In a recent article, Rebecca Minkoff, an American fashion entrepreneur, shared her biggest mistake about money when she started her business. According to her, she overestimated how fast her business would take off. She purchased stock even before actual orders were made by customers, invested in shooting fancy lookbooks and provided clothing in multiple sizes. This strategy lead her to burn her cash savings much faster than anticipated. And her major learning was that she could have gotten the business off the ground with less capital. Furthermore, it is absolutely necessary to focus on getting orders first before providing the most perfect product. It sound so basic, but a lot of first-time entrepreneurs lose sight of this simple fact.
I can 100% relate to the mistakes Rebecca Minkoff made. I made similar ones. As a first-time founder, timelines and capital expenditures are very difficult to assess. I thought I can take a fitness app with the relating brand off the ground in three months and that I would be profitable within year one. While it may be possible to code an app within three months (depending on the features), I quickly learned that shooting fitness videos and pictures, coding, testing, assessing the legal landscape, branding and marketing would take much longer than I had expected. Similar to Minkoff, I was too confident about how fast the business would take off.
I also anticipated things instead of letting my customers decide. When I started with the fitness app, my strategy was to offer a perfect product right at the launch. There is nothing wrong with perfectionism. I still strive for perfection. However, I use a more realistic point of view.
When I became an entrepreneur, I had just left a job at a big company. I knew that my spending approach had to change drastically as a business owner. But I had little knowledge about industry rates. My biggest driver to spend money was my perfectionism. For our video and photo shoot, I hired a whole team of experts – a fitness trainer, a professional camera team, models, a make-up artist and photographer. On two shooting days, we filmed over 60 short video clips and shot a big amount of pictures as well. Along the way, I learned that like Minkoff I spent money on overly fancy things and that I could have probably achieved a similar or even better outcome by spending less capital.
My motivation was to look like a big brand while only spending a start-up budget. When I started the business, my main competition was established brands such as Nike and its Training Club. But when the videos were ready, I realised that a new type of competition had emerged: people like you and me filmed videos of themselves working out at home. They just used their phones and shared them on platforms like Instagram (or WeChat in China). Even though they were not professionals, people loved that type of “product” and they were able to build a large following at virtually no costs. My videos looked very professional – in line with my aim to build a great brand. However, it was not absolutely necessary. I could have used the capital for other areas such as marketing.
Now I know that a product does not have to be perfect when it is launched. (Disclaimer: It always depends on the product and the industry and the specific business case, of course.) I wanted to present the perfect product to my customers. I realised much later in the development process that this approach can be very risky and pulled the emergency brakes by involving potential customers. It was just the right time to mitigate the risk of building a product which may totally be irrelevant to the market.
As I discussed in my article about Minimum Viable Products (MVP), the key is to have a great product which people love and want to use on a regular basis. While you build your customer base, you improve the product step by step. Let your customers know that their opinion matters, listen to it and incorporate it. The advantage is that you avoid spending a lot of money on features which might be unnecessary or even useless to your customers. And as you know, we all love to talk and share your opinion. If this opinion is then taken into account, your customers will be really happy. And the best part is that you get this customer insight for free if you just listen.
I think a good strategy for start-ups is to take your customers on your journey. There is no shame in saying “I’m a small business”. I realised that my customers, readers and followers actually appreciate the behind-the-scenes. Therefore, I have become much more open and accessible about the background of this blog (the postcard-series being part of this) and my online shop Pelagona. Because in the end, I develop the products and services for you.
So if you have any recommendations, wishes or remarks, please feel free to send me an email or contact me via my social channels. I look forward to hearing from you!
Have a great week ahead!