Vancouver-based Tilano Fresco, manufacturer of a diverse line of decorative tile-making kits, offers artsy craftsy people a new play on the old-world art of "fresco". Each kit provides buyers with all the supplies and instructions needed to personalize their project by transferring their photos onto a decorative fresco tile, marble coaster, glass, or canvas (depending on which type of kit is purchased). Because Tilano Fresco's products are not quick and easy to describe to customers, the company has had to figure out less traditional, creative marketing strategies to engage their target audience. www.tilanofresco.com
Vital Statistics:
Location: Vancouver, BC
Number of employees: 7 full time, one part time
Retail stores carrying products: 3,500 in North America, 85% of these are in the US
Years in operation: since 2002
Annual revenue growth since inception: The business quadrupled in size in its first three years. The company then experienced a plateau — in part because it stopped being progressive. The owners are now focused on taking the business to the next level.
Product line description: Currently there are six core products. The company is releasing its largest number of new products this fall, including five new products.
Many unique businesses have discovered the hard way that, in the marketplace, the flip side of being innovative is that people don't understand what you're selling.
For a unique business like this, the million dollar question is: how can I explain my products or services when they are outside of most people's realm of conceptualization?
The answer is not that complicated. As I've seen in my experience working with many companies like this, the most effective approach is to find and nurture a community of enthusiasts who are proponents of what you're selling. You need to identify exactly who these people are and to let them know how much they need what you're selling.
Assuming you have something people need and want, finding the first batch of influential enthusiasts will lead to a chain reaction, well described in Malcolm Gladwell's best-selling, The Tipping Point. Gladwell does a great job of showing how the most effective way to promote a new business, product or brand is to become adopted by a group of trend-setting influencers who become fans of your business, and essentially are able to do your marketing for you. Of course the theory is easy. The real challenge is in its practical application.
Case in point - Vancouver-based Tilano Fresco, manufacturer of a unique line of decorative tile-making kits, quickly discovered at it's inception in 2002 that it was selling a product line the mass market didn't really understand or relate to. Based on this realization, the company decided to investigate and leverage its early market adaptors to determine exactly where it should be marketing and how it should be marketing.
Explains Randy Orr, Founder, Tilano Fresco, "We knew we needed to focus on people who did get what we were doing, so we honed in on a community of creative individuals already engaged in "arts and crafts" in various forms. There already were enthusiasts out there who shared our values. We tapped into the community of scrap bookers/designers- people who essentially are looking for creative ways to create art that incorporates their personal lives, and adds to their décor. Over the past several years, this initial group of adaptors has been the leverage that has introduced us to and helped us discover new communities of people who are looking for products like ours."
Finding innovative ways to leverage the creativity of enthusiasts has become the foundation for this company's marketing plan. Its initial product enthusiasts have developed into a cult-like following; these people sign up for product updates online and share anecdotes and pictures of their fresco creations. Tilano Fresco has developed marketing strategies that offers these VIP customers free products in exchange for rights to use the pictures/images of exceptional creations (judged by staff). The results of this competition demonstrate to potential customers the extent of what can be done with Tilano Fresco products. Consciously or otherwise, by personally engaging with its customers, the company has strengthened its brand loyalty as well.
Tilano Fresco has also successfully "personalized" its marketing approach with large-scale buyers.
Explains Orr, "Because our product starts out essentially as a blank kit, people need to see a personal connection to visualize just how effective the end results can be. When we introduce the product to buyers, we personalize the kits with corporate logos. And we do the same things with product demos at trade shows and on interviews. Like on Vicki Gabereau Live, I created a decorative tile with a picture of her Labrador Retriever. She loved the result and was touched at the sentiment behind it. The emotion and surprise viewers saw on air demonstrates exactly what people value about this product and why they would want to give it as a gift."
The case of Tilano Fresco illustrates several lessons that any business should consider, when trying to generate interest in atypical products or services:
Investigate unique marketing channels that connect with your niche market
If you're trying to identify and reach a unique target market, ask yourself: where are your customers? Do they go to fitness clubs? Do they read industry journals? Are they part of any on-line communities?
Your objective here is to catch your potential customers in a location where they will be receptive to your message and recognize the ways you could enhance their personal interests.
When you find appropriate niche communities, get creative about ways to help them recognize the ways your product will enhance their special interests. Nowadays there are discussion groups and clubs, and corresponding magazines/publications, for every type of niche interest group.
The internet has become the great enabler in this regard, with its seemingly ever-expanding set of communication tools, such as Blogger, YouTube, Facebook, and so forth, not to mention a plethora of on-line special interest groups.
In my experience, nothing helps you establish credibility more than an honest exchange of ideas. So make your customers feel important by communicating directly with them, and most importantly, giving them a chance to communicate with you as well.
Develop as clear a message as you possibly can
Part of reaching your market involves developing your product messaging as clearly as possible. This can be a bit of a process, so ask for critical feedback and expect some fine-tuning to be needed.
During this process, remain receptive to any part of your message that confuses people. Use language that is simple and encompassing and fosters key elements that people will find personally relevant. If you have a product like Tilano Fresco, which requires explanation, the challenge is to come up with a succinct marketing message.
Pictures are a great way to help get your message across when a product line isn't simple to explain. They really are worth a thousand words. Throughout this process, continuously ask yourself why you are the best choice for your potential customers. Even when they don't have any obviously direct competitors, we find our clients benefit tremendously by understanding what sets their businesses apart from other similar options.
