How does a small company go from introducing a new product to the market and take it all the way to profitability? This is a question that just about every new consumer products startup would love to know. Like many who have attempted this challenge, you are painfully aware that effectively navigating this process is one of the most difficult things for a small business to succeed at.
So how can a small business go from product to profitability?
Data and Track Records Key To Small Business Success
Taking a small business to profitability is challenging for the first time entrepreneur, as well as the seasoned business person. Knowing what not to do and more importantly what to do and when are crucial elements that are required in order to realize success.
What if there was a road map of experience and statistics that could help your business succeed? Now there just might be something close to that.
Recently research firm Longitude in collaboration with GSI US released a study that was the culmination of a survey of 513 leaders of consumer packaged goods (CPG) companies in the United States. The study included some 75% of smaller brands that had less than $1 million in sales in industries from apparel, food & beverage, arts & crafts, health & beauty, electronics, and home & garden.
Successful Small Brands Create A Product
In analyzing the research that Longitude released, it is apparent that many of the small brands that were interviewed place a significant emphasis on their product. It makes perfect sense that the product is where many small business brands get their start and where their focus and expertise reside. Solving a specific problem that they expertly understand is the genesis of how the new business gets its start, however, there are many additional skills required to taking a product and making it a successful business.
In fact, the study reveals some interesting information about why entrepreneurs start their company. Let’s run through the top reasons.
- 51% of companies interviewed said that their biggest motivation for starting their own business was to pursue their passion, ambition, or skill.
- 42% stated that they had a desire for financial independence.
- 38% wanted the opportunity to innovate/become an entrepreneur.
The Biggest Objectives Over The Next 3 Years
When these small businesses were asked about their top business objectives over the next three years they provided some valuable details that every new business should pay attention to. Remember, there were over 550 successful small business owners who were interviewed and their insights should be something that should drive your next steps as well. Respondents were asked to provide their top three choices.
Here are the top objectives that they listed:
- 45% said that they would diversify their product range to enter new product categories.
- 44% had the objective to become the top-selling product in their category.
- 37% wanted to change and/or influence customer attitudes within their industry.
- 34% desired to grow their sales through ONLINE channels.
- 33% wanted to grow sales through LOCAL channels.
- 28% had an objective to grow sales through INTERNATIONAL retailers
Improving Channels and Content
Growth leaders in business build diverse sales channels with clearly defined strategies for growth. Newer brands especially have to look beyond the startup pressures to investing in and understanding what and how to establish diversity in their sales channels that position them for growth in the future.
Growth companies tend to sell across all channels, while those who are laggers dabble in just a few. Here are a few channel decisions that distinguish small business growth companies from those who are lagging.
Selling via Their Own Website: Growth Leaders 73% – Growth Laggers 44%
Local Retailer: Growth Leaders 59% – Growth Laggers 38%
Online Marketplace: Growth Leaders 57% – Growth Laggers 16%
Tradeshow or Craft Show: Growth Leaders 51% – Growth Laggers 22%
A key point to make that the study pointed out related to sales channels is that 97% of those using an online
marketplace has recorded revenue growth in the past 12 months. Brands MUST find a way to diversify their sales channels and have a strategy that includes fresh marketing and content creation that supports the strategy and growth opportunities.
Developing Critical Partnerships
The final component that the study details is the critical issue of establishing partnerships. When you are an entrepreneur, doing everything alone works and as an important time for developing a product and getting the company started. But a key to growth is creating valuable partnerships that deliver additional knowledge, capabilities, and functions that you just can’t do by yourself.
Here are some of the key consumer product partnerships that you should be considering and the difference between growth brands and those who are lagging in their growth:
Barcode Services: Growth Leaders 47% – Growth Laggers 16%
Web Content/Marketing Provider: Growth Leaders 43% – Growth Laggers 18%
Business Advisor/Consultant: Growth Leaders 33% – Growth Laggers 10%
Software Provider: Growth Leaders 27% – Growth Laggers 14%
Marketplace-Specific Support: Growth Leaders 27% – Growth Laggers 22%
As a digital marketing firm that works with startup retail brands quite a bit, we cover many of the above partnership components that the study reveals as crucial for companies like yours. From content, marketing, advisory, and marketplace support roles, we help brands grow through proper strategy and online execution that puts your brand in a position of growth.
What are you doing to ensure your retail product brand is a growth company, not a lagger?