Indie Brand Builder: how to build a successful business online

Kevin Mako is a leading expert on hardware startups.  He is the Founder of MAKO Design + Invent, the pioneer firm for providing world-class end-to-end physical consumer product development tailored to inventors, product startups, and small manufacturers.  Est 1999, Mako Design is a 30-person team with offices in Austin, Miami, San Francisco, & Toronto, has developed over 1,000 products for clients and has earned over 25 design and business awards including Red Dot, Inc5000, Entrepreneur360, Indigo Gold, Creative Pool Gold, Best Places to Work, Lux Magazine Best Design Firm in North America, and many others.  Kevin lectures at the Masters of Engineering program at Ryerson University, sits on a number of entrepreneurship and education boards and holds the Duke of Edinburgh Gold Award designation. He is the host of The Product Startup Podcast, the hardware development industry’s leading podcast.

The financial formulas for scaling a consumer product business are really only applicable if your goal is to build a scalable venture. If you're just looking to run a lifestyle business you can disregard this article -  but if you want to build a scalable consumer product business,  these are the numbers that you need to understand.

Use the financial formulas to compare the efficiency of each channel in your consumer product business and increase or decrease your resource allocation to the most efficient channel or customer segments.

So you’ve got your amazing product idea, and maybe you even have a prototype. But now you’re considering larger scale manufacturing and you’re speaking with factories that are halfway around the world where English is not the native language. You’re also talking about spending tens of thousands – or even hundreds of thousands of dollars on your production run, and it’s starting to dawn on you how much could potentially go wrong – and how much those mistakes could cost you! 

One of the most important factors in the factory/designer relationship is how you communicate your product requirements. And that’s where TECH PACKS come in.

Belinda Jacobs is a technical fashion designer from London (now based in California). She had her first job in fashion at the age of 15, stapling swatch cards together! Belinda has been designing & creating tech packs for more than a decade for household brands and independent designers alike

Thinking of auditioning your business to appear on a show like Shark Tank or Dragons Den? In this episode, I cover SoYoung's experience from the audition to taping to the deal itself. 

Hiring decisions are some of the most crucial decisions you will make as a small business owner. A great employee can take your business to new heights and open up new opportunities for growth, while a poor hire can set you back months and thousands of dollars, causing undue stress and frustrations.

In this how-to podcast, I’ll lay out a step-by-step hiring process for small business that will help give structure to your decision making and increase your odds of bringing on a great employee.

Julie Ellis a co-founder of Mabel’s Labels, one of Canada’s greatest small business success stories.

Back in 2002, Julie and her three partners Julie Cole, Cynthia Esp and Tricia Mumby decided  they could do better than the scribbles on masking tape that were being passed off as labels to keep track of for kids clothing and personal items. So, after much research, they brought a brand new product to market in the form of personalized waterproof name labels and tags. From its humble beginnings Mabel's Lables has grown into an award-winning, market-leading company loved by Moms and kids alike.

Mabels labels was recently sold  to paper and label giant Avery Labels which lead to Julie’s exit from the business she had founded and run for nearly 15 years

Julie is now entering a new phase of her career as she shares her experience and expertise with other entrepreneurs helping them gain clarity and accelerate their success.

Mabels Labels hadn't been looking to sell the business when they were approached by Avery but quickly realized that the idea acquirer “checked all the boxes” and helped them address some big questions: how they would finance further growth and who of the 4 founders would ultimately lead the company.

Julie adds that what’s best for the business may not be what’s best for you personally and what you would do as an autonomous leader is much different than what you would do as part of a 4-person team

While selling a business is often the end goal for many entrepreneurs, the experience can be bittersweet as it was in Julie’s case. As someone who is used to giving 110%, she says it took her at least 3 months to accept the idea that she was able to take some downtime.

Want to quickly ramp up your sales while generating extra cash to finance your next production run? Then it’s time to grow your global distribution channel.

Finding distributors for your products in foreign territories may seem like an overwhelming prospect if you’ve never done it before, but it’s certainly possible.  SoYoung now has distribution in 8 territories including Mexico, Australia, The Netherlands, and Korea – with more in the works.  In this week’s post, I cover the pros and cons of distribution and outline some of the best ways to find distributors in foreign markets.