Once you've developed your main product message, you can then expand on this original statement, apply creativity to get your message noticed, make your message memorable, and drive home your message by hitting the emotional triggers uncovered by your customer feedback mechanisms.
Engage with customers based on your core values
How this is done varies depending upon the company.
Tilano Fresco has learned how to play upon elements of its products that most reflect the core values of the company- creative, artistic, decorative, and quality/history. The company has learned that the personal element of the product must appear relevant and tangible to the customer. It wasn't until they made this connection that sales really started to take off.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
Previous Case Study: Dinner Works
Description: Vancouver-based Dinner Works provides a place where busy people can prepare quality, home cooked meals without the hassle and mess of grocery shopping and cooking at home. Customers choose from an assortment of dinner choices, prepare their meals, and take them home to heat and serve later. A wealth of market research along with a business-finding trip to the United States inspired the owners to open shop in Vancouver's trendy Kitsilano in February 2006. They face a slippery challenge as they try to determine how to reach out to an elusive target market and capitalize upon what appears to be an emerging industry trend.
Vital Stats:
Location: One corporate location in Kitsilano, Vancouver; one franchise in Abbotsford, B.C.
Number of Employees: Three full time owner/operators; one part-time owner operator; two on call casual labor.
Revenue Growth: A rocketing start — the company broke even in their second month Revenues have doubled since then.
Primary Market: The primary market has been the US, but Canada is now rapidly growing. The first easy meal preparation store has opened in Australia. Stores are expected to open in the UK and other parts of Europe in the near future.
The ever-important question of "what's for dinner?" has inspired yet another new trend. Dinner preparation businesses are popping up at break-neck speed across North America. But unlike fast food, take-out, or frozen entrees, specialty dinner preparation centres provide quality, gourmet, home-cooked meals prepared on-site by customers themselves who aren't interested in shopping for groceries or messing up their own kitchens.
When the owners of Vancouver-based Dinner Works, first discovered the idea back in July, 2005 there were approximately 250 of these new outlets in the U.S. and only four in Canada. The door was wide open for entrepreneurs seeking to capitalize on this new trend. Today there are approximately 1,420 of these businesses worldwide, 39 located in Canada.
Like any new trend explored by daring entrepreneurs, it's important to determine if the trend will last and to clearly identify the factors involved in reaching and engaging market demographics, likely not yet even familiar with the trend. Canada has been accused of being slow on the uptake, and in the dinner prep industry, this appears to be no less true.
But Chris Roscoe, Owner/Operator of Dinner Works is convinced that the dinner prep industry is a promising trend: "The reason for our initial confidence in this came down to practicalities. My wife and I were visiting a busy mom in California who had great meals on the table every night- even though she was run off her feet. Her secret was that she and her girlfriends went to a large U.S. franchise dinner prep centre called Dream Dinners, to make 12 meals each every month.
"At the time, we were looking for a new business to start and this seemed like a potentially very profitable industry with high consumer demand. We began the market research process and developed our business from there. We chose to open on the West side of Vancouver where we knew we would have a large and affluent customer base."
Some might wonder at first, who would want to pay to go somewhere outside of their home to prepare dinners, package them up and then take them back home to cook fresh and serve. Why not just visit the frozen dinner aisle at Safeway? Or pick up sushi?
According to the Easy Meal Preparation Company of Cheyenne, Wyoming, "Customers who are drawn to dinner preparation centers live a busy lifestyle, often with little time or energy to commit to the evening meal. They must often make last-minute dinner decisions that minimize nutritional value and all but eliminate quality time at the table. While income is a factor, the premium that these customers place on time makes it less so. These customers also appreciate the high cost of labour, as well as the benefits of wholesale buying."
Statistics estimate that approximately 70% of families represent potential customers for this industry. From an income perspective, this provides a huge and impressive market to entrepreneurs like the Roscoes.
"We have a wide variety of customers but the vast majority are working professionals with children. Our customers share the common element of being time starved and they want to have good food that is easy to prepare. We get the full spectrum of people that cannot cook to people who are very good cooks, the latter are even more "insulted" by fast and take out food. Some people use our food for entertaining and most use our meals for every day of the week eating."
The main obstacle Roscoe faces is finding a way to explain the concept to people.
"Because this still a new industry, and quite different from anything else out there, we've found conventional marketing like advertising has been almost useless for our business. Instead we have a PR person who promotes us to the media. PR has brought in the majority of our business, as well as word of mouth referrals and incentives offered to individuals seeking to host private parties at our facility."
Every new business venture is a risk. But the risk is perhaps amplified for those who decide to pursue ideas not yet readily grasped by the mass market. If you are considering a trendy new business opportunity, the following are a few ideas to consider before you get started.
1. Clarify your target market.
A clear understanding of your target market is important for marketing any business, but it is absolutely critical if your business is in a trendsetting category. Start by getting to know your "early adopters". Who are they? Where do they live? Where do they work? Your early adopters are the people who are ready to try something new and who love to tell others about it. They are the key to getting your new business off the ground. Dinner Works is no exception. Roscoe confirms that the success his business has enjoyed so far is largely attributed to referrals and word of mouth traveling rapidly among groups of trendy, like-minded people in Vancouver.
2. What will the masses think?
You need to take some time to imagine what your business will look like as it grows. When your trendy new business category is adopted by the mainstream, what will your expanded customer base look like? How might they be different from your early adopters? Will they use your products or services in the same way? This type of strategic thinking will help prepare you to stay on top of your industry as your market begins to expand.
