Thursday, July 28, 2005

Let me count the ways....

7 key for a successful small business.... 1) A plan - Detail what market you are going after, your competitive advantage and how this is going to be received in the marketplace. Be clear that there are many other people who will do something similar to what you do, so what makes you special? Do you design better items with different features? Do you provide more value for each dollar spent? Do you serve an underserved market? 2) A knowledge of your customers - You need to know who your target is. As a wholesaler, our customers are retail stores, but by extension, their customers are also ours. We need to serve both and understand their different needs. Retailers need suppliers with good service and product that sells. They need low minimums and hassle free reordering. Most of all they need items that will sell themselves. Consumers need something they can use easily that add to what they are doing. 3) An understanding of product - You need to know what customers want AND what they need. It may not be obvious. Be a trendsetter, but not on the bleeding edge. That has been a hard one to manage in our industry since we have such tight cycles for new product launches, but it is important that we have something new at least every six months. 4) A marketing plan - Figure out where your customers are and go after them. It may seem simple, but it is not. As a wholesale company, do we go after consumers or retailers? Are we a push or pull marketing model? It is hard to say. In our industry, there are a few key influential magazines for consumers and a few for retailers. We cannot afford to do both. So pick wisely... We ended up doing a little of both, but focusing on retailers initially. We could not go full throttle on consumers until we had the footprint of retailers from which they could buy our products. Internet retailers help, but they cannot be the only distribution channel. Many customers need to be introduced to a product by touching it, so it is important they can do that at a local store. 5) A budget and financial goals - If you aim high (but realistically) you will push yourself to achieve it, so know what you want. But be specific. Know if you want to scale or make profits or grow a customer base. 6) A cashflow model - I remember reading in business school a case called "How to go broke while making a profit..." It talked about a business with lots of outstanding accounts receivable (net 30) while floating a ton of money for new inventory. If you cannot manage the cash in your business, either you need to have a huge investment pool or you need to limit your growth to a pace you can pay for. 7) A passion - You either need a passion for the industry, the customers or entrepreneurship itself. In B-school, I studied with a famous professor who advocated the "search fund" model. You raise a ton of money and buy a company, but you must be industry agnostic. Those folks had a passion for management and entrepreneurship. We built Maya Road because of our passion for altered and scrapbooking, and we knew we could bring unique and fun products to the market at reasonable prices. I have spent years studying and consulting for large companies, but at the end of the day, these ingredients are common to all businesses whether you are IBM or the corner store. In the days ahead, I will be talking more about my industry specifically and how we built this business from the ground up, but until then I leave you with this...
Find you niche and your passion and go with it.

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