Distribution means granting the rights to sell your products in a specific region to another business entity or individual. This is typically done to cover a part of the world in which you have a limited presence and lack the internal resources or knowledge to cover the region. In essence, you are outsourcing the management of your brand in that region to a 3rd party who will handle all sales, fulfillment and management of customers in the defined area, for a defined period of time.

The most obvious benefit of growing your global distribution channel sales is that it increases your bottom line. These tend to be large bulk purchases that can instantly add zeros to your revenues. They also tend to be repeat purchases.  Since the distributor has more skin in the game than your typical retailer skin, they will be more invested in growing your sales in their territory, leading to predictable increases over time.

Distribution gives you access to new markets with relatively little investment. Typically your distributor in the region is assuming all the risk for launching and selling the product in that territory.  This allows you to increase your overall brand presence while outsourcing most of the work involved.

While the agreement may be exclusive, typically a distribution contract includes a clause that allows you to end the agreement with a certain amount of notice and or at the end of a certain time. You may continue to maintain the relationship indefinitely, but if you plan to eventually own the region yourself, you will have already established a brand presence as a foundation for further growth.

Unlike a wholesale relationship, a distributor will typically purchase your products in bulk and have them shipped directly from the factory. Usually, a distributor will pay you a deposit towards an upcoming production run that you can take to the factory to help finance production. With the net new sales that the distributor is projecting, you will also be able to increase your minimum orders which may increase your buying power with your factory, lowering your manufacturing costs or simply making a manufacturing run possible.

While it is tempting to view distributors as a low maintenance sales channel, this may not be the case. All relationships require some level of administration and management. Distributors may negotiate for better pricing when they get some traction or may have issues specific to their region that you have never dealt with before. Also, if a distributor is underperforming, you may be tasked with the uncomfortable process of ending the agreement.

While distribution is a generally a lower risk channel – since you are taking distributors orders and deposits to the factory – it is also a low-margin channel. Distributors will typically ask for a discount off of your wholesale price that can range from anywhere between 25% to 50%.  Assuming you have the margins, this is the price most brands are willing to pay for guaranteed sales. However, when looking at your overall financial results, you will see a serious hit to your gross margins as a result of increased distribution sales.

Because of the size of upfront investment a distributor is making in your products and building his own infrastructure to sell them, distribution agreements tend to require a much higher level of legal rigor than a standard wholesale agreement. Also, in entering foreign markets, you may be required to purchase trademarks and website domains in those regions as well as actively defend them when necessary.

Many distributors attend trade shows looking for new products to represent in their home market. If you are able to attend some of the leading international trade shows in your industry, you may find yourself being approached by foreign distributors interested in your product. This is also a rare opportunity to meet face to face with people who live far away and get a better sense of whether they are a good fit for your brand.

Another way to find distributors is through online research. Look for complementary brands – not direct competitors – and research who they are working within various regions. If they are doing well, they are likely attracting the most successful distributors in foreign territories. Find the distributor’s website, reach out and see if there may be a fit.

If there is a retailer in a target region that you feel would be a good fit for your products, ask them who the best distributors are. Retailers are on the front line with consumers and make the ultimate decision whether to stock products, so they will have a good idea of the landscape and which distributors are doing well. If possible, you might consider securing an anchor retailer in a region in advance of a distributor. This will allow you to test the market and hopefully provide extra incentive to distributors by proving there is demand there.

As you attend more trade shows and get to know the lay of the land in your industry, you will make contacts with other brands in your space. Leverage these relationships to trade industry knowledge and see who other people are having success with and how they are approaching the question of distribution. You may get some good contacts and feedback on what is working and what is not

Finally, SoYoung receives unsolicited distribution inquiries from people who have heard of the brand and visit our website. Have a page or paragraph that speaks to potential distributors and who to contact, then have a process in place for vetting and dealing with distribution inquiries.

Nothing trumps experience when it comes to distributors. While a new company may have a lot of enthusiasm and gumption, they may be unrealistic about what it will take to launch a new brand in a new market. I would strongly suggest looking for people with a track record to work with when entering a new market.