3. Focus on the media.
When a business concept is new to the marketplace, advertising can loose much of it's effectiveness as a marketing strategy. A big reason for this is that you are asking people to take your word for something they know very little about. Unfortunately, consumers don't typically see advertising as a trusted source of new information.
On the other hand, new trends make for interesting news stories. So the press is often quite happy to tell your story for you. The bonus here is the tremendous inherent value of the third party endorsement, not to mention the fact that it is essentially free.
4. Be financially prepared.
Because they are untested in the marketplace, growth patterns of trendsetting businesses can be somewhat unpredictable. A trend-focused business can take a little longer to catch on, or it can take off like a rocket as you ride the wave to success. Either scenario, however, has the potential to hurt your cash-flow. For this reason, it's important to have fairly strong cash reserves when embarking on a venture of this nature.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
Previous Case Study: Kin's Farm Markets
Description: Vancouver-based Kin's Farm Markets, retailers of fresh and specialty produce, have used a variety of growth strategies to grow their business from one to over 20 locations over the past twenty years. Armed with the guidance of a strategic advisory team and tons of first hand experience, the company is now venturing into the world of franchising as a tool for taking their business model national.
Vital Stats:
1. Location: West Coast, expanding to Toronto
2. Launch date: 1987
3. Number of Locations: 22
4. Number of Employees: 600
5. Annual Sales: $55 Million
Kin's Farm Markets is a household name in Vancouver, with annual sales of over $55 million, a network of more than 20 stores throughout the Lower Mainland, and plans to expand across the country. But this wasn't always the case.
The company began as a one-table produce stand at the Granville Island Public Market in 1983. The owners, two brothers recently moved from China, didn't speak English and had no business network to leverage. Yet their dream for a successful business grew into a reality. So what sets Kin's apart from the scores of other business that start small and dream big?
According to President, Kin's Farm Markets, Kin Wah Leung, a commitment to learning has been a big factor in Kin's success. "We had the objective of getting our business to a place where it would not only be successful, but would pretty much run itself. We wanted to grow and we needed to learn how."
When Kin's signed on as a client of ours in 2004, they were remarkable from many other clients we've worked with in that the owners didn't shy away from the substantial amount of work required to get their business in the shape they wanted it to be. They were enthusiastic about the strategic roadmap we created together and they continuously met targeted objectives. Their plan is to expand to 50 stores by 2010 and develop a fully functional franchise model.
"We are now at a point where we feel ready to take our business to the next level and we believe franchising is the logical next step for us," says Leung.
For many businesses seeking growth, franchising can be a good option, but as I tell many of the businesses I work with, it's not a simple solution. The process of turning a business into a franchise requires careful consideration of several key factors. Typically, a business decides to franchise when they reach a point like Kin's Farm Markets where they have experienced success in more than one location and are looking for a systemized method of growth. Franchising can indeed be an effective growth strategy, with fewer of the typical cash-flow challenges associated with rapid growth, once you are up and running. However, several factors need to be carefully considered before determining if it's the right growth model for your business.
Factor One: Consider Your Growth Model Options
To determine whether franchising is a good growth model for your business - or if there are other more suitable options- start by considering the following:
• Is your business duplicable? Can it be packaged into a duplicable model? This is best assessed if you already have more than one location in place.
• Is your business unique?
• How much direct control will you need over your business processes?
• How much of your business relies on your personal expertise? If your business works only when you are there, it's not likely ready for franchising.
• What type of individuals will you need in leadership positions as your business grows?
• What kind of cash requirements would rapid growth place on you?
Other growth models to consider include licensing, partnering, adding corporate branches, or simply growth-in-place, to name just a few. Depending upon the type of business you have, you might even consider using a mix of growth strategies, as opposed to just one. In fact, Kin's did this by opening a combination of corporate locations, partnership locations, and more recently, their first two franchise locations.
The decision to use one strategy over another will be impacted by a number of factors, including, but not limited to, your cash position, the pace at which you wish to grow, the type of people you want to attract, and the amount of control you want to have over your organization as a whole.
Factor Two: Capacity for Documentation and Systems Implementation
To be effective, a franchise business should have all of its systems and processes documented in a franchise manual. Essentially, a franchise manual becomes the operating manual for your business and it's a big part of what your franchisees will be paying for. This manual is usually developed to include detailed instructions for running all aspects of the business, including human resources, accounting, production, marketing, sales and everything in-between.
According to Joseph Adler of Hoffer Adler LLP, a Toronto based franchise lawyer, "Franchise Manuals are critical to the success of any franchise system as they serve as a hands-on instruction guide for franchisees and provide franchisors with an easy way to adapt the franchise agreement to the current needs of the system."
Factor Three: Training and Support
Franchise manuals are one thing, but consistent implementation is another. Therefore it's important to have a comprehensive training program coupled with ongoing support. In the case of Kin's, they provide their franchisees with a one month training course, two months worth of hands-on training, and thee months worth of on-site coaching and support.
The amount of training provided to franchisees will vary with the complexity of the business model, of course, but almost never can a franchisor provide too much.
Factor Four: Able to do Homework
Part of owning a successful franchise is related to the franchisor's ability to do some homework- in other words, to be resourceful. It's important to get to know other franchisors and franchisees to get a clear understanding of what the process of franchising will look like for a business like yours.
