No one gets into business with the goal of maintaining the status quo. As an entrepreneur, it's in your DNA to be focused on growth, not simply keeping your brand where it's at! Deep down, you have a drive to want to expand your product or service offerings, attract more customers, and assert your expertise in the industries you serve. To do so, however, you're going to need to master the financial aspects of your business - the tedious operational components that take place behind the scenes and which ultimately are the lifeline of any business.
So where do you start?
There's no true cookie cutter approach when it comes to getting your brand to the next level, but one thing that's needed to get there - no matter what industry you operate in - is capital. As you begin the process of searching for potential investors to fuel that growth, there are things you'll want to focus on and things you'll want to avoid. I took the time to engage with executives from the c-suites of some of today's leading and emerging brands to gather some advice and insights, many of which can be used immediately to position your business for growth.
Here are some Dos and Don'ts to keep in mind:
DO: Have sufficient cash for leverage
Cash preservation is essential when it comes to building and seeking out capital to fuel the growth you envision for your business. As Coral Chung, the Founder of Senreve told us, cash is also something that those looking to invest in your business will look for.
"Having sufficient cash can be a source of leverage when it comes to evaluating potential investors and partners," said Chung. "It's a much stronger position to have when you do need capital immediately."
More importantly be sure to run your business lean and adhere to a strict budget. It's the best way to ensure that cash and capital raised goes a long way.
DO: Be Creative When Exploring Funding Options
For many brands, seeking outside investors isn't always the path to take, especially if there's a way to use your own capital. When faced with the need to raise significant funds to help fuel the introduction of a new product line, Eva Spitzer, the founder of Peony and Moss, turned to the crowdfunding model and tapped into one of her most valuable assets, her consumers. By giving consumers the opportunity to pre-order via Kickstarter, Spitzer was able to raise over 25% of what Peony and Moss needed to place its inventory order. The remaining budget was self-funded and raised using pre-orders from wholesale buyers.
DO: Understand the core metrics & numbers you're tracking
It's a much faster-paced business environment for emerging brands and startups, and you must be just as fast when it comes to your metrics and how you analyze them. It's important to know how these numbers will affect you and your financial plan as they continue to change. According to Stuart Huzinga, the Chief Financial Officer of Sun Basket, one of the most important metrics to have a firm grasp of is what it costs your brand to acquire customers.
"You need to know your cost of acquiring and servicing customers," said Huzinga. He also points out the need to track metrics such as "retention of customers and the lifetime revenue and margin value of a customer at the transaction and cohort level."
This means that not only should you be tracking the money you spend and invest in your business, but you must have a firm understanding what each customer is worth to your brand from a revenue generation perspective. Having a grasp on these metrics will force you to be more strategic and thoughtful when spending cash to drive your business forward.
DON'T: Overspend and overextend capabilities
As any entrepreneur will share, there's a lot required to get a business up and running, both from a financial and human resources perspective. Being so vested in seeing the success of your brand, it's easy to over-invest in resources right out of the gate. Greg Buscher, the CFO of Essentia Water, touched on some tendencies entrepreneurs will want to avoid.
"Classic missteps include things like hiring too many people too soon, investing too early in consumer marketing, going asset-heavy, and taking on too much sales volume without the financial resources to last through a prolonged order-to-cash cycle," said Buscher.
Investors can be turned off rather quickly if they see that your company is accumulating massive overhead that you won't be able to later compensate for. Make sure you have a solid financial plan in place that takes into consideration the large costs of funding your startup and how you'll be able to use projected sales to pay off this initial debt. It will be the cornerstone for your success as a fully-functional business and something investors will want to see.
DON'T: Abandon your brand identity
If you don't see your brand immediately taking off as you envisioned, it can be quite discouraging. To try and jumpstart sales, you may be tempted to move in a direction that doesn't align with your initial vision. Avoid this at all costs.
"Don't lose sight of your brand's meaning," explains Mike Amoia, Entrepreneur and Co-Founder of Switchblade Entertainment Group. "Continue to work on systems and fix problems. Even when things are good, they can always improve."
The President of Vero Water, David Deshe, also shares this same advice, stressing that brands need to invest in understanding their core customer - an investment that can lead to organic growth and evangelism.
"Brands need to focus relentlessly and truly get to know their customer," said Dehse. "It is critically important to focus the company's resources on your core customer, and to ensure the brand delivers on its value proposition to them. The benefit of customer focus is that it drives the discipline of financial focus on them, which will help the brand and the business grow organically."
Remaining focused on your brand vision is essential for a new startup. If you stray from your original idea, make sure you have data and analytics that show why a pivot is needed. If you pivot prematurely, this can end up hurting you financially in the long-run. Potential investors may be uncomfortable if they feel your brand comes off as unoriginal and ingenuine.
To learn more about solidifying your brand's financial foundation and ways to attract potential investors, download our new eBook eCommerce Guide To Maximizing Profit.
You'll find additional insights from other executives as well as a list of metrics that matter most to investors and that you'll want to be sure to measure.