 When my partner and I started our toy company we had taken an old, tired product (a hula hoop) and reinvented it in multiple fluorescent colors.
It was beautiful to see when you walked by the display in a store. The existing hula hoops at that time were boring light blue and pink. The gender association cliche of those colors was mildly annoying to me, too. We called our product, the Maui Hoop and invested in a booth at the New York Toy Fair. We planned a lavish, Hawaiian-themed decor. However, my partner and I knew that our sales would be limited to just one product, however cool it was. So we invented an even cooler product which we called the New Wave Hoop (it was the 80s, so … New Wave). Even with two products, our booth seemed a little empty so we came up with two more products that weren’t very good at all. In fact, I only remember one of them — a plastic tennis racket with no strings. A kid could dip it in a bucket of soapy water and wave it in the air to make giant bubbles. We didn’t get any orders on those. We did receive many orders, including a few chain stores on our two different hoops, and the following year we added quite a few things to our line of products. We were off and running. What You Need to Start a CompanyYou can start a company with one great product, but if you want to grow and be a real company, you must add more. Often, small companies are started by creatives who have an idea for a really cool product and then that’s all they do. They can’t or won’t add more products to their line. I’ve observed several reasons for this:
You think starting and running a company will be easier and safer with just one product to manage, but it’s actually harder. These companies always dwindle until they go out of business. Typically, buyers don’t want to buy from a company with only one product. A retail buyer takes a chance to order a product from a startup. It is always a bigger risk than buying from an established company. Why? It takes work to set up a new supplier in the system. If they only sell one thing, or if they don’t offer new products every season, why go to all that work? It’s easier to buy a similar product from a competitor that’s already set up in the system. Most novel products only have a lifespan of one or two years unless it becomes a classic which is rare. Again, not worth setting them up. Also, the statistics are working against startups in general. They have a higher chance of going out of business, and if they don’t have multiple products, that chance increases. I’ve observed the one-product paradox with more than one friend. In all cases, they invented a unique product, went to the effort and expense to manufacture and buy inventory, and then tried to sell it. I told two of them to add new products to their line. And no, different colors or patterns don’t qualify as new products. Product extensions are easy. Take the company in the photo above (which is completely hypothetical; I don’t know this company). I’ll posit that they start with face wash, then add moisturizer, then facial cleanser, eye cream, etc. Voila. It’s an entire line of products. The only novel part of this line could be the charcoal facial cleanser. Let’s say they were the first to introduce this concept. It’s completely novel. The brand’s other, subsequent products might be completely ordinary in the sphere of facial care. It doesn’t matter. If people love the cleanser, they have a good chance of buying the add-on products. Then the company can become a brand. After establishing itself and earning money, maybe they can add makeup products. Or sunscreen products. Or haircare products — shampoo infused with charcoal? That’s how you add new products. That is what you must do: add new products. After your first couple of seasons and decent performance at retail, buyers will continue to buy from you. Then you will have a real company.
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And why money should never be overlooked.  Of course you need customers. You need a few for proof of concept and to show you can sell. These things are important for investors.
But don’t overlook the importance of cash. Because cash is king. Customers are queen. Or bishops maybe. A CEO who is a potential client needs money. He’s hired three people to go out and prospect for customers. This is important. However, there is a problem if and when those orders land on his desk. How is he going to service those orders? He needs to add more equipment. He needs to pay for that equipment. This is for a SaaS company, but the same goes for companies that are making products and need to buy raw materials. And even service companies may need to hire more employees and pay them. In a way, they are the raw materials. I’ve worked with many CEOs in the last couple months as we grow our consulting practice. I’ve seen this problem over and over. Companies are so obsessed with customers that they forget about making their customers happy. You need cash to do that. The last thing you want is to land an important customer/client, and upset them to the point they won’t want to do business with you anymore. As someone who writes about cash flow, has done webinars and seminars about cash flow and is writing a book about cash flow, I am firmly in the camp of bootstrapping a startup. I’ve written about that, too. If you can bootstrap, by all means. However, it’s hard. And it takes a lot longer. We know that around three quarters of startups rely on a founder’s capital and cash from sales; that is the definition of bootstrapping (which comes from the expression, pull yourself up by the bootstraps). However, we also know that two-thirds of startups fail before their first decade in business. I don’t know. Maybe there’s a connection there. My partner and I started our first business in 1988, bootstrapped it, and had a very happy ending. It is possible. But we had some unique help including a family business providing our component parts giving us 120 days accounts payable terms. That’s difficult to find out in the wild. Customers are vitally important. Cash is more important. Why? Let’s say you get a huge order out of the starting gate because, of course, your product is the best. How are you going to finance that? What if you have enough money to process the order, but you don’t have enough to cover your overhead expenses (rent, salary, insurance, etc.) while you wait to actually collect the money owed to you? That’s a thing. What you need is a couple of customers to show proof of concept. After that, put together a pitch deck, and go to an investor to raise money. Then you’re off and running. If you can get purchase orders from a reputable company, you can also raise money from a bank. Many banks (or factors) will lend money against purchase orders. When I say raise money, it doesn’t have to be from an investor who will take a percentage of your company. It can be debt from a bank as well. You just have to pay it back. With interest, of course. There are a lot of creative options to raise money. I explain some of them in my Medium post, “Why Cash is King and How to Get More of It.” If you need to know how to construct a good pitch deck, send me your email at: [email protected], and I’ll reply with my two-page outline. My partners and I have raised tens of millions of dollars using it as a template. Originally published in Data Driven Investor.  Photo by Sara Krulwich/The New York Times I don’t remember the exact year, but I remember that it was the beginning of the end of my marriage.