For example, the Leung brothers spent considerable time getting to know the owners of Cobs Breads, a rapidly growing franchise that's been opening locations in Canada at a rate of nearly one a week. "As a result", says Leung "we have spent considerable time streamlining our operating procedures, making them as simple as possible for our workers to follow."
Joining the Canadian Franchise Association (CFA) is another way to stay abreast of relevant, franchise-related information.
Factor Five: Get Professional Help
Franchising brings with it its own unique set of challenges, so you may need to change up your professional help a bit. Start by getting in touch with a recommended Franchise Lawyer, consult a Business Advisor with franchise expertise, and make sure your Accountant has experience working with franchisors. Most importantly, introduce your new team of professional advisors to each other, because you'll definitely want them all working together for you.
And finally, if you do become a franchise, you'll need a paradigm shift. You no longer sell widgets; you sell businesses that sell widgets. As you proceed with a new understanding of how to market your franchise, consider strategies that can incorporate and benefit all the franchises you represent.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
Case Study: Spectrum Skatepark Creations
Description: Vancouver-based Spectrum Skatepark Creations Ltd. specializes in designing and building innovative concrete skateboard parks. Spectrum's reputation for creativity and uniqueness is what sets this company apart from its main competitor, New Line, a larger company with a longer track record and a more traditional approach to designing parks.
According to landscape architect Jeff Cutler of Vancouver based space2place, skatepark development is a five to seven million dollar per year industry in Canada. And in this tightly competitive industry, Spectrum is struggling to compete against a more established competitor while staying true to a vision for creativity in skateboard park development.
Vital Stats:
1. Location: North Vancouver, B.C.
2. Launch date: 1997
3. Number of employees: Three in the office, plus their construction team of roughly 20 (one outsourced company they work with on all projects)
4. Number of skate parks built to date: 60
5. Revenue Growth: Has doubled over the past year
When a business services a niche industry like skatepark building, there are bound to be some specific challenges.
Jim Barnum, owner of Vancouver-based Spectrum Skatepark is all too familiar with unique challenges. The hurdles began the moment he pitched the vision for his first community skatepark to a municipality in Vancouver, BC. While communities tended to resist skateparks at that time, they have since become almost ubiquitous recreational sites across Canada. Barnum no longer needs to sell the idea of community skateparks. The issue now is to demonstrate how his particular designs are set apart from the competition. Especially because almost 100% of the projects Barnum bids on are also being pursued by New Line.
"My challenge is to differentiate our work through the actual project bid. It's a tough challenge for us because New Line has more projects completed- which means a better track record. Because we're working with municipalities, which by nature tend to be conservative, we have a disadvantage in that we aren't the most normal and mainstream choice. When we win bids it's often because the community values something unique."
Metro Skatepark in Burnaby, BC, for example, has three distinct signature features that act as identifiers; the "Rock Gap", which consists of two boulders excavated onsite, the "18-foot Bonsor Pipeline" fullpipe, with its cantilevered roof deck and access stairs, and the "dual steel Sunshades" between the street and bowl sections. Together, these signature features ensure that the park is unique to its community, and is readily identifiable as Burnaby, B.C, Canada when featured in the media. This helps instill pride in the local skateboard community.
Popular skatepark internet message boards testify that Spectrum has indeed developed a solid reputation among skateboarders for unique, creative parks and pushing the design envelope. These same boards note that the designs of Spectrum's competitor appear sometimes to be very similar or "cookie cutter".
Spectrum and New Line both base their design fees on Architectural fee guidelines: a percentage of construction costs, so competitions are based on the quality of their proposals, their track record, methodology and past projects. A standard community skatepark might be around 10,000 sq. ft and cost around $300,000 to $350,000.
Expansion planning is a big part of the skatepark building business. Spectrum says there is at least 10 years of work left in Ontario, estimating that BC is getting closer to a saturation point, though there is still room for many parks in the GVRD. When a "saturation point" approaches, the company will focus more on the maintenance of completed projects and additions needed.
Spectrum has chosen not to work on projects in the US, on the advice of their legal team, North Shore Law, cautioning that the high possibility of devastating personal injury lawsuits is not worth the financial risk. However, the company has recently been approached by teams overseas including France, Dubai, and Israel. Barnum is in the process of pursuing these opportunities with the advice of a strategic advisor. He is looking to partner with a financial backer and go international.
A company like Spectrum provides an illustrative example of several key factors that every business needs to consider in order to effectively set itself apart from the competition. When the competition is close, as Barnum has described above, attention to these details is critical.
Lesson One: Differentiate
Every business needs to have a clear understanding of why and how its products and/or services are different from the competition. If you can't answer the following questions, you most likely aren't competing as effectively as possible.
1. Why should my customer buy from me, rather than my competitors?
2. Operationally, what can I do better than any of my competitors?
3. How can I make my unique market position obvious to the marketplace?
4. How can I maintain my position as a market leader well into the future?
To remain competitive, it's important to periodically review the answers to these questions. The goal is to continuously understand the unique place your business holds in the market and what sets it apart from the ever-changing competition.
Lesson 2: Have a plan B
Having a Plan B offers protection against the impact of economic shifts in the marketplace. And these can be particularly devastating when the market niche is particularly limited, as seen in the case of Spectrum.
For example, in the skatepark industry, a well publicized injury and/or a serious lawsuit has the potential to significantly impact the willingness of municipalities across the country to build skateparks at all. If this were to become a negative trend, it could drastically impact the future of Spectrum's business. Exploring the globalization of his business (plan B) reduces Barnum's risk of being dependent upon one market.
