An excerpt from Jules Pieri’s book, “How We Make Stuff Now”
Grommet Makers enter their businesses with wildly different ambitions about growth. Some never intend to leave their day job but want to have an engaging side hustle. Some Makers know from the start that they plan for their first product to be a springboard to a full-time endeavor and sustainable business. Others hedge their bets with a “wait-and-see” attitude.
Because the obstacles to growth are unique to every company and the ambitions of the founders are equally diverse, there are few universally true growth hacks. But for the Maker looking to scale, cycling through the below pool of options is a productive place to start.
Create New Products
This scaling option is equal parts necessary, expensive and fun. It’s fun because the joy of creating products is why you get into this business in the first place. It’s expensive, in the same way developing the original product was. It’s necessary for a host of reasons: to stay ahead of the competition, to command more shelf space and thus open up retailer doors, to create more scale in the business to cover your fixed costs. Twice the products to sell can mean twice the revenue.
Here are a few ways you might think about product line extensions:
- Good, better, best. You might consider “knocking yourself off” to pre-empt competition and to have an appropriate value/price point for various tiers of retailers.
- Adding SKUs. For some products, adding additional SKUs is the fastest way to create an engaging display at retail.
- Adding related products. Ideally you will have anticipated a full line of products right from the start so that your company name and visual identity can easily accommodate line extensions. This is harder said than done, as so many Makers start with one genius problem solver and do not foresee “what’s next.”
- Building exclusive SKUs. [O]ne of the most powerful tools to increase a retailer’s purchase order is to offer them an exclusive range of your product.
Some Makers take their product to a limited point of development and then license their intellectual property to a larger company. [I]n virtually all categories of retail, the large players who have a private-label business are actively engaged in licensing IP. Tradeshows are the fastest and least expensive way to get a face-to-face meeting with a potential licensor. Outside trade shows, identifying the company matches and the right person at the target company will require research. Contact the legal department (they handle the backend of these contracts), and they can refer you to the appropriate person/team.
Typically, Makers who gain a successful license have begun to produce their product and have gained some distribution before a licensing deal will be struck. The licensor will quite often redesign and re-engineer the product to take out costs or improve its commercial appeal. They will take over its manufacturing and usually give it a new brand identity. The Maker thus puts the future of their product in the hands of the licensor.
Successfully licensing a product can open doors to similar future licenses, and some Makers happily stay in the realm of “serial inventor” rather than business builder.
Hire an International Distributor
While Makers are highly variable in their use of reps for sales in their home country, it is the rare Maker who does not engage an international distributor. These distributors are dedicated to one or many countries and have retail reach that a Maker would have a hard time accessing on their own. The contracts can be exclusive or nonexclusive on a country-by-country basis.
Key questions to ask an international distributor include:
- Which brands do you represent, and what are the sales volumes by country?
- Where do you sell these products?
- What are the minimum sales volumes I can expect in XYZ country?
- What support do you expect from me?
- Will I get paid at time of shipping my goods?
- Ask for an example engagement contract (and get good counsel on term and termination).
In terms of finding an international distributor, a good place to start is with the federal government. David Archer, president of International Business Trainers relates, “[T]he Department of Commerce's International Trade Administration, through its U.S. Commercial Service, operates a network of 107 Export Assistance Centers in major cities across the country. The export and industry specialists employed there can help you find appropriate distributors in your target markets.”
Low(ish)-Cost Marketing Initiatives for Scaling
[S]ome options for building the business become a bit more viable with growth.
- Hire a PR firm or consultant. A public relations firm is an expensive option … expect to pay $5,000 a month. But a part-time independent contractor can take on your PR outreach work for a fraction of the cost.
- Build a content machine. [G]enerally speaking, content pros are affordable and a great move as soon as you can contract them. Just make sure their content execution is tied to the SEO goals you have established for your business so that the content really does drive inbound traffic to your site or to the retailers who stock your product.
- Set up an ambassadors program. Once you have a bit of bulk in your customer list, there will be fans of your company and products who will be natural candidates to become volunteer spokespeople and amplifiers of your mission. This effort is a cousin to a perks/rewards and referral programs. Rewards and referrals are especially effective for a business which expects a frequency of purchase.
If you have a business that is already scaling with a clear path to profitability and an attractive set of options for an exit, taking on equity capital could become a viable choice. However, the most frequent way Grommet Makers do this is with a series of crowdfunding campaigns. These campaigns are spaced out in terms of years, not months, and require a level of attention and focus that makes the funds anything but free money.
Double Down on Retail Distribution
Beyond building your wholesale business via reps, distributors, exclusive products and tiered good/better/best product extensions, there are three other routes to building your retail footprint.
- Pop-up stores. Holiday markets are one traditional expression of this opportunity. On a more year-round basis, LovePop has created a network of kiosks in train stations and malls where customers can touch and feel their products and be constantly updated with new designs. There is a whole industry forming to fill the excess retail space across the U.S. In addition, real estate companies building and managing mixed use developments are looking to enliven the streetscape of their projects and local areas.
- Established retailers have started to capitalize on their foot traffic and real estate locations by renting space to brands.
- Your own stores. Examples of DTC companies expanding into physical retail are rampant. While on the one hand I am convinced of the brand-building benefits of these shops, these companies tend to also have deep bank accounts funded by venture capitalists so the economics of these stores may be quite warped by that unusual condition.
Scaling is, by definition, a never-ending activity for the business.
My own playbook for figuring out the next moves for The Grommet is largely based on continually asking people in my network what is working for them. The problems of scaling are universal, but the solutions can be quite creative. In a fast-moving world of marketing platforms, technologies and shifting consumer behaviors, we can easily miss trends and opportunities. As a CEO, I find myself heading out to events with a general sense of dread and “I am too busy for this” and almost 100% of the time come back with a new idea or important contact. I have learned to trust the universe and the likely benefits of these efforts.
And sometimes – the best times – the real magic happens when you just try something that you haven’t seen anywhere, and that novelty or special arbitrage opportunity puts unexpected wind in your sails, and you ride that condition as long as you can or until others discover it.
This article is an excerpt from Pieri’s recent book, “How We Make Stuff Now.” For more information, visit howwemakestuffnow.com.
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