path

Are you also taking the wrong path like most start-up companies are?

marko.pyhajarvi Entrepreneuship Leave a Comment

A few months ago I was sparring a start-up company that had an excellent business idea on a highly competitive but very large volume market. They had a good team, the right attitude and good product ideas. I believe that the guys could eventually get there, but their approach might still be a bit shaky. Dudes, if you’re reading this, this is for you

” We’re going to build the best and sexiest brand on this market”

That’s awesome! How were you thinking of doing it?”

” Well, we have a really good photographer and great contracts with a couple of well-known celebrities”

Great, but how are you going to build the best brand that you were talking about?

”???”

Here we come to the point where my way of thinking differs from that of a traditional advertising company. By no means am I saying that only I am right, and that the thoughts of others are wrong, only that according to my own experience my approach is the one that rocks.

What is it about then?

You do not build a brand by force.

A strong brand cannot be built just by creating photo and video material, a great logo, a beautiful colour palette, etc. A strong brand is built with customer experience during a longer period of time, and matters affecting it are for example.

  • The purchase experience
  • The customer service
  • The quality of the product
  • The additional sales made
  • The client experiences of others
  • The experiences of authorities (for example athletes using the product etc.)

It’s possible for a strong brand to be born, only when the product really sells. Without sales, it’s incredibly hard to build a brand, as if by forcing it. Of course, it is possible to build a known brand before the product is launched, but then we are speaking of an investment of at least millions of euros into advertising.

Do you have millions of euros to invest?

Yeah, I thought so too. Very few of us do. That is why my approach rocks.

In the beginning, forget about building a brand. What you need is sales. You need buying customers. You’ll have time to polish the brand later on.

Sometimes people have blurted out slogans such as ”content is king” or ”customer is king”…

Bullshit!

CASH FLOW is the motherfuckin’ king, tsar, president and emperor!

“Cash flow” is what you need, and what you should aim for, in the beginning, and focus on even a lot later on. Cash flow happens when customers order and pay for products. Cash flow is born out of sales, so you will need to create sales. The cash flow should always be positive, meaning that it constantly brings new cash into the register.

Why is cash flow so important? Why does a business need a constant flow of cash?

Online sales can be increased in a variety of ways, but the fastest and most effective one in increasing the sales intensely, is paid advertising, and it swallows a truckload of cash. Without cash you simply cannot do advertising. Of course, you could always use your credit card, but when we are trying to build a revenue of millions of euros, we are talking about advertising budgets of tens of thousands monthly, easy, and sometimes about ones as high as 100,000 euros and more.

Does your local Nordea bank offer you a credit card with a limit of 100,000 euros? Maybe, but before that, they could demand you for a collateral of 400,000 euros’ in cash.

A business requires more cash in order to be able to grow. Cash is produced through sales, so you should focus on generating constant sales with the help of Facebook and Google AdWords advertising.

You can always consider getting an investor or a loan. With 200,000 euros’ worth of dough you’ll get a nice start, but what happens when 70% of it is tied into products and the remaining 30% has been spent on advertising and other costs? Maybe you’ve even withdrawn a nice salary for yourself.

We’re screwed.

Whatever your starting point, whether or not you have investors, you will, nevertheless, need a constant cash flow. Your business will only be a success if, and only if, you manage to build a constant cash flow producing machinery. If you fail, there is something wrong. Either the business idea is bad, advertising sucks, or there is something else to fix.

What then should an eager start-up team do?

  1. Build a product to sell (even a rare version or a prototype) as soon as possible
  2. Build an online store or a sales site for the product
  3. Get at least a few grands’ worth of capital for advertising
  4. Begin generating sales by directing the right target group of people to the sales page through FB or GA advertising
  5. Analyze data, learn, make conclusions and CHANGES (to the product, to the marketing, to the sales page, etc.)
  6. Fail as soon as possible (this, if anything will teach you to find the right direction)

Forget all about brand building. It isn’t relevant in the early stages. Undeniably, it is smart to produce good photos and videos, but you should aim to create “good enough” material, as soon as possible, so that you don’t waste a lot of time and money, as well as in order to make sales that produce a cash flow, as soon as possible.

You need a continuous, positive, and ever increasing cash flow. You need sales. You need clients to whom to make additional sales.

When you focus on building these, sell quality produce, serve your customers with care, make memorable advertising that stands out, get ambassadors and sponsors, expand your sales to an offline distributing channel, etc., it’s inevitable that you create a good brand, and that you claim your place on the market.

Once you have enough chips collected (i.e. millions) you can start to focus on polishing your brand with, for instance, television advertising and different kinds of collaborations.

Here are my 2 cents with my nearly 10 years of experience in online sales. If you disagree, go ahead and explain your view in the comments section. I definitely appreciate others’ views and experiences.

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