Being competitive requires that a business project well into the future and develop a plan that looks ahead to potential business markets and expansion opportunities.
Lesson 3: Act fast
When the competition is stiff, the importance of moving quickly on opportunities and development cannot be overstated.
For example, when partnership options come up, get advice quickly and move on it. When a request for proposal (RFP) is available, act on it immediately. If your design team suggests something innovative, be the first to try it.
Acting fast is one of the ways Spectrum has grown successfully and stayed true to its mandate for building the most innovative skate parks.
The best way for every business to do this is to develop a strong network of business experts, before you need them. Surround yourself with the best of the best. So that when you need to make a critical decision or take advantage of an opportunity you have a go-to person already lined up and ready to help.
Niche businesses can be risky. But with the right strategy, the risk can be mitigated, leaving you with a fast, exciting business. Or, like Spectrum, a half-pipe dream come true.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
Previous Case Study: Babylicious
Description: Vancouver-based Babylicious specializes in hip, modern baby gear collections ranging from bedding to bibs. Rapid growth over the past two and a half years has challenged this small business to expedite significant structural changes and to quickly raise a substantial amount of financing in order to meet retailer demands for Babylicous products.
Vital Stats:
1. Location: Vancouver, BC; manufactured in China, warehouses in BC and the US.
2. Launch date: January 2005
3. Number of employees: 8; currently looking for 4 additional staff
4. Number of Retailers: 350 in North America
5. Revenue Growth since inception: 400%
Rapid growth sounds like a good thing for any small business. But when a small company finds itself in hot pursuit of the mass market, the results are usually sink or swim. According to Stats Canada, approximately 20% of new businesses fail within their first year of operations. This number increases to 45% within the first three years of operations. Why so bleak? Typical culprits are weak management skills and an inability to manage finances. And these factors become amplified when a small business suddenly finds itself needing to grow quickly to meet product demands.
Vancouver-based Babylicious launched its line of colourful baby gear just over two years ago. Within its first year of operations, owner Tina Barkley found the demand for her company's products almost more than she bargained for. Barkley expected $75,000 in her first year, but got $250,000- these figures more than quadrupled in her second year. Suddenly, she was faced with immediate financial pressures related to massive increases in inventory needs. She also needed to find an appropriate warehousing facility and to streamline her shipping system to meet the demands of a growing list of customers.
It sounds like a dream come true, but the sudden influx of business also put a lot of pressure on this small business.
"We hoped for success and expected people to like our products, but we didn't anticipate the ripple effect that sudden popularity would have on the structure of our business. Suddenly we found ourselves face to face with two main challenges: A whole new level of financial pressure and a sudden need to warehouse our growing inventory and find a way to ship our orders more effectively."
As a privately funded company, Barkley sourced some urgently needed cash by approaching a personally-recommended venture capitalist, Brent Holliday of Greenstone Partners, who Barkley touts as "realistic, incredibly smart, and knows corporate fundraising inside and out." This particular VC's experience as a businessman and his knowledge of market values and investor personalities gave Barkley the assurance and guidance she needed to work with interested financiers. Barkley used her personal network of business contacts in a similar way to locate a warehouse that would agree to work with a business of her size.
"This was something I had no clue about. My sales manager Jamie Hampson and I initially started fulfilling orders ourselves out of a small space located in Vancouver. Within four months, we realized our only solution was to outsource to a warehouse. But finding a warehouse that would agree to work with a company of our size turned out to be a major challenge."
Two and a half years later, Babylicious has already beaten the odds and is well on its way to becoming an institution in the world of baby gear. Here are several lessons learned that apply to any small business facing rapid growth.
Lesson One: Join a 12-step Group
Just kidding, but you do need to have a solid understanding of the support group you'll need to take your business to the next level. Your supporters— your advisory team, financiers, Board of Directors, management team, as well as your business and personal networks— will help you ride the challenges you'll face, especially during times of growth.
When you develop your strategic growth plan you must take the time to ensure you have buy-in from key stakeholders. In the case of Babylicious, Barkley continuously consulted with her investors and her advisory team in this capacity. As a result, she was better equipped to meet unexpected challenges like sudden financial needs. Her support group was on board.
Unprepared business owners can find themselves in perilous situations that could have been avoided, such as an influx of orders threatening to outpace the company's ability to fulfill them, or not enough cash on hand to maintain a rapidly diminishing inventory. It's much harder to address situations like these after the fact than it is to invest a little time into your strategy up front. Recent technologies such as on-line shopping mean that a business can literally become an overnight success, but only if it's properly equipped to meet the challenges that come with instant popularity.
It's also very important to know who you can leverage for resources. Time and time again I meet business owners who have found their solutions through their personal and business networks. Babylicious owner Tina Barkley is no exception, her networks served to provide her with the answers to her two most pressing issues- financing and warehousing.
Lesson 2: Know your business and prepare for the occasional "bounce back"
To effectively manage growth, you need to understand your business thoroughly yet remain flexible to required changes.
It's important as a small business owner that you are rigorous about understanding every aspect of your businesses operations, finances and key accounts. You should be able to answer the tough questions, such as what kind of culture are you trying to develop? Who is your target market? How much cash do you need in order to grow? How are your sales systems functioning? What is the turnaround time for orders? And so forth. Questions like these will help you sort out the areas of your business you may need help with.
