Over the past 22 years, I've met with and offered advice to - probably over a hundred Founder, CEO's from companies from start-up to multi-million turnover. 99% of the time, I've never asked for, or expected payment. I've viewed it as a bit of 'giving back' to people who might benefit from my learnings in building King of Shaves over the years.
Now I'm no longer CEO, I've met more companies than ever before, many beat a path to my door via Linked In, asking me to accept their connection request (even though we've never met, or fleetingly chatted) and then for what I can only call 'free advice'.
This post isn't about that. This is about people I've met, with grand aspirations for their business, which all start off well, but by the end, when I get down to asking them about money to fuel their grand ambitions, grind to a halt.
Here's why. And why this is such an important 'learn' for these people.
They all have champagne taste. They all have beer money. Then expect champagne for free!
A lot of this I put down to the internet. Via this amazing piece of digital infrastructure, we're used to getting stuff for free. An image grab here. A 'copy & paste' there. Research lifted. Free social meda. Free apps (OK, many with in-app purchases). Everything's cheaper. Everything's trending to zero. And this 'money for nothing' culture then, by a process of osmosis, infects their attitude to doing business.
Business is about money. And making money costs money. Anyone who has started up a business will tell you it cost money to get it started. It's tough starting a genuine business with zero spends.
So, this is how a typical conversation/meeting/discussion might go.
Them: "Will, we'd love to meet. What you've done with King of Shaves is amazing. Can we pick your brains about how you did it. You might be able to help us!"
Me: "Nice to hear from you. Happy to spend 30 minutes with you, see where you're at. You never know. I might be able to help"
Then at the meeting:
"Them: "We wanted to be Entrepreneurs. So, we've had a great idea. It's this _________ . What do you think? What would you do? How would you develop it? Got any tips? How do I get people to know about it?"
Me: "Looks interesting. What have you spent your money on so far? Where are you?"
Them: "Well, we've got small offices, some part time staff, obviously stock (typically companies I meet are product companies) and a lot on the design, you know - web, branding. We've got a few stockists, and a couple of the big retailers are interested in us. But we need to increase our sales. How can we do this? You know, a viral. Like the stuff you do. Or that Dollar Shave one."
Me: "So, you've got stock (read dead cash). You've got a few stockists. You've spent on the design, branding. How much, approx?"
Them: "Um, well - it was a bit more than we thought. Say £20K on the design, and another £50K on stock. All in, we've probably spent £100K. But, we're in a few stockists. But sales are slow. We thought the product would sell, but it isn't at the level we predicted."
Me: "How much have you invested in getting your product to sell?"
Them: "Well, we've run out of money - that's why we wanted to meet you."
Me: "Why haven't you treated marketing & publicity/advertising investment 'cost' in the same way as you have for everything else? Did you think people were just going to 'buy it' because it's there.
Them: "Um.... Well, marketing is expensive, isn't it? We don't have the budgets."
LET ME END THERE.
Start-up founders. Wannabe Entrepreneurs. Seasoned SME businesses seeking scale up. It's like this. YOU HAVE TO ALLOCATE A PROPORTION OF YOUR EXPENDITURE ON INVESTING IN MARKETING YOUR BRAND/PRODUCT/SERVICE TO DRIVE AWARENESS OF IT AND DESIRE FOR IT.
No ifs. No buts. The next time I meet a team, and ask them what their 'budget for the project they'd like me to help on is' if I hear "well, we don't really have a budget for it" I'm going to walk away.
I REALLY AM.
My wife, Tiger Savage - who's spent her life working for global agencies on massive brands including (and I kid you not) Adidas AND Nike; BA AND Virgin; Becks AND Krug. Isobella Rossellini AND Lynx - no longer rolls her eyes. She just lets the meeting end (if she's sitting in on them, which she often is) and says "WHAT A BUNCH OF IDIOTS." They expect something amazing, for no money, or even if there is something, what they want for what they've got - is never going to work. "Will, why is it everyone has champagne taste with beer money?"
So, here's a tip for anyone who's reading this, and thinks "You're talking about me!" (you may never admit it, but secretly you know I am).
- Before you spend money on ANYTHING ELSE (incuding lawyers, accountants, part-time helps, interns, externs, office desks, furniture, computers, mobiles (everyone I meet has the latest high end smartphone) and anything else, decide how much MONEY you are going to actually fuel the CAR you're building with. Because, however compelling it is, and however many people might buy it, NO ONE will buy it if its in a dark garage, door closed and no fuel in the tank. NO ONE.
You get the metaphor I hope. A car is useless without fuel. A garage is dark without the door opened. So however amazing you think it might be, it'll go nowhere and get seen by no one without you dipping your hand into your pocket and filling it up with fuel.
In the consumer product space, let me be clear about costs of marketing. They're typically between 20% to 50% (YES 50%) of sales. A blend might be 25% When you're in start-up or early growth sales, they might be 100% of sales (YES - loss making - YES - volume building - if the product is good).
So, if you're raising £1m to get your business going, expect to spend between 20-50% of that on actually MARKETING the business. Clearly sectors are different. Some do their marketing so cleverly and creatively, that it can be a fraction of this. But these are the proverbial hen's teeth. Not everyone comes up with a product name pivot to 'meerkat' and captures the zeitgeist of the moment.
If you've got beer money, expect beer.
Quality people work for fee, never for free.
Treat marketing as your #1 expenditure line, and ensure it doesn't start with £0.