. We’ll sell a zillion widgets. Great.

We met with our Venture Capitalist to go through it. This is where the lesson kicks in.

He just looked towards us and said, “Whenever I see telephone numbers like that, I disregard them and sometimes, I disregard the person presenting them.”

He was very clear and measured with his response. Heavy lesson, we nearly lost him through some entrepreneurial stupidity. Let’s call it entrepreneurial exuberance. We immediatly recalibrated and just discussed the strategic implications and why it ‘could’ work. Rather than what the numbers look like if it did work.

Put simply he was focused on what would make things work, not the benefits if it did. There are still a couple of really big if’s to our revised strategy; like consumers actually embracing the concept and our ability to deliver it.

It’s fine to you think know what the financial boon looks like, but never present it. You’ll just lose credibility, like we did. Keep your dream numbers within the inner sanctum of your start up.

When you have a rather big opportunity on your hands that could really kick, break it down into components:

• Rather than long lead P & L’s, just show Internal Product Margins.

• Rather than spruking about how many widgets you can sell in a year, just show some launch or test market volumes.

If the venture capitalist is any good he’ll know what the upside is.

While watching a review for the movie “Fast Food Nation”, I heard a great quote. Star of the show Greg Kinnear said “If you’ve been made to forget something, do you really know it?”.

He said that often when you tell someone something they’ll say… “yeh, we know all that…” and then continue without consideration.

This is no different to marketing and start up business. Consider what you ‘know’ and the last time you ‘remembered’ it. Do you really ‘remember’ what exceptional marketing looks like? Have you ‘forgotten’ what consumers want?

Maybe remembering what the current industry incumbents have forgotten is your opportunity.

What will stymie potential competitors from doing what you’re about to?

Why haven’t they done it already?

Do you know this from the ‘inside’ or are you just guessing?

A cool answer is there aren’t any competitors. Being first gives you cred others can’t get, it’s value is diminished when the next 100 gorillas or entrepreneurs turn up.

While it’s great if there aren’t any competitors, but it’s even better when your strategy provides a Lock Out Device.

LOD: Definition   Competitive Strategy within which the idea itself encompasses a method to lock out followers.

Can you make a strategic circle that starts with consumers and closes the market simultaneously? Hard to do, but worth the trouble to invent one.

Here’s some clues (no I don’t know them all, but I know where they’re found), think infrastructure, think channels, think platforms, think bridges, think islands.

“…I would have, but I’m not very good at maths”. How many times have we heard that?  I love quadratic equations and differential calculus as much as the next guy… Good news bulletin; Simple Maths rules the financial world. If you’re familiar with the following symbols you’ve got all the number skills you need.

 +         -           x          /           %         <          >

You only need grade school math. But, you’ve got to be quick with your numbers, know which ones matter, understand industry averages and which ratio’s to look for - top of mind.

The most important of all these symbols is %. Everything that matters is represented as a percentage:

Gross margins

Net margins

Rates of interest

Return on investment

Price earnings ratios

Growth rates

Quick ratios

Debt to equity

Get to know your key financial indicators. Simple tools used on the share market are your best friend even for a small start up. Fundamental analysis is always based on ratio analysis.

Your company will only ever be what it earns and remember these two things that entrepreneurs often forget:

Revenue must exceed expenditure

The crocodile always gets the biggest piece!

Last week I blogged about risk. Some of my detractors would have come through with the counter punch of something like “I have a family to feed and a mortgage to pay.”

As you can’t really argue with what was proposed as your true risks, I can’t argue with your real commitments. It’s all a question of gearing. What’s your life geared towards? Maybe you have a large mortgage. Maybe you have an investment property. Maybe you take an annual overseas holiday. Maybe you have a car lease.

I know you deserve nice things.

I know you work hard.

I know your job pays for all this.

I know you deserve a reward.

What is the solution? De-Gearing. You need to de-gear your life. You will never get off the treadmill unless you de-gear. Your lifestyle keeps you on the treadmill perpetually. What could you achieve if you didn’t have any debt? What if you didn’t have a mortgage? What if you sold your house banked the net proceeds, quit your job and backed yourself to make something happen in 12 months? What if you used a portion of your money to feed, clothe and house yourself / family for a year, then you focused all your energy on your start up? What if money was not an issue and you worked on something you were passionate about for 12 months? What if you or your partner quit while the other worked?

This is not a fanciful “if”. Work out your net worth if you sold out all things that cost you money every week. How much money, no freedom, would you really have? What if you de-geared your life? What interest would the freed up assets generate for you on weekly basis? $100, $200, $500? It really opens up some options. The mind boggles.

Worst case scenario, it doesn’t work. You go get a job, probably a better one with more pay. You learn more in 12 months than 12 years. You have a great story for any interview. You’re seen as a pathfinder, a leader, courageous. The type of profile companies are searching for. You live the dream for at least 12 months (1% of you life if you live till 100). You have a great pub story. Cool.

It’s really a choice.

I can’t coin this any better than Tyler Durdin from Flight Club….  

“The things you own, end up owning you.”