As a manager, your objective should be to focus on what you're good at, and then delegate or outsource everything else. For example, even if you have a handle on your finances, you'll likely still want to hire a good accountant. You may have creative flair, but decide hiring a graphic designer to design your marketing materials is more effective. No matter how you decide to outsource, continue to keep a firm understanding of the systems upon which the foundation of your business is operating. Especially during times of growth because you'll likely need to access or change these core systems rapidly to meet challenges.
Remaining flexible to change was critical to the growth of Babylicious. Like every business, Babylicious needed to try a few different approaches which required some "bouncing back". For example, in its early stages the company split its inventory between two warehouses in both Canada and the US, quickly discovered this was a premature move, and went back to a Canadian warehouse only. Quick recovery ensured minimal loss.
Another key to flexibility is systemization. This may sound a little contradictory at first, but only when things are done according to a plan, can they be altered with any certainty. In other words, a lack of organization does not lead to flexibility, it leads to chaos. And if a business is allowed to grow too rapidly in a chaotic state, it cannot adapt and ultimately collapses. On the other hand, systemization makes it possible for a growing company to "turn on a dime".
Lesson 3: Remain an optimist
There will be great times and there will be tough times, but through it all, the winners never give up. That's what makes them winners. So if you've got a tiger by the tail, as the owners of Babylicious appear to have, hold on tight and don't let go. The ride may get bumpy, but you'll get there in one piece.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
Previous Case Study: Lug Canada Inc.
Description: Lug is a small Toronto-based manufacturer that supplies retailers nationwide with innovative travel accessories including handbags and gym bags. Owners Ami Davie and Jason Richter merged their creative backgrounds to develop the Lug travel product line. The company has rapidly grown their sales across North America by working with outsourced sales reps. (www.lugtravel.com)
Vital Stats:
1. Location: Head offices in Toronto, Ontario, and Dallas, Texas. Products are manufactured overseas.
2. Launch date: 2004
3. Number of employees: 9
4. Number of Retailers: 500 plus in North America
5. Number of Sales Reps: 17 in Canada, 50 in the US
6. Years outsourcing sales: Since inception
The goal of every manufacturer is to develop an excellent product or product line and sell it like crazy. But getting a new product line out to the mass market can be daunting, especially for a small business learning how to deal with the daily challenges of launching a new company.
In a short three-year time span, Toronto-based Lug Inc. has successfully launched its line of travel accessories into 500 plus retail locations across North America. How did they do it? According to Ami Davie, co-owner of Lug with partner Jason Richter, "Using outsourced sales reps has been the only way for us to quickly get our products into retailers across North America and develop a nationwide presence."
Davie explains, "As a small business, there is no other way we would have had the time or resources to grow our sales as quickly as we have. Working with sales reps has been a critical part of our sales, and we've also relied on our reps as consultants for important sales-related information and to help ensure our products land in the right type of stores."
Admittedly, the process of finding and developing rep groups has been time consuming for this small company. Co-owner Jason Richter elaborates, "Finding the right reps has required that we go out and visit show rooms, ask around to other manufacturers to help us better understand the product lines it makes sense to align with, and actually talk to our retailers to find who they like working with. Those referrals have pointed us to the best rep groups to work with."
Typically, when a manufacturer decides to outsource their sales, they look for established, reputable sales teams/agencies usually who already have relationships with the types of retailers they want selling their products. Because sales agents carry multiple product lines, the main challenge faced by manufacturers is getting reps to promote their products above or on par with the other lines they are carrying.
According to Davie, "With every rep group we come across, there are strong agents and not so strong agents so we do what we can to help make their sales presentations as effective as possible by providing a solid sales rep kit, consisting of the product, press, catalogues, etc. The key here is to build a relationship with each individual rep and make a personal connection while supplying the most up-to-date product information. This serves to establish clear lines of communication and equip reps to sell the product."
A brief case study of Lug's three-year journey down the outsourced sales rep path reveals there are several things that every manufacturer should note when choosing to outsource sales.
Lesson One: Take the time to consider your options
Determine whether your business will be best served by a sales force that is focused exclusively on your products or one that already carries multiple product lines to your target buyers. While exclusive reps can rapidly become experts in your field and offer a high level of energy and focus, established sales teams have the potential to put your products in front of a group of qualified buyers almost instantly.
If you decide to work with established teams, like Lug did (most manufacturers chose this route), you'll need to carefully consider the types of sales agencies that are best aligned with your particular product/product line. For example, Lug found that their travel accessories aligned well with reps specializing in the gift industry, as well as those carrying other complimentary product lines such as stationery or jewelry.
And while you're considering the types of product lines you fit best with, make sure you find out which groups have the best professional reputation, and which are already selling to or have the capacity to sell to the buyers you want to reach. Lug has found it strategic to work with the same rep groups as their competitors, since they're targeting similar retailers.
With each new territory you decide to expand into, expect some trial and error with respect to the relationships and types of new reps you work with. The turnover rate within rep groups is a telling sign here. If reps have generally been with their group for a steady amount of time, that's a good sign. They'll better understand the needs of retailers and likely have a better success rate selling your products.
Lesson 2: Outline your expectations
Once you've found a suitable rep group to work with, it's a good idea to develop a contract, establish a three month trial period and outline exactly what your expectations are during that time. Include things like your minimum sales expectations, reporting schedules, and compensation details. Because reps are based on commission, they can be a very cost effective way to grow sales. Industry standard in the gift industry, for example, is 15-17.5% of sales. However, you need to be careful you don't waste a lot of time managing your relationships with unprofitable reps, a trap many fall into that can be avoided up front by clear communications.