The biggest value of a distributor is their ability to get you into retailers that can quickly establish your presence in a new market. An established distributor will have a network of retailers that they are already working with and to whom they can sell your products along with the products they are already representing

Make sure that the distributor has experience in your product category and has dealt with complementary products. There is not much value in working with the distributor who will be peddling products that compete with yours or are in a completely different category. 

Get a feel for what the distributor really thinks of your products. Has some detailed questions about what they think of the product and make sure that they have a good understanding of what makes your product unique and different. Are they just looking for a quick sale or are they truly passionate about the products? Do they believe in the brand vision to the point where they will weather adversity to ensure the products are successful in their market.

Over the last seven years, Joseph Hanson has built and sold four e-commerce based companies and is currently a managing partner to three businesses that help sellers succeed on Amazon Buy Box Experts, Prosper Show, and Marketplace University.

It was Joseph’s experience as an Amazon expert that put him on my radar, So I’m excited to get his insights on what for SoYoung is of one of our single biggest revenue sources also  the most frustarting and confusin channels and platforms that we deal with.

1. Brand equity: Brand equity on amazon comes through

• Search

2) Managing counterfits and knockoffs

3) Having transparency or understanding how profitable their SKUs are and how each product is performing can give you a big competetive advantage.

If you want to control the way your products are displayed on amazon you need to either

• Invest the time required in really owning your Amazin presence

55% of consumers start a product search on Amazon, so you need to be there

At the end of the day price is going to be the biggest determining factor in where people choose to purchase their products. If they’re prime members, that will be a huge incentive for them to purchase directly from amazon

Amazon prices reactively and you can’t set a MAP with amazon.  If you’re having MAP pricing issues on Amazon, it tends to be because you have distribution problems, selling to grey market people who are then not honoring map, forcing Amazon to do the same.

Key to controlling your Amazon channel is having airtight distribution and reseller agreements in price.

James founded the Prosper show to address the needs of Amazon sellers and help them with an educational based show with a level of transparency that discourages self promotion in favour of real objective education on how to best leverage Amazon.

If your products have a proven audience and you are ready to start driving serious traffic to your site, the 2 biggest games in town are Google and Facebook.  In assessing Google vs Facebook advertising for consumer product brands, I’m going to share my experience in marketing our line of lifestyle bags. Other products and businesses may experience very different results

We primarily rely on Google and Facebook for top-of-funnel activities. In other words, this is where we first lure a potential customer to visit our site. To align with this goal, we set up all of our campaigns to prioritize click-throughs to our products.

For a full explanation of the marketing funnel and some examples of other techniques we use see the post:How to increase website traffic and conversions

We do not have a good way to track the ultimate effectiveness of various types of traffic, since we assume that a first time visitor will make several more visits before actually purchasing a product. So, by the end of the sales funnel people may have come through one channel, been retargeted by another and then Googled our brand name to make their actual purchase.

We also use a service called Criteo for retargetting, which does offer better tracking of purchase activity. However the majority of our “new” traffic comes through Facebook and Google. I will not be covering Criteo here but may in a future post.

I’ll start with Google because they are the incumbent, and for many years have dominated the online ad space.

Google’s unassailable advantage is that it owns the world’s most popular search engine,  giving it the ability to target people as they seek a product just like yours. Someone who enters a search query tends to be a much more motivated buyer than one who happens to stumble upon an ad the you’ve served. Because of this, some businesses can build a very valuable stream of traffic off of just a few key search terms.

Google’s advertising products have the ability to reach 90+% of the sites on the internet.

Because it is free and extremely powerful, Google analytics has become the defacto standard for tracking your online traffic and performance. Google’s ad products integrate seamlessly with Google Analytics to provide a single dashboard for assessing your campaigns, though you will probably end up spending a significant amount of time in the Adwords dashboard also.

Google’s wide variety of products can get a bit confusing, especially as they continue to evolve under new names and with enhanced features. I’ll just cover the main concepts/products that would be relevant to indie consumer product brands.

Adwords/Text Based search campaigns

Google Shopping/Image-based search campaigns

Video

Remarketing

Google does offer phone support and will even assigned an account person to help you optimize campaigns. My experience with their support has been mixed however (see conclusion below). The in result for me was spending a lot more money to achieve essentially the same results – despite the best of the ad words team.

