In the competition to get the market’s attention for a product or service, fledgling entrepreneurs tend to get pushed to the side walk. Dealing with the cost of production, brand positioning, marketing and other aspects of business growth are difficult tasks that are often shouldered by the entrepreneur (or a small inexperienced team).
Is it really possible to scale up a business without relying on equity investors or hiring (and paying) experienced managers? Are there other ways to minimise business growth costs?
Leveraging on partnerships
As a start-up business, you will benefit from forging alliances with partners, suppliers and staff. It all depends on your negotiating ability. Putting in place a payment instalment plan with suppliers is a great way to leverage partnerships. For example, American Greek yoghurt company Chobani negotiated with large supermarkets to pay off slotting fees using sales proceeds during the initial launch.
You may also negotiate with staff to defer huge salaries for future stock options or the chance to do something innovative and industry defining.
[Lesson: Forging partnerships with your suppliers and staff reduces the cost of business growth]
Brand design aids brand positioning
Design may help you gain the attention of your market and leapfrog competitors. Detailed packaging and appealing content come into play here. An historic example is the innovative move by Apple to create brand distinction in its stores with just a few products on display. According to Tim Kobe, co-founder of Eight Incorporation, an architecture firm that worked on the design of the Apple stores, “Steve Jobs’ perfectionist attention to aesthetics, his decision to lease extremely expensive real estate and his focus on selling just a few consumer Macs resulted in Apple averaging roughly $6,000 in sales per square foot per year”.
[Lesson: Design differentiation helps you gain attention and leapfrog competitors]
Outsource non-core functions
You may consider outsourcing non-core functions to avoid the cost of specialist skills. An example is the outsourcing of business functions by Daimler AG, owner of Mercedes Benz to Mercedes-AMG GmbH, originally an independent engineering firm specialising in performance improvements for Mercedes vehicles. Both parties maintain their brand identity.
[Lesson: Maintain your brand essence in the event of outsourcing]
Seek legal protection for your brand
In a business environment where ideas are easily copied, protecting your brand from infringement saves you the cost of a protracted legal battle. In 2000, Dyson Vacuums sued Hoover Company in civil court for patent infringement. Hoover had just released their Triple Vortex bag-less vacuum, which prompted Dyson to sue for patent infringement citing their Dual Cyclone vacuum. Hoover was forced to pull the Triple Vortex from the market.
[Lesson: An entrepreneur should seek legal protection to safeguard brand assets]
Your ability to grow a start-up without over reliance on external investors (in the form of venture capitalists or strategic investors) gives you space to grow your business at your own pace and without undue influence over your brand. It also reduces the pressure to repay debt from loans.
However, to succeed with this model, you must be disciplined and plough back earnings or profits into your business to facilitate organic growth. As an entrepreneur, you must also be willing to sacrifice personal profit and pay-outs in the short term.
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