One unnamed Vancouver-based clothing manufacturer ended up spending thousands of dollars and resources trying to nurture a relationship with a Quebec-based sales agent who ended up opening only two accounts in one year. The time spent flying across the country to meet the rep, training and sending products, not to mention lost business that could have been developed during that year, was a financial strain that this small, company really couldn't afford at that time.
Lesson 3: Motivate your reps
A sales agent can only sell a product successfully if they know and hopefully have an appreciation for the product they represent. It's up to you as the business owner to motivate your reps to believe in and sell your products as long as they are working for you.
You can do this by providing materials that will educate your reps — such as product news or updates; supplying reps with an ample stock of demos; and offering incentives such as a strong commission structure. Of course you also need to make sure your reps know the features that determine why retailers will want to buy your products in the first place. So take the time to educate them and answer their questions. Remember, it's a two-way street. The more support you can provide reps for selling your products, the better job they'll do when selling your products to others.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
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Case Study: Industrial Artifacts
Description: Manufacturer of one-of-a-kind designer furniture and decorative accessories made out of a variety of mostly rescued, historical materials such as old doors, wheels, old traffic lights, and discarded parts of equipment. Currently this company operates from one retail shop located in Vancouver's trendy Gastown area. Retail space is adjoined by a workspace where all products are made. (www.industrialartifacts.com)
Vital Stats:
1. Location: Vancouver, BC
2. Launch date: 1998
3. Revenues: Sales have almost tripled over the past six years.
4. Number of locations: 1
5. Number of employees: 4
6. Recent media attention: Growing strong
Sustainability is no longer the little brother of mainstream business. In fact, sustainable businesses are popping up all over the place; a movement due in part to the fact that sustainability itself is gaining broad appeal among the mainstream population.
Witness the launch of environmentally friendly clothing lines by companies like Levis and H&M, and eco-friendly makeup by designers like Stella McCartney. Clearly, Hippies and tree huggers aren't the only ones who care about the ways sustainability factors into our daily purchases.
While some say the popularity of sustainability is more about perception than ethics, the fact that CEO's everywhere have the phrase "triple bottom line" on the tip of their tongues tells us that sustainability can indeed be profitable. This phrase indicates that a broader spectrum of corporate values is taking shape. Measuring the success of a business means considering social and environmental impacts, as well as economic profitability.
Vancouver-based Industrial Artifacts (IA) is an interesting case study of a small, sustainable-minded pioneer on the eco-friendly front.
Launched in 1988, owner/designer Ross McMillan set out with a simple goal: to create innovative designer furniture and home accents without damaging the environment.
McMillan's business plan proceeded with a commitment to making designer products using solely wasted materials. He began by actively researching the possible avenues he could explore to acquire quality, free production materials. Networking was (and still is) an important part of his plan. McMillan developed a network of production resources, such as construction site contacts, who call him when they have appropriate materials available. He also developed a business network of like-minded artisans to encourage one another to remain innovative on the sustainability front. It helps that McMillan is also the manager and curator of an art gallery.
Industrial Artifacts has successfully incorporated sustainable ethics into its marketing by providing a story with each purchase, that lets people know how recycled materials are (and can be) used in every creation.
Business planning and goal setting, McMillan admits, have not been the strongest area of his business development. Since developing a more strategic plan six years ago, the overall profitability of this small company has increased, as evidenced by a tripling of revenues over the past six years.
Consider the following lessons drawn from the growth of Industrial Artifacts. These lessons can be applied to any business seeking to be both sustainable and profitable.
LESSON 1: Develop a clear corporate vision that weighs all costs.
Any business that chooses to operate on principles of sustainability instantly has the advantage of a built-in mission statement, and one that will likely resonate well in today's increasingly image conscious, mass marketplace.
But because your sustainable products are likely more costly than the non-sustainable alternatives, it's essential that you understand how much more people will actually be willing to spend to make that eco-friendly purchase. Develop your vision from this place. You need to identify where your market is shopping and then clearly and specifically articulate to this group why they should feel good about buying from you in particular.
Industrial Artifacts has found that people will pay on average 15-20% extra for their environmentally sensitive products. Over the past two years especially, they have noticed that people are willing to spend more on a piece of their furniture if they know it's made responsibly and locally.
LESSON 2: Be consistent (don't try to fool the hippies).
If your business really is about sustainability, you need to ensure all aspects of your operations, like your packaging and production methods, are consistent with your mission statement.
For example, if you're selling organic frozen food, don't make it microwaveable. This will conflict with the "natural" image you're trying to achieve. More importantly, make sure you are using recycled packaging produced in environmentally friendly ways. These are the details that eco-conscious consumers will notice and weigh when deciding which types of products to buy. Make sure they have every reason to feel good about yours.
Industrial Artifacts has effectively incorporated its vision into every aspect of production and marketing. "With each design, we include a First-Life Description that preserves the story of its former industrial use. We all need to be better educated on how easy it is to make small changes in our life which can create very positive changes for the whole world, especially when others choose to make more sustainable choices with us."
LESSON 3: Plan for the long-term (run your business like a pro).