I’ve found Google to be significantly more expensive than other platforms, however, we are in an extremely competitive category. Terms like “backpack” and lunchbox are simply too expensive and generic to be effective for us. This will likely be true for many lifestyle products that are differentiated primarily on the bases of style or design.

Search marketing can be very valuable to a brand targeting more niche/less competitive terms. If you fall into this category, you can use google Adwords to get a better understanding of which search terms are most valuable to you and double down on those to reach the most valuable traffic.

Part of the reason google has become more proactive whit their customer support is that their interface has become monumentally complex as they’ve layered in more products and features. (apparently, a redesign is in the works) While the AdWords is learnable with some coaching and dedication. Many people who don;t see results end up wondering if google simply ineffective for their products- or don;t know how to run them right.

I did fall into the camp who was wondering if there was something I could do to achieve better results, so when Google called and offered to help me build optimized campaigns, I jumped at their offer. Unfortunately. The campaigns Google built were a complete dud and Google’s account team came off as a bunch eager sales beavers who, while they understood the interface, did not show a good understanding of marketing. They also overspent on our assigned budget and offered poor account management to address the issue.

Facebook’s advertising platform has come very far in a short period of time and continues to evolve at a rapid pace. For anyone looking at advertising online, Facebook deserves a serious look.

Compared to google, the facebook ads interface is surprisingly simple. This is largely because facebook advertising is built around audience demographics, which are a predefined set of attributes, rather than keywords, which are potentially endless.

Facebook’s ad interface also allows you to reach other platforms such as Instagram and third party sites. You can easily upload videos or create ads with multiple images.  Facebook’s mobile app for advertisers is surprisingly good and allows you to make quick edits to your campaigns on the fly.

If you have a clear idea of your audience characteristics, as we do, facebook offers powerful tools to target them. For instance, I can target women age 27 – 45 with kids between the ages of 3 and 10 who have a university degree, enjoy shopping online and appreciate fashion.

Facebook also has a feature that allows you to upload the email addresses of past purchasers called lookalike audiences. This, in turn, will scan Facebook’s database for the unifying characteristics of your audience and look for other potential users that will match with them. I’ve used this feature and, while it sounds cool, it has not delivered a lower cost per click.

For us at least, facebook traffic is much less expensive than Google’s. According to facebook, our cost per click is a low as $.35 – but in reality, only about half those clicks translate into website visits, at least according to Google analytics. However, even at twice the cost, a click from a Facebook ad (some of which may appear on sites beyond facebook) is still less than half the price of a Google ad.

Facebook only allows you to upload images in sizes that fit its platform’s strict format. Also, your image cannot have more than 20% of its area covered with text or your ad will not be approved. Headlines and text must confirm to facebook’s standard format.

Since our products sell primarily on visual appeal I’ve found that our lifestyle images do well on facebook. I haven’t had much issue with the limitations, whose intention is to keep ad quality high and non-spammy. Depending on

What Facebook calls traffic and what Google calls traffic are not even close.  I have more trust for Google analytics then what Facebook cause a click to our side. Essentially we see a large proportion – like 50% or more – of clicks unaccounted for, leaving me feeling a little bit skeptical of Facebook’s reporting.

Facebook tracking code – or “pixel” – seems spotty and mostly useless in terms of tracking convrsions. However, we are using the old version of the pixel which has since been updated. I’m in the product process of migrating to the new pixel and may update this post if and when it is up and running

There is absolutely no way to contact Facebook by phone. Any issue you might have will require submitting an email through a standard form, to which you may or may not receive a reply. I did receive a call back from a Facebook person at one point after sending an email inquiry and she extended an offer to call her anytime I had a question – I have often a regretted not noting her number.

In the battle of Facebook vs Google advertising, Facebook has proven a more cost effective way to drive new traffic for our business. While there is no definitive across the board answer as to which is right for your brand, my impression is the Facebook is better suited to brands like ours, who are able to arouse interest with compelling lifestyle images or a catchy and novel value proposition.

If you have a very strong content strategy and are publishing regularly around your products, you might also find that Facebook is a good way to build relationships by promoting your content – this is not something we have invested much in, but I have seen other brands very successful with this approach

• Professional Voiceovers: $200 We hired a premium voiceover artist. There were others out there that were much less expensive that probably would have done a comparable job.

• Sony A6000 Camera: Aprox $600 – shoots great stills and video, and includes autofocus in video mode

The first task is creating the script that will form the voiceover of your video. You should cover all the distinguishing features of the products and your brand. If possible you should aim to keep your video less than 60 seconds in length as attention spans on the web are short! This works out to about 100 – 150 words.

As you’re crafting  the script, focus on demonstrable benefits and facts. Avoid superlatives,  (“amazing” “incredible”, premiere”) as they tend to undermine credibility when coming from the brand or manufacturer. Be conscious of how the script will flow by picturing the accompanying shots. Order the descriptions of features appropriately to any scene you might shoot.

I would suggest checking out a service like https://www.fiverr.com, where you can preview a number of voiceover artists and choose the one you feel is best suited to your brand. A pro will generally cost more than $5 but will still be a relative bargain.

They should provide you with a fully edited, professionally recorded file which can be inserted directly into your video.

There are three tasks associated with the planning phases

1. List of Shots
   

If you want to elevate your video to the next level, I would strongly suggest shooting each major scene from at least two angles. For instance, we shot Catherine packing each bag from the side and the top, which allowed us to cut the shot in the middle of a movement, giving the video a more professional look. You will need to be aware of consistency between the two shots by rehearse the series of movements being performed.

Lighting is the other thing you will have to check. If you can find a space with natural light that is ideal. If not, you may want to bring a floodlight that can be pointed at the shot. If using natural light you will again have to keep an eye on consistency. If the light changes you may have to reshoot previous scenes.

Finally, review all of your shots on a computer before you wind up the shoot to insure you have the shots and quality you need. It’s a lot easier to redo a scene.

This is potentially the most time-intensive part of the process. However, if you’ve planned your shoot well it should be fairly straightforward. Once you get the hang of it, editing is a lot of fun, so consider this a great opportunity to learn a cool new skill.

If you are on a mac, iMovie is perfectly adequate for editing your video and is bundled free with your system software. If you are on a PC there are a number of inexpensive options available. Here is a list of video editing applications under $100 http://www.tomsguide.com/us/best-video-editing-software,review-2167.html

I won’t get into the basics of using video editing software as there are many tutorials out there, including this one for imovie https://www.youtube.com/watch?v=GKu5p4e4CbY )

However I will give you some tips on the general workflow we used specifically for editing a product video:

• Start by importing the voiceover recording, and use this to define your timeline.  This will provide the guide for all your edits.

Once I have a rough edit, I usually will put it aside for a while and then come back with a fresh perspective before making a few final tweaks.

Background music will add mood and polish to your video, tying it all together. There are a huge number of stock music providers online. Feel free to do your own web search, but the one I use most frequently iswww.premiumbeat.com . It has a great search function, allowing you to search by genre and mood. Tracks are typically about $50.

I like to test the track using the Premiumbeats.com preview player while playing my edited video in a separate window. You can adjust the volume of the track and get a pretty good idea of how the final piece will feel.

Uploading your videos to Youtube is a no-brainer because it is the world’s second largest search engine potentially sending new traffic to your site.

Some hints for Youtube:

• Include a link to your product page in the video description to insure viewers can find you

The down side of embedding a Youtube video on your site is that, at the end of the video, it will prompt visitors to watch other videos on Youtube’s platform – potentially distracting them from the sale. While we do upload our videos to YouTube, the videos on our product pages are actually hosted on a platform called www.wistia.com. It is a paid service, but there is a free tier for up to 5 videos.

You can place the videos anywhere on your site, however I would suggest also having them on the product page,  since that will typically be where the visitor will make their buying decision. If you are using Shopify, there is a video embed button in the editor that allows you to easily add a pop up video. However, nearly every platform allows for easy embedding of video.

Product videos are a valuable tool to have in your marketing arsenal. In addition to enhancing sales on your own site, product videos can be shared on many other platforms and via your retailers to help you inform new audiences about the benefits of your products. Finally, the process of creating your own product videos can be very cost effective if you are willing to take it on yourself.