My then husband and I landed tickets to Miss Saigon when it was the show to see on Broadway. The story, while great (a reinterpretation of Madame Butterfly), was eclipsed in my opinion by the set design. For those who might question that, there was an actual helicopter on the stage. I felt like I was in Saigon at the end of the ill-fated Vietnam War, besieged and fighting to get on one of the last helicopters. I sobbed. Was it the play or the marriage? Jury’s still out on that. Regardless, I learned something important. Set design is everything. When said husband and I readied for our first trade show a few months later, I took that revelation to heart. How We Made Our Booth a Must-See for BuyersWe had reserved a booth at the International Toy Fair in the Jacob Javits Center and needed to get attention and orders. We only had four products and two of them were questionable. One was just okay. And one was a winner. The idea was to create an amazing booth that would garner us attention. We didn’t have a lot of money for an advertising budget. So we planned a kick-ass booth. The name of our company was, Maui Toys. We decided to create a, “beach experience” in a ten feet by ten feet area. The floor of the booth was covered in white sand with iridescent glitter mixed throughout. We found pastel, cardboard cut-out palm trees (life-sized) and planted four of them in the sand. I hand painted an ocean sunset mural that hung across the back of the booth. A couple of beach chairs were planted in the sand. The floor was littered with several sea shells and star fish. A beach ball and beach towels sat nearby. In the middle of the booth was a pyrex stand that held a display of our four products. And the coup d’etat was a ten foot long neon sign placed above the booth with our palm tree logo and the name of the company. It was the talk of the show and everyone came to our booth just to see it. Then, of course, they looked at our products while there and put in orders. Our company was off and running. Trade ShowsYou can and should do the same thing. I still think trade shows are one of the best ways to launch a company. It is relatively inexpensive and if you do your research you can usually find a trade show where buyers are known to write orders. There are other advantages:
Do some research and choose the trade show that is right for you. Don’t spend the money for small shows that don’t offer much. It still costs money to secure a booth as well as design, sales materials, creative giveaways, travel, and hotel and food while you’re there. You’ll need a helper or two to set up the booth and work the show. Budget all of that appropriately. Make the most of your investment. Read my article on reverse engineering your dates to make sure you are ready on time: The One Clear Difference Between a Good Businessperson and a Bad Businessperson  Illustration by author on Adobe Express Follow this advice no matter how much you might want to avoid it.
None of us likes to do tasks that we find draining. You must do it, grasshopper. Here it is: Read the contracts that your attorney writes for you. That’s it! I know you might be thinking, “That’s all? I do that anyway.” Good for you and then you can skip right down to the "likes". For those of you who don’t, I will tell you why this is vital and the most painless way to do it. Why is this vital?You cannot trust your attorney. You just can’t. Attorneys are not business people. Not to offend anyone, but most attorneys don’t understand business that well, or your business, or just what you want for your business. They know the law. Good! Because you probably don’t. But you must go through your contracts to make sure they get all your business points down correctly. Are you supposed to get 35% of the company or 40%? Are you to be paid 5% or 5.5% on that loan or for that licensing fee? Those are examples of business points. How is it done in the most painless way?I have found that it’s best to do this at the end of the day. Finish all your other day’s work beforehand. No distractions. Print out a copy of the contract or agreement or whatever it is that you’ve hired a lawyer to write for you. Personally, I find that a nice glass of red wine helps, but if you don’t drink wine, try a cup of your favorite herbal tea. Go through your printed copy with a red pen and a highlighter. Read it, highlight mistakes, fill in any blanks, and make notes. Call your attorney the next day and communicate any mistakes. Voila. You’re done. Depending on the length of the contract, it should take a couple hours at the most. It could make the difference between a worthless piece of paper, and something that might save your business. As President Ronald Reagan once said, “Trust but verify.”  “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” ~Wayne Gretkzy My partner played soccer (football) his whole life up until he was in his 40s. He also coached his kids in soccer for many years. He’s European. My partner paraphrased the Wayne Gretzky quote for soccer and continually pressed it on the kids he coached, including his own kids: “Don’t pass the ball to where your teammate is. Pass it to where they’re going to be.” This concept is, of course, made more difficult because any sports game is fluid. You don’t really know where someone is going to be located at a certain point in time. It’s a game. Everyone is running around. And it depends on where the other team’s defenders are, too. Here are the takeaways from this wise analogy:
Because the great Wayne Gretzky also said: “You miss 100% of the shots you don’t take.”
Ah, sports is always such a great metaphor for business and life in general. This is what you must do when planning to create and make a product or launch a service. You don’t make a product based on where everyone is right now. You make a product for where they’re going to be. Same goes for a service if that’s what you are going to offer. Don’t develop an idea or service or educational course for where the world is, where your potential client is. Develop it for where they should be. Look at your competition and create something that is different and better than what is already out there. Observe where the empty spots are. You also plan a release strategy based on where you think the market will be a year, or even a few years, from now. There’s a certain predictive, even futuristic element to this theory. How does one know what is going to happen in the future? Well, we don’t. But we can make educated guesses based on research and brainstorming with our team. I write about this more in a past post: The Wisdom of Your Crowd. Thanks for reading! And feel free to reach out with any questions.  Photo by krakenimages on Unsplash It could save your company. |
Stories and snippets of wisdom from Cynthia Wylie and Dennis Kamoen. Your comments are appreciated.
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