Many sustainable minded businesses begin with a great idea and proceed with production. Industrial Artifacts was one of them. McMillan acknowledges that a lack of planning was his weak point, "A 'creative' by nature, I needed to turn to professionals to put the systems in place that have better equipped me to run the business efficiently. Being better organized has allowed me to focus more on the creative aspects, which is what I wanted to do from the beginning." It took him a few years to gain this realization and put an effective system in place. Profitability followed suit.
It's very typical for a business owner to specialize in his or her trade or service, but not in business management. As a business owner, you need to remind yourself that you can't afford not to take the time to create a long-term strategic plan for your business. You need to develop a roadmap that will ensure you reach your goals. So take the time to research the market, identify niche marketing groups, plan for a longer sales cycle (sometime sustainable products take longer to be reused) and whatever other elements of your business require planning and consideration.
As a result of better planning, McMillan now has more time to focus on his designs and increase his distribution to large urban markets in the United States
LESSON 4: If you want to help the world, then let the world know.
If you're a sustainable business, you shouldn't be operating in a bubble. You're already making a difference, so it's important you let the eco-friendly community and everyone else know about it.
Industrial Artifacts did several things right in this regard. First, McMillan was instrumental in bringing the first Sustainable living Expo in North America to Vancouver. As a sustainable business, you too should be researching and leveraging the networks of sustainable-based coalitions and groups you can join to let people know what you're doing.
The internet is a big tool in this regard. McMillan leveraged the web by creating an interactive online network to promote sustainability and educate people about ways to buy sustainable products (www.betterwaytolive.net), like a Craigslist for sustainable living. It's important to align your business with a sustainable community.
There are a growing numbers of consumers using the internet to find ways to make more environmentally friendly choices, so make sure they know where to find you.
There are many steps any business can take to have a positive social and environmental impact while at the same time becoming a profitable enterprise. But it's important to remember that sustainability should be an addition to the overall goal your business has of creating top quality products or services, not an end in itself. Done right, social capitalism can be a winning strategy for all of us.
Mark Wardell is President of Wardell Professional Development Inc. (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.
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Capers Community Market
Description: A specialty grocery store focused on organic, natural and local products.
Vital Stats:
1. Location: Vancouver, BC
2. Number of locations: Four
3. Newest location: Cambie Street
4. Number of employees: 480
5. Amount spent on grand opening campaign: Not disclosed
Opening a new location can be a harrowing undertaking. You hope your new customers will flock to your store like Starbucks, but as a small business, your branding budget is usually less than a cafe's petty cash.
Fortunately, opening a new location successfully isn't just about your budget.
Capers Community Market in Vancouver is an interesting case study of the ways a business can use creativity to gain the respect, loyalty and buying power of a new neighbourhood. If you're planning to open a new location, here are three good lessons.
Lesson # 1: Let people know you're coming
According to Aron Bjornson, Capers' marketing manager, the success of the company's newest location on Cambie Street had a lot to do with pre-opening initiatives, "We chose initiatives that helped our business build personal relationships with our new community." Capers strategy exemplifies creative marketing steps any business can take.
Be a giver. Capers introduced itself to its new community by giving a (well-publicized) donation to a local inner-city school. Choosing a good deed, vs. advertising alone, helped Capers leverage community loyalty in addition to publicity.
Send a note. A promotional mail-out is essential. Capers maximized their mail-out by advertising product specials at their new location while promoting the specials at their existing four locations, so all would benefit.
Make a personal introduction. Send a friendly 'street team' out to meet your new neighbours and give out free water, coupons and other premiums, like Capers did. This is an economical way for your business to promote its brand and place featured products literally and physically in the hands of potential shoppers.
Lesson #2: Consider all the potential partners you can involve in promoting your grand opening.
As a small business, the limitations of your budget will inevitably determine just how much you can do to promote yourself. Capers made the most of their marketing budget by creating joint marketing opportunities designed to include partners like their suppliers and other community groups. Any business can do this, by considering the following points.
Understand yourself. The Capers brand is all about local, natural and organic products. A solid understanding of its brand was the springboard for each of Capers marketing initiatives. Based on a clear brand vision, Capers successfully identified appropriate niche groups to partner with to achieve their marketing goals- including local artisans, celebrity chefs, and the arts community.
Be creative. Not only did Capers identify appropriate groups to partner with for their grand opening, they brought people together collaboratively to build events that were good for the community. One of these events was a fashion show hosted at their new location challenging local design students to incorporate food into fashion designs. Capers invited local Celebrity chefs to further attract media, foodies, and target shoppers.
Leverage your give-aways. Capers dramatically reduced the costs of marketing their new location by inviting suppliers to provide promotional product give-aways. Activities like the street teams, fashion show, and grand opening events were presented to suppliers as distinctive marketing opportunities. Suppliers sponsored catering as a way to promote new products, featured at the store. Every business can learn from this by simply considering the needs and goals of new or local suppliers.
Lesson # 3: Don't forget your post-opening.
Since we're talking about how to make a big splash when opening a new location, keep in mind your plans to continue attracting publicity even after the grand opening festivities are over.
Leverage the publicity of your opening like Capers did, by putting pictures of the opening festivities on your website, and make sure to showcase everyone involved. Media and the general public will be particularly interested in images that demonstrate how your business is helping build up or bring together your new community.
Over 450 people lined up around the block at Capers Grand Opening- even Starbucks would be jealous of that!
Mark Wardell is President of Wardell Professional Development (www.wardell.biz) an advisory group specializing in growth management for privately held companies.
