Monthly Archives: November 2013

How do I scale?

So, you have your concept consumer tested – customers love it, but they are paying an introductory price or it’s your friends and family that are giving you the praise.

What next – well simple – more customers = more revenue = more profit.

If it was only that simple!

Typically decisions you made months ago come back to bite you – the biggest one in my industry is fresh versus ambient. It sounds simple – but when Diet Chef was purely a concept we spent a massive amount of time talking about how we would produce the product. We checked all market data and advice we could get and although I would love to have a freshly produced chilled supply chain – it was impossible to fund or scale.

Here are the problems:

  1. Margin – handling fresh ingredients requires you to buy daily and therefore you are linked to commodity price movements out with your control.
  2. Distribution – Moving the product from the producer to the end consumer is expensive. That’s why supermarkets are so successful. But you need their scale
  3. Price points – fresh has to be more expensive so will the customer pay this premium.

In the diet industry although consumers want fresh, they don’t want to pay the premium that it would require to make the same margin, so it fails.

This is the major challenge Hello Fresh, Gousto and Lifestyle larder face.

Crack it and you are onto a winner – but don’t use the “when we get scale” argument to show that your business model works – go back to the drawing board!

Most of these issues are linked to the fundamental margin you are making on the product – have a KPI and plan to show how you are going to fix this otherwise you are going to be a busy fool!

Cash kills Startups (or lack of it!)

So you have a great product, margin is good, marketing is flying but the world seems bad.

Every time you login to your bank account the number is getting smaller and smaller.

You check sales and they are going up – what is wrong with this business you say?

Simple, working capital cycle!

In the excitement of bringing your product to market you don’t spend long enough working on supplier support.

If you wandered in to see a Tesco buyer you wouldn’t expect them to whip out their chequebook there and then and order and pay, so why do you do this with your suppliers.

Even for businesses that I am involved in that have good access to funding or personal cash there always comes a point where you need more working capital.

So once you have ordered once or maybe twice from a supplier make sure you spend some time speaking to them about the route to credit. If you don’t ask you don’t get!