Finding the right money for your growing business is inextricably linked to finding the right audience who will pay you what your products or services deserve. As most entrepreneurs know, a growing customer base attracts investment. Being creative in your approach to these intertwined challenges is essential.
This is just one of the key themes of food business growth advice given to entrepreneurs during our January Good Food Spotlight event. At this bi-monthly networking event, impact investors and food business experts give advice to entrepreneurs presenting specific business challenges.
January Spotlight takeaways on this theme include:
1. Audience growth and expanding your appeal to more buyers means focusing on the products that are well branded and earn the highest profit. It’s hard to shed flavors, unit sizes or even whole products, but investors often seek market saturation of fewer product lines in the early stages.
- “If the specialty item has a significantly higher margin, why would you not double down on that and expand sales and the selling period,” advised expert Billy Flemming, national client executive at Sodexo. “You have created a better mousetrap – this is an unusual product. Take advantage of that.”
- Education is the key to building the market, says expert Liz Mazzei of Liz Mazzei Small Business Marketing – and mixed messages don’t sell. Packaging is a differentiator and can allow for higher price points. Whenever possible, narrow the sales channels to those with high volume potential.
- On food service opportunities, Fleming advised that although some high end accounts (e.g.: law or investment firms) desire premium-priced goods, be ready to provide significant vendor discount allowances (VDA) commitments. “Food service margins are extremely thin, but the volumes can be high,” he said.
2. Similarly, entrepreneurs can segment the kind of money they accept, advised expert Doron Goldstein, Esq, a partner at Kattan Muchin Rosenman, LLP, and a Slow Money NYC board member. Specifically, seek an investor who is also an advisor and has experience with the extensive challenges of your particular business.
- “Slow Money investors are eaters first, investors second,” he said. Many impact investors are interested in playing advisory roles, although there are also those who prefer to be less involved in the daily operation of the business, he said.
- There are also creative types of equity and debt financing for products that hit some key messages for impact investors – like local, farm-raised and organic, Goldstein recommended. Slow Money investors are patient enough to await the maturing of the market.
- “What you raise is typically relative to what you are earning,” Goldstein and Fleming advised. However, a powerful social mission or a new category or a burgeoning market eager for your products could add up to an opportunity to go to large equity funds and asking for market-making levels of investment.
Check out the photos from the January event on our Facebook page. Mark your calendar to join us for the next Good Food Spotlight on March 12th.