While creating some video content with PricePlow, they asked me what I would advise a client to do if they had $50,000 and a goal to start a sports nutrition brand. To some, that amount of initial investment might seem reasonable to start a business but to others it might seem extremely low. I will say that I have helped clients start with less and I have helped clients start that used more than that amount on initial label production and packaging design. Obviously, more capital provides opportunities and risk insurance but I wouldn’t jump to conclusions that its always superior to bootstrapping your initial phase.
I thought this subject would be interesting to talk about because I have been seeing a surge in paid social marketing by contract and private label manufacturers. The marketing copy on their posts usually has some mention of “start your supplement brand today for very little investment.” I am all for provocative marketing copy but I can’t imagine they are getting the type of conversions the newly hired marketing team member or agency sought out. I speculate this because when I first started my consulting company in 2012, I had talked to a lot of people that were “green” to starting a business, the sports nutrition category, and all the nuisances of consumable CPG. Looking back, all that time talking to aspiring Marc Lobliners, Aaron Singermans, and Andy Frisellas, were great practice in thin slicing potential pre-revenue clients.
Regardless, can you really start a sports nutrition brand today for only $50,000? Simple answer, as I mentioned before, is yes.
So what do I suggest as a game plan? Start with some self awareness. Any successful entrepreneur needs to understand their strengths, weaknesses, and what is truly driving their decisions. If they are deficit in something extremely important, look to find a partner(s) that is strong in those areas or frugally outsource to keep your equity. The aspiring entrepreneur should also have a sense of their aspiration level with the business. Do they want to simply make a decent living? Do they want to grow it to a mid-sized domestic brand? Or do they want to transform the market with some multi-national corporation? Those goals all take a different level of fundamental knowledge, confidence in executing tasks, and risk assumption.
I could talk for days about needed entrepreneurial skill sets with starting a brand in 2018 but lets focus on how I think you should spend the $50,000. **For assumption sake, we only have $50,000 and we cannot negotiate lines of credit.** I always K.I.S.S. (keep it simple stupid) when giving initial advice. That being said, are you a science person or are you a creative/marketing person? Whichever you are, I would allocate 60% of your budget to that area. The remaining 40% would go to the other side of the equation. Why? That will keep you aligned with your strengths at launch and give you a better probability for success.
- 60% (or $30,000) to product development
- 40% (or $20,000) to creative/marketing
A science-confident entrepreneur starting a sports nutrition brand will likely have strong ideas on product development. That is why I suggest having more allocated to your manufacturing budget because you will want to either have more flavors of your flagship product or a few different SKUs if you are really savvy with which contract manufacturer you select. What is the typical minimum order quantity for a custom formulation? It varies greatly depending on manufacturer, manufacturer’s core competencies with your proposed formulations, and that manufacturer’s belief in you as a business person. The more savvy you are in this area, the further you can spread that budget. Are you going to have to give up certain “wants” with having such a small budget, certainly! Does that make it impossible to find a suitable small but trusted manufacturer for this initial phase? No.
I tend to preach “lean principles” to start-up clients. That means that you launch a minimum viable product that will give you a proper feedback loop with the least level of inventory to sustain cash flow positive operations. That does not mean you come up with a shitty product formula, taste, or a label that looks like you drew by hand. It means that you still create a product that is 80-90% “perfect”, you buy at MOQ (if suitable for price analysis), and you send it to market. The market will then give you a feedback loop. The great thing about digital Millennials are they love giving feedback! Trust me, sit back and embrace it and you will see needed pivots or opportunities to double down on your next phase.
**I will cover the other side of the equation below. Obviously budgets change but strategies and tactics generally follow a similar map in this example. **
- 60% (or $30,000) to creative/marketing
- 40% (or $20,000) to product development
A creative/marketing-confident entrepreneur starting a sports nutrition brand will likely have strong ideas on brand development and digital marketing tactics. I say “digital marketing” and not just marketing because I suggest anyone in this budget range to only start direct to consumer and Seller Central Amazon. That means, you are building your brand through owned, earned, or paid digital media. I think most of us probably know what I meant with those marketing buckets but as a recap, owned is your website/social/Amazon listing, earned is UGC/influencers/reviews, and paid media is social ads/PPC or anything you actually have to pay for that isn’t performance based commissions.
Now, there can be two subsets of the “creative/marketing person.” First, that person is looking to create a lifestyle brand. This is all about brand storytelling and appealing to an emotion. You are about creating an experience that resonates with a consumer group and every content decision will be geared toward reinforcing that lifestyle. Alternatively, that other person is decent at brand development but they are much better that building digital marketing funnels that can exponentially grow online. These are the Amazon-only brands you look at and scratch your heads because you have never heard of them but they are doing 7-figures a month on 60% gross margins. This is a much different skill set than creating beautifully presented lifestyle brands. In very rare occasions, you have both, but usually that is for brands that are either a bit bigger in start-up funding or is a 2+ partnership team with strong applicable experience.
**I covered the other side of the equation