Great ideas are thought up all the time. Certainly there are those who are more inept to conceptualizing great ideas but that’s just the beginning. The real challenge begins with scaling a great idea. A lot of great ideas make it to market with all the promise in the world, but fail to turn a profit.
How will you turn promise into profit?
No. 1: Start With a Service
Observation: Most products, which enter the marketplace do not start out as necessities. They become necessities with the right amount of marketing, but they seldomly start that way.
Example: In starting Knickerbocker Mfg. Co. the intention was always to leverage our manufacturing capabilities to become a vertically integrated business in the apparel market. However, we did not have the starting capital to begin developing our own line but with a knowledge of the market, I knew there was a need for private label services. In manufacturing for others we knew our margins would not compare to that of our own label where we have the option of retail & wholesale. This is simply based on the fact that we had to offer production pricing so that our clients could then wholesale and retail the goods. Though we weren’t achieving high margins, it allowed us to maintain cash flow, analyze our business and better plan for the future. All the while, our many mistakes and obstacles,were funded by our services for others.
Key: Essentially, if you don’t have the capital, hone in on a service you may offer and build your company off of someone else’s dollar while marketing that service all the while. That way, when you introduce your own product, you will already have a seal of approval for quality.
No.2: Maintain Integrity
Observation: Many brands start out with a great product or service only to get distracted by the bottom dollar later on. Over time, what once made them so special becomes forgotten.
Example: Maintaining integrity is all a matter of respecting the process, and the workers who are a part of that process. Without them there would be no product and no process. Be honest to both, and it will pay off immensely. With that there’s an order of things that needs to be followed; from the apprentice to the master and from the cloth to the final product. It simply comes down to putting the work in and not jumping the line. With our process it’s about mastering the craft, then utilizing both new and old machinery to not simply cut out steps but to combine the traditional machines associated to our craft with the use of modern machinery to create a new process.
Key: As long as you’re doing something special you’ll always have a place. With the level of competition being at an all time high, and only getting higher you have to keep this mindset of consistently improving upon the process to maintain longevity.
No. 3: Cash Flow Management
Observation: New businesses with a bright idea always attract press, with this press comes opportunities. Let that bright idea have a future and remember this; inevitably when you love what you do you will always bite off more than you can chew. Manage your cash flow right and you’ll know just what and when you can take on these projects you’ve been aching for. Should you have no choice but to make a certain project happen, you’ll also know when and where your business will need the investment to make these projects happen. By no means will this be completely accurate but with the proper management you’ll be making the best out of every situation and every opportunity you take on.
Example: In our line of work you deal with a numerous amount of suppliers, some of which are flexible on payment and others, which are not. To properly manage payments to suppliers and employees we must not only be realistic but pessimistic when it comes to receivables. Ask yourself, how much capital do we have and how much do we need to bring in to take care of x, y and z? With this are we sustainable, and are we profitable? With limited time and capital we don’t have the allowance to take on p.o.’s, which don’t answer these questions yes. We once made the mistake of taking on deposits for p.o.’s, which could not fulfill our upcoming expenses. We haphazardly spent that money while not taking our upcoming expenses into account, which is where that money should have been allocated to.
Key: It’s nice to see money in the bank account, but it doesn’t necessarily mean it is yours, and it doesn’t mean your profitable either. Luckily, we made it out of this situation with an immense amount of after hour work and with the help of our dedicated employees. In the end, make sure your p.o.’s will get your business what it needs and always ask the simple question: is the juice worth the squeeze?
No. 4: Bite the Bullet
Observation: It’s no secret that it takes businesses some time before they establish a profit. With low capital to begin with, your salary should not be the priority and before things get moving your employees will likely be taking a larger salary than yourself. If you’re entrepreneurial spirit and talents have gotten you this far, then you undoubtedly have the ability to establish side income for yourself while you get through these tough times.
Example: Many industrial professionals are faced with the harsh reality of little to no salary when starting their business. There is a lot you can sacrifice to better kickstart your venture but you’re always going to have to eat and you’re always going to have to pay rent. Use your talents to take on side gigs. It might not be an exact practice of your craft but it’ll allow you to get by while the business grows. Not to mention, all experience is invaluable and often humbling, whether you’re washing dishes or not, you’ll appreciate that success that much more in the long run.
Key: No one’s too good to work two jobs, let the experience better yourself as a person. Do what you gotta do to make it work in the meantime and have the confidence in yourself to know you’re going to make it happen.
No. 5: Open to Change
Observation: Every business has it’s competition and when you enter the market you may know of your competition but more often than not your competition won’t know you. Don’t take it as an insult, but rather use it to your advantage. Keep your eyes and ears open. With the amount of tech start ups multiplying, services such as POS systems, e-commerce platforms and more are now readily accessible at lower prices than ever before. Thus providing platforms for small businesses, which previously never existed. The accessibility and convenience of these platforms to your business will translate through your business and to that of your consumers. Look out for these advancements for every time one is introduced there is the opportunity make your goods more accessible and ultimately get a leg up on your competition.
Example: If it ain’t broke don’t fix it…no. I love my Papa but in this rapidly moving industry it is sometimes too late to fix it and you have to be on the pulse at all times. Ford motors once triumphed the auto industry, introducing revolutionary model types and paving the way for the auto industry. But sooner than later Ford got too comfortable. What once made them special was no longer, they took their positioning in the market for granted and passed up on opportunities, which their competition then took for granted. Toyota put their emphasis on the automatic transmission, while Ford made comfortable money off of manual transmissions. Soon enough, Toyota made automatic transmission vehicles at an accessible price point thus taking a stronghold on the market while Ford was left scratching their heads. The technology market is a billion dollar industry, the apparel market is a trillion dollar industry and to me that says opportunity.
Key: No business ever made waves by replicating their competition. There are certainly comparisons to be made but at the end of the day the devil is in the details. Use your ingenuity to make the most of the marketplace and tools at your disposal. With proper use and management you’ll have the ability to create a level of accessibility, which may soon rival and eventually take over that of your competition. Accessibility is king, provide a level of convenience to your consumer others can’t match.
Do you have more helpful tips to starting a brand with low capital? Share them below!