by Matt Weik
Statistics aren’t doing entrepreneurs any favors. There are so many numbers and percentages being thrown out these days on business failures that it’s staggering—one thing is for certain, and that is only a small percentage of start-up businesses will succeed. So why take the risk just to lose it all?
Any hungry businessman knows that in order to reap the rewards, risks must be taken. Starting up a legit supplement company will cost hundreds of thousands of dollars if not a million plus in order to get off the ground. Those dollars invested are not to be taken lightly. The return on your investment to start a business will not come quickly. It could take well over 3 years before you even break-even—and that’s without you taking a salary for your work and dumping any revenue right back into the business.
For this reason, you have to look long and hard and decide if the risk is worth the reward. Do you have enough money saved up to take a leap of faith into the industry and not get paid for several years in order to grow your business? Can you pay your mortgage, utilities, taxes, etc. with what you have saved in the bank? Or are you planning on cashing out your life-savings and 401K in order start up this business? There are many things to think about. Will you take out a loan? Will you look for investors? Are you willing to give up equity in your business to get it off the ground? Will your investors help you grow the business (do they know the business/industry?) and be a mentor or are they literally your piggy bank to start manufacturing of your line of products? Speaking of products, do you even know what products you want to launch, and the reasoning why you chose those specific products? Do you know the manufacturers you’ll need to create your line? Do you know who the distributors are in the industry? Or are you going to strictly stay with ecommerce to build your business? Make sure you know these things before you dive in. Not having these things thought out and lined up could be costly and delay the process of production as well as getting your products on shelf/website.
Generally speaking, a first to market strategy seems to be a clear path to at least some financial gain. Trying to launch a brand that is full of “me-too” products simply won’t yield you the best returns. There are some companies out there who go that route and they dump all of their money into marketing the products rather than spending it on innovation in hopes that the hype from the marketing campaign will engage users and turn them onto the new line. This works for some and others it will be a very quick exit from the market.
Trying to reinvent the wheel isn’t the best strategy as majority of the supplement companies on the market these days are more interested in innovation and being first to market with something new and exciting that has some hype behind it. The “me-too” brands can linger in the industry, but they will never be a big player in the space using this kind of strategy.
Innovate or Die
Researching new ingredients and launching something that no one has ever seen or used generally creates a buzz around the product which in turn will turn more people onto your brand as a whole. Innovation is exciting. But know going into it that not every new product that hits the market is a homerun. There are several launches that go terribly wrong and are completely unexpected. Some of these busts even happen after doing market research and testing to see how the response is prior to full blown production and launch.
When you are first to market with a product, you generally tend to hold the most market share for the life of that ingredient/product if the product is accepted well. People will come along and try to copy, but generally unless the initially launched product is found to be junk, taste bad, or not do as it claims to, the brand who came to market first will almost always lead in that category.
Seeing It First Hand
Some of you know that I worked for a very large supplement brand in my “previous life”. I call it my previous life because I feel after leaving that brand it was pretty much like a rebirth for me and gave me an opportunity to better myself and the industry which this company held me back from. While my time with this brand was nearly a decade, it felt like forever as there was never anything new or innovative coming from them. This brand was the typical “me-too” brand who launched products based off of what was working in the industry at the time. They were always behind the eight-ball and never took innovation seriously. I’m honestly not even sure why they had a R&D team as I have no clue what they were doing on a daily basis as there was nothing they were doing to create excitement around the products or brand.
The marketing and brand team were terrible. When you have a sales team who can run the business better than they can, there’s a problem. There was no leadership. No one with a clear vision of how to win. Some of the people running the ship clearly never worked out a day in their life so surely they aren’t using any supplements to truly know what works and what doesn’t. So how do you grow a business like that? Some of the people high up on the totem pole have never even been in the supplement industry yet come in thinking they know everything about it as if they are going to light the world on fire with their vision. Not gonna happen, and it didn’t with this particular brand.
Who are you?
Pick a brand identity and stick with it. There’s nothing more confusing to a consumer than seeing a brand you currently purchase and use constantly changing their brand identity, their labels, their tagline, their marketing imagery, and their product portfolio. It’s confusing as hell. It even confused the employees of the brand on how to explain the brand to the public or when a salesman walks into a retailer how to explain the brand to sell in products.
There were several occasions where I asked to be moved over to the brand team. For six years I ran a territory for sales and distribution before they gave me my own division to grow myself from the ground up—which I did very successfully. After my departure, they actually took my division and model and rebranded the entire business after what I had built. Only now they will have a full team behind it rather than one person such as myself building the business.
A History Lesson
At the tail end of my career with this brand, they were preparing to launch “new innovation”. Which ultimately were products that had failed miserably in the market in the past with other brands and this company was trying to bring that concept under their wing to reinvent it. My thoughts? It will fail. It’s only a matter of time. Before I left I made it clear that the products would not sell at all and I stand by my opinion. Time will tell, but if you don’t learn from the past you are doomed to repeat it. And in the coming months, I’m fully prepared to say “I told you so”.
I am no means the end all be all in terms of how to run a successful business in the industry. But when you’re on the front line for nearly a decade learning the industry, living the industry, breathing the industry, and talking to influential people and distributors in the industry as well as consumers, you learn A LOT. This is something those working at the brand I worked for failed to realize. They never wanted to go out and visit retailers and distributors. They thought they could figure everything out from their office. Not going out and investigating the competition on shelf and speaking with retailers is a huge mistake. How can you compete against brands that you don’t even understand or know their products?
I actually sat down with a new director a couple years ago who told me she looked at the Bodybuilding.com website on her flight to corporate and she feels she totally understands their business and how we need to approach handling their account. What? You’re kidding me, right? This is the same chick who had no idea who the Philadelphia Phillies were when I brought up my next door neighbor was part of their organization. This is the caliber of talent coming to the company, it’s sad. Luckily I didn’t have to work with her and ultimately grew the account myself to a multi-million-dollar book of business.
So what is the take home message here? Make sure if you are starting your own supplement company that you hire people who are actually from your industry. People that are hard workers and who bring value to your company and have a brain. This does not mean hiring all of your buddies (another terrible idea that my old company did often). This isn’t a boy’s club, this is business. You’ve invested YOUR money into it, only hire the best you can find. Expect to start off slow. Things will not explode overnight, it takes time. And while it makes sense to have some products that are already out on the market, once established, innovate. Come up with something new that no one has on the market. Be the leader in the industry for that specific category of products or ingredients. If you fail to think outside the box and innovate, your company will surely fail and die.