“We’re not sure about this”, “I don’t see it flying”, “It’s a lifestyle business, it can’t be scaled”, “I’m not convinced I’ll get my money back”, “It doesn’t look like a goer to me”, “Our marketing department doesn’t think it will sell”, “We’ve decided that it’s not for us”, …
All discouraging statements investors use when talking themselves out of a high-growth investment opportunity. Merciless declarations that pour cold water on an entrepreneur’s many years of hard work and enduring hopes.
Of course, it’s an investors prerogative to refuse a request for any number of reasons. But in this process, it means some genuine investment opportunities are rejected on a mere hunch. Often, sadly, those innovations will die simply because the entrepreneur or inventor runs out of steam and money.
It’s The Economy, Stupid!
About eight years ago, I was sat in the boardroom of a prestigious German company. I’d gone with a client to meet top executives of a £15 million+ turnover business. It was an impressive business with plush, top quality offices. They were a perfect investor for my client.
In this case, it was a seasoned inventor with 30 odd years’ industry experience. He always insisted on arriving in a borrowed luxury car in the belief it created an ambience of success. To enhance the picture he was smartly suited, sported a fresh haircut and was impeccably clean shaven.
And his proposition was a good one. If the German company had taken his DIY tool product they could have manufactured it up to 40-60% more cheaply. By mobilising the company’s distribution network, research indicated the product could sell between 4,000 and 7,000 units a month in the UK.
The margins were great. It would cost them less than between 1- 3% (including packaging), more than the inferior product they currently distributed but with much greater sales potential. “It wouldn’t make a dent in their purse.” he said, and he was probably right.
And yet, the company decided not to take up the proposal. After three agonising months of deliberations, with requests for ever more technical information and consultations with their marketing team, they passed. We were disappointed but not surprised. Still, so much wasted effort for very little result.
The worst part is we were not told exactly why they didn’t invest. We speculated that in the period following the Global Credit Crisis of 2007 – 2008, maybe they were concerned about the economy at the time. But here was still significant investment activity across the industry, so this couldn’t have been the sole reason.
Alas this was not an isolated incident. Between 2008 and 2013, I met two or three small business owners each year who encountered similar challenges. We sat in meetings together. We gave well-researched presentations. We attended numerous workshops, some supported by recognised public bodies such as Innovate UK. We wrote hundreds of letters, all with little result. It was inefficient and time-consuming. And I doubt it was worth it.
One client who had invented a brilliant product for use in the haulage industry told me of an encounter he had with a huge firm which owned over 2000 trucks. If adopted, the product had the potential to greatly reduce spinal injuries, which are common to drivers of heavy goods trucks. “They didn’t want to buy it from me… I sat in a meeting room with five of them, and they told me they liked the product, but that they couldn’t buy it from me.”
“You’re too small, they said.” Small, it seems, isn’t always beautiful.
But we did learn something from these encounters with inventors and investors. They helped us to create a blueprint that SME innovators can follow in the pursuit of their ideal customer base.
And it is with Sanrixa that we are now supporting our clients with these strategies.
To grow a small company from the ground up, the growth strategy may use unconventional methods to reach customers. And with modern technology the barriers to success have been hugely reduced.
For example, if you can’t get your product into a retail outlet such as B&Q or Screw Fix maybe you should start selling online. On platforms such as Amazon. At least initially.
This cuts out the middle man and puts you directly in front of your customers. Sure, the reach maybe lower but improved margins can make up for that. In this case, a large part of the challenge is your capacity to quickly learn the effective marketing techniques that promote success.
The good news is we’ve helped several high-growth opportunities to incredible and profitable runs on platforms such as Amazon, often achieving higher profit margins per item, than if they had partnered with a middle-man.
But such platforms are not for everyone and cannot be used for all kinds of products.
Joint Venture Partners
If your company is designing software for use in the FinTech sector, or you are making an accessory for use in leisure boating, online may not be the ideal outlet. A specialist sector event or even an industry magazine may be a better fit.
Pitch your product where your customers congregate, and you get to understand their needs. Maybe there are certifications, or legal requirements your product needs to comply with. Then the first line of attack becomes: ‘We have this certification’, or ‘We use that industry standard…’ This makes a huge difference in how you’re perceived.
These days it’s so much easier for start-ups to find people to collaborate with. Start-up accelerators, Co-Working Spaces and Angel Investment Networks are all readily available for you to meet like-minded people who may be potential joint venture partners.
Often these partnerships will have synergies which weren’t anticipated but can strongly propel your business forward. Building a successful small business doesn’t always have to be about going it alone.
Like it or not, whatever the product, most entrepreneurs are in the business of marketing. If you can’t sell your offering effectively, it will struggle to fly.
If you are only talking to 100 people, that’s how small your potential market will be. For many products, your business needs to be appearing in front of 10,000+ people. The trick is to find cost-effective ways which maximise your exposure.
Of essence is learning how to prioritise your resources towards the marketing tools that have a proven record of reaching your core customer base. The good news is there are many options available that provide the intelligence, and automation, and which can help small business to get in front of their ideal customers. For example, if you sell your products or services online, tools like HubSpot, Ahrefs and Buzzsumo, can help you customise your marketing to reach a lucrative audience quickly and effectively.
Sanrixa – Experience Counts
At Sanrixa we specialise in working with start-ups and small businesses with pioneering product ideas to create, develop & protect innovations, helping them effectively exploit their ideas. We develop bespoke solutions for our clients and assist them to build partnerships that maximise their reach, impact and success.
Visit our website here to view our list of services. If you need help, call today to discuss how we can help you bring your innovations to a large and receptive audience.
T: 0800 634 6590 E: firstname.lastname@example.org
Sang Nkhwazi is a Technical Director at Sanrixa.