In Exclusives, Finance, Insight

Skilled investors and managers within consumer strategy see windows of opportunity that others don’t see. Windows open and shut. If you time the expansion of your brand’s special magic to coincide with exploding consumer demand, you may do very well.

In a nutshell, that’s what makes a team uniquely set to kill it. And by kill it, we mean scale the business appropriately. Timing and resources. This article will talk about aligning those two factors. In part one we talked about the team, in part two your innovation, in part three your levers to growth, and now finally we come to an unpleasant truth governing much of life—that timing, while not quite everything, is a real success factor.

Up to this point in the series, success was fairly straightforward. You build a synergistic team of motivated geniuses, create an amazing and unique innovation, and grow the firm with divine grace, taking on just the right amount of pedigreed capital at reassuring intervals. Easy. Now comes the hard part.

For even assuming you’ve done those things heroically well, you may still fall short of a good investor’s requirements. Some of this is out of your control, meaning you needn’t worry about it. But timing and resource deployment are very much in your control, and they are key to a proper scaling effort. Thus, being able to show your mastery of these things –even in the abstract—is a powerful attractant to ramp up investors and large-scale investors alike.

The first task is to set out in broad strokes how the scale capital will be deployed. This can be well summarized using a visual chart with time running along the x axis. Show your uses of capital in a visual sequence. Show all the ways you are creating supply (product) and demand (via innovation, or via the big levers to growth). A few minutes spent going through the exhibit should summarize resource deployment.

Now layer in key timing. Answer: why will your brand (whatever it is) now properly resourced, scale up in a way that’s both rapid and orderly?—both, not one or the other. Whatever levers you are using scale capital to charge ahead with, make very clear your reasoning. Don’t take refuge in jargon. Don’t cite industry-wide growth trends. Don’t be optimistic. Testify. Say why you (and only you) are set to take the stage and torch the place.

Good example: “Today we are in two regional prestige accounts with five products and in both have had the highest stock turn rates of any product in-category for the last 50 weeks of data. We just signed a deal to co-create a limited collection with an A-list celebrity. We are close to signing a deal with a luxury hotel group to distribute our products at their spas and in their suites. We have a pipeline of killer new products, some of which we tested in Sephora and sold out in two days. We are the only brand with a product like ours and will be for quite some time. Our biggest challenge now is to meet growth in demand, and our resource deployment slide demonstrates an orderly and rapid path to doing just that. It’s go time. We would value you as an equity partner because of your experience and your team, but with or without you, we are going to raise capital and scale this business.”

If you feel the above is bravado I suspect you wish you could say as much about your own brand. That’s natural. I would rather all our clients could say those things. But then, some of them can. But don’t wish, and don’t hope – those aren’t strategies. Figure out the results you need to put on the board as a growth venture before you seek scale capital, make them your goals, then go and get them. If you don’t know what the right goals are for your brand, then that tells me you don’t have a unifying strategic principle that animates the venture. We can help with that, and the first consultation is always free of charge.

In short: being uniquely set to kill it means timing your brand’s newly fortified ability to hit the target with the target’s coming into range.

After your investor has assayed the mass of your venture, found gold, and agreed to fund growth, what remains is execution. Ready or not, the strategy part draws to an end. By now you’ve proven beyond any reasonable doubt that there is an unmet market need for your special magic act. Thus, what is left is to do the boring stuff extremely well.

How well you can deploy resources is a key factor to success in all ventures in all businesses. There are entire post-grad degrees devoted to this subject matter, so I’ll simply focus on the areas we see come up the most often.

People. There’s some debate around this point. You’ll recall it’s where we began this series. I feel that scale investors are still investing in people whether they know it or not. That’s because at scale time, it’s likely the brand has an established culture, which, good or bad, is impossible to conceal. If it’s good then it’s an asset to be leveraged. Even when a brand is really successful, say, $10MM or more in sales, investors are investing in the people behind the brand. Because they’re clearly doing it differently, better, perhaps with a nobler way or a higher-order devotion or brand purpose. Passion. Culture. We all want human connections and most investors do, too. I would look for teams comprised of flexible entrepreneurs, ready to pitch in to do whatever, whenever, to make things go. One friend of our firm told us about her firm’s commitment to elastic roles, people whose job descriptions were focused but still very flexible. Never siloed, cross-functional a priori of their core function.

What if the team or the culture is toxic or bad? I once naively asked a private equity investor how real a deterrent a bad team might be. Their answer: none at all if the brand is good; after the trade we simply fire the bad people and bring in new ones, and that’s a lot easier than tackling problems with the brand, or bad price/value or supply risk or changing consumer tastes. What could I say in reply but fair enough, because they’re right.

Good operations: Scaling a business requires you become better operators. Making sure you are able to ship an order for 1,000 cases on time where before you would have shipped 800 and incurred a penalty. Bringing forecast error down and managing your lead times better. So that you don’t run out of product and handicap your business for a quarter. So that you don’t carry too much inventory and be forced to do a burn in costly, brand-dilutive seasonal events or discount retail. So that you don’t put the balance sheet under stress. Sure, it’s boring. But making more money isn’t. Want to make more money? Invest in and learn how to use an enterprise resource planning system, like NetSuite. Most managers in hot consumer categories can’t even bring themselves to say those words, but then, most ventures fail, don’t they?

Point being, finance and IT matter. A lot. Often relegated to the back office—mentally, figuratively, literally—these are the people who keep order. Like cops, firefighters, or Tyler’s army from Fight Club, they guard you while you sleep. In my experience it is the mark of the good leader to care deeply about them. I think it is equally the mark of those without leadership potential to be dismissive of them, unaware how vital they are to their firm’s success. The controller is the single most important hire you can make as you go from a small- or medium-sized brand to becoming a big one. And bear in mind that the finance director you hired when your venture was young may not be the same person to get you to $200MM in sales and beyond.

On HR I have less to say. I recall an excellent HR team at Pfizer, real partners to the business. I’ve seen excellence in HR at other big client companies, too, Disney comes to mind. But at small-to-medium firms, I think the growing trend of outsourcing HR makes sense. Done very well, HR can be a beacon of safe, welcoming light. Done by anyone but A-players, HR often becomes little more than the law enforcement branch of a warped judiciary—Machiavelli minus the intellect. A-players cost money better spent elsewhere on the business.

Great leadership. If scaling requires doing the quotidian very well, then surely it is the role of the CEO and her team to make the mundane exciting, getting people to see their vision, love what they do, and feel good doing it. The CEO needs to motivate and inspire at least 80% of the workforce for a company to scale well. That’s leadership. If you don’t have 80% of the team believing in the CEO, you should seriously consider replacing the CEO when it comes time to scale. And in general, the team you keep on to scale the business should all be people who can lead: formulate an idea, articulate it well, convince others, execute. What else is there?

Read the full series What Investors Ask Our Clients:

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