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    Startups: Four start-up maxims

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    aa22-jun-jul-2007-startups-four-start-up-maximsWe don’t need to be revolutionaries to have a successful business. We could do something simple, like open a shop. But if we wanted to be ordinary, wouldn’t we be better off in a job somewhere? What if we truly want to change the world or be the next sell out story to some corporate Goliath? There are some strategies we can employ to make it at least slightly more likely.

    Here are four simple business maxims startups should consider.

    MAKE ONCE, SELL MANY TIMES

    A replicable formula: Something that can be built, designed, made, or bought once, but sold over and over again. It’s all about efficiency and the multiplier effect. Some of the oldest business models in the world follow this maxim. Think about real estate. You buy an investment property once, and you sell it over and over again, every month as ‘rent’.

    Other examples include franchising. Build a format like McDonalds, do it over and over again. Write a book once, sell it for years. Record an album once, sell it over and over. The same holds true for movies and software. The production line also exemplifies this. Efficiency is not necessarily evil. More importantly, this is also the component of your business model that helps it grow beyond the founder. If your business can’t survive and grow without you, the truth is, you haven’t really got one.

    CUSTOMER IS CONSUMER 

    Avoid the middle man at all costs. Deal directly with end users. When we depend on a reseller for survival, our strategy is often compromised ‘ it becomes their strategy. You can see this all the time with consumer goods in the supermarket game. The retailers Coles and Woolworths have become so powerful, even multinational manufacturers/brands are being told what their pricing and new product innovations should be. Having your customer as your consumer gives you the ability to better manage cash flows, usually the greatest challenge for any startup.

    By dealing direct with your end users you have a short value chain. It also allows us to more effectively manage inventory levels. The feedback cycle is instant and it’s easier to gauge performance and make changes quickly. The last thing we need is excess cash invested in assets that won’t be converted into more cash in the immediate-term. You get your money back faster, sometimes instantly, as a customer buys. This is the commercial high ground as there is no cash trap (having to pay your suppliers up-front while your buyers get 30-day terms). This can shut down a profitable business. For your startup, cash is oxygen, and the promise of it at some future date won’t keep you alive.

    THEATRE AT TRANSACTION 

    Humans are emotional beings and theatre at transaction can provide great leverage. Theatre is the element that allows some companies to charge a premium for their wears. It operates on a subconscious level. Theatre is all about branding, design, eyeball impact, craftsmanship, technology and possibly even some old school advertising. In fact, theatre at transaction can best be described with an example: Starbucks ‘ yes, the coffee was better than the average American cup of Joe. But the soft couches, gentle music and consistent amphitheatre did as much as the aroma.

    Put simply, adding a bit of theatre to what you do can help someone feel special or make an everyday thing seem an indulgence.

    ALIGNED WITH ENVIRONMENT / HEALTH 

    If your startup is flogging something that pollutes the planet or people’s bodies, you’re just asking for complications. Any product or service that has environmental or well-being approval has a massive head start. And people are prepared to pay more for these offerings, because they are worth doing; because they make a valuable contribution to the community.  

    This is another reason the internet comes into its own. It connects communities and it’s virtual, which means it can multiply without pillaging the planet.

    Startups that have an environmental or wellness focus also have another advantage ‘ the ability to generate brand awareness without spending on advertising. The fact is, media coverage and viral marketing of your startup idea might be the difference between having a good idea that goes nowhere and gaining market penetration.

    Starting a business is difficult. These four elements put things in our favour, especially if you want to change the world or have a business someone might want to buy from you in the future.

     
    Stephen Sammartino escaped his cubicle after 10 years marketing global brands and has now founded two start-ups, recently launching rentoid – the place to rent anything, www.rentoid.com

     
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