Raise the level of confidence of potential partners by demonstrating your mission, vision and focus.
By Robert U Craven and Ellen Schutt, ScalePassion
Today's nutrition industry is full of passionate entrepreneurs with great ideas and the motivation to build successful companies. The challenge for these individuals comes when they get past the proof-of-concept stage and need additional capital to be able to scale their businesses. Investors for early-stage companies are hard to come by, and many are not interested in taking the risks associated with a company that does not have a long history or consistent track record. In addition, many investors are accustomed to evaluating larger opportunities and are not 100% comfortable with the typical nutrition products company, which is often smaller in scope.
Fortunately, if you are the CEO of a high-growth nutrition product company, you can improve your chances of securing capital and boosting investor confidence in your business. The following four tips, which any entrepreneur can begin implementing immediately, will help you to step back and take the time necessary to work on your business, while helping to raise the comfort level of potential investors and improve your chances of securing funding at a favorable valuation.
Tip No. 1: Present your marketplace in a clear, concise way
Yes, you know your customers because you've been selling to them for months or possibly years. But do you really know them as well as you could? Do you know your customer's customer? Do you know which customers make up most of your sales and which are most profitable? In today's information age, this data is easier than ever to attain and much of it may be already at your fingertips. Showing potential investors that your understanding of your marketplace runs this deep will increase their confidence in you, your company and its prospects.
So how do you get there? First, make sure you understand your current customer base with an 80/20 analysis. This means knowing which of your customers bring in 80% of your sales. Take this analysis a step further by determining which of these customers are among your most profitable. Once you understand these metrics, it will be much easier to make educated decisions about channel development, customer interactions and product development plans.
Knowing who your best customers are is only step one, however. You also need to talk to them. Call them—personally—to set up a meeting. Then go there, take them out for lunch or dinner, and listen. Ask them questions about their businesses and future directions, what your competitors do better than you, and what you could be doing to make their lives easier.
While you're at it, get to know your customer's customer. If you're a manufacturer selling to retailers, go dazzle them with details about what the consumer is thinking. Peruse the trade magazines, read company websites, buy data from organizations such as Nutrition Business Journal, SPINS or The Hartman Group and use this information to educate your customers. Explain to them why their consumers buy your products from them.
Knowing your marketplace also means knowing what your competition is doing. Sign up for Google Alerts and include major competitor company names and product names so you'll know immediately when they do something newsworthy. Appoint a "competition czar" within your organization and make him or her responsible for researching the competition and disseminating that knowledge throughout your organization, or have a contest among your salespeople for the best competitive information presented at the next sales meeting. Join industry organizations to tap into a network of knowledgeable colleagues.
Lastly, you must also understand the macro trends that influence your business. The economy, a political situation in a country from which you procure a raw material, or a negative news story in the consumer press about your product category can all have a huge impact on your bottom line. Make sure you are not so buried in the day-to-day operations of your business that you're not watching the overarching trends that can affect the industry in general and your market in particular. Investors do not think highly of companies that don't understand the basics of their marketplace; and in today's world, where information is so easily accessible, there is no excuse for "I didn't know."
Tip No. 2: Nail your mission statement
Nutrition industry companies may be better than most at having a true "mission" behind their organizations, but that doesn't mean they are necessarily any better at articulating this mission to their employees and customers. However, if you don't do this, it's much more difficult to successfully scale your business and sell investors on your team and its motivations.
Why is a mission statement so important? For one, it tells people what you do in a clear, concise way. Many times it can also tell them why they would want to do business with you. A mission statement can serve as a mantra or rallying cry for your entire company and help build the right corporate culture. It can even be the common denominator across all your marketing and show investors you know why you are doing what you're doing and that you are focused.
Creating a great mission statement requires answering these three questions: 1) What are we deeply passionate about?; 2) What do we do?; and 3) Why do we do it?
When answering these questions, keep it simple, real and authentic—and give yourself permission to develop "version 1.0." of your mission statement. Also, make sure it links to your passion and purpose and has "legs" to last for a while, even as your company evolves. Successful companies have a "story" and your mission is the foundation of this story, giving investors the confidence that you are focused, go deep and are a solid entity that will be around for the long term.
Tip No. 3: Focus your vision into a three-year road map
Now that you know what your mission is, you need to figure out how this relates to your vision. Do you have a strategic plan? Are you constantly dealing with urgent crises and never completing the important strategic items that will propel your company forward? What you need is a three-year road map and vision that will provide you focus so you can concentrate your energies where you need to and have the confidence to say "no" to opportunities that aren't right for you.
Here's how to get started mapping out a vision. First, schedule a two-day offsite retreat to define your market and mission and map out the long-term vision. From there, work backward by six-month intervals to develop your execution plan. Ask yourself, "What do we want to accomplish in the next six months?" and then "How are we going to accomplish it?" From there you can add metrics and assign responsibilities to get it all done. Be sure to keep all of this information to one sheet of paper; it doesn't have to be complicated.
Once you've accomplished this, you will want to hold monthly strategic meetings and weekly tactical meetings to track your results against this plan and spot issues as they arise. Disseminate this information throughout your organization. This will help make your employees feel a sense of ownership, empowering them and making them feel included in the organization's growth.
By doing this, you will also gain freedom in your decision-making process. You will know what's important now versus 18 months from now and be able to say "no" to those "right, but not right now" opportunities.
Tip No. 4: Prove your 'laser beam focus" with one sheet of paper
You can manage this whole process from one sheet of paper by creating a simple "what," "how" and "who/when/how much" spreadsheet that lets everyone know at a glance what's in the plan and their roles in it.
The beauty of the "one sheet of paper" is that this is an easy way to keep everyone on the same page with your plan and its execution. The one piece of paper links to your mission and spells out for all of your team the path to success. You can use this to run weekly tactical meetings, post a running "scorecard" in the office and talk about it at strategic meetings or company-wide "town hall" forums. If a potential investors walks through the office asking your team what they are trying to accomplish, having everyone on the same page with this one sheet of paper will show potential partners you all know what the priorities are and are working toward the same goals. Investors will like that you have a great handle on your business as a whole, that you know your strategic plan and that you are realistic about how to execute it.
With these four simple tips, you can take your company a long way down the path toward being perceived as a solid business that is attractive to potential investors.
Robert U Craven is founder and president and Ellen Schutt is general manager of ScalePassion, an executive coaching and online education firm. ScalePassion is dedicated to the "change-the-world" entrepreneur™ and offers tactical and practical advice for these socially responsible business leaders. ScalePassion offerings include online "do it yourself" lessons and courses that offer tips and tools for CEOs to implement immediately to grow their business, as well as "do it with me" services for those companies that would like a more personal touch.
Robert is former CEO of Garden of Life and New Organic Ingredients, while Ellen was the editor of Nutraceuticals World magazine, vice president of marketing and brand strategy at RFI Ingredients and president of Schutt Solutions, a strategic marketing and business development consulting firm.