Turning a sweet start into a smart start: Making money from honey with your start up business
What happens when your small side business suddenly shows a whole bunch of potential? How do you turn a hobby into the startup business of your dreams? On The Money Show with Bruce Whitfield, Pavlo Phitidis chats to the founder of Honey & Co, who is facing this unique set of circumstances in their business journey and outlines the all-important questions you need to ask of yourself:
Why did you start?
Assessing your startup business, before you scale up, starts with remembering why you started in the first place. Ask yourself if you started this side business out of necessity, because a specific opportunity arose, or did you fall into it somewhat mistakenly? Similarly, ask yourself how suited you are the business – are you the technical whizz kid, the administrative professional, or excellent at making those sales? Answering these questions will help you to define where you intend this business to go, and decide whether you should, indeed, say yes to the big deal that’s come your way.
How did you start?
The genesis of your startup business comes from one of two places: You either came across a product that excited you, or you discovered a customer base that needed a problem solved. For Honey & Co, their gap in the market appeared when synthetic honey products flooded the South African chain stores. Honey & Co’s differentiating factor is that it produces pure, unpasteurized and natural honey, free of added sugars and synthetic substances.
How do you do what you do?
When the big deal lands for your startup business, there’s one thing you can’t compromise on – and that’s your product quality. To quickly expand your business, you’ll need to ensure that you’re equipped to supply, deliver, and live up to the demands of the deal. If you need to outsource your product manufacturing, how will that affect your product quality standards, and impact your ability to deliver on time? For Honey & Co, the quality of their product is closely linked to their reputation and the brand experience they offer is what’s made a potential big deal appear on their doorstep.
How did you get the deal & what’s the agenda?
Understanding how this deal landed on your doorstep, and what’s in it for each party is vital, and could help you make a firm decision on whether to pursue it or not. Build a relationship with your potential big client, so that you can understand their agenda and the benefits for each of you.
How can you negotiate the deal to let you build safely?
Slowly building your startup business may not feel like an option when you’re faced with the lucrative big deal, but it remains vital for ensuring the longevity of your business. Work with your customer to better understand their demands, and regulate your supply in a measured way, as you build up your internal capacity. Understanding your working capital cycle, and all the pressures that go with that, is key to being able to build a business that’s not only equipped to serve the needs of this customer but the proceeding customers too. If your customer seems to be demanding too much of you, too quickly, that big deal that’s landed in your lap may not be all it’s promised to be.
How do you fund the deal?
Finding the capital to finance your startup business’ expansion can get tricky. Consider your working capital cycle and find ways to finance your business by re-investing your profits, cutting back on your debts, and holding on to other securities that may help you finance your operations. If possible, look for ways you can partner with suppliers and customers to offer them profit margin returns, until you’ve built enough momentum to attract a potential funder. Once you’ve been able to prove your business expansion plan is working, you’ll be equipped to approach a funder, backed by evidence that you’re not a fly-by-night operation, are able to fulfil orders, and have customers on tap, who want what you’re selling.
How do you scale?
A business grows in the same way a human does – slowly, and in phases – nobody walks and graduates from University within the first week of their life, and your business can’t grow that quickly either. Recognizing where you are in your startup business development cycle will help you to act, and do the right thing, at the right time. Rather than jumping into the big deal straight away, start with a smaller-scale project, and build your business’ muscle to ensure you’ll be equipped to match up with bigger demands.
How do you compete?
Of course, as your startup business grows, you’ll soon attract the attention of competitors. It’s at that point that you’ll need to begin broadening your brand and operating ethos while scaling up. For Honey & Co, who focus primarily on producing natural honey, it may be an opportunity to work more closely with local communities and farmers, get involved in relevant marketing campaigns, and showcase their support for environmental programmes.
Don’t let the big deal take you by surprise. Chat to Aurik, and we’ll help you build your business into an asset of value.
Image source: https://bit.ly/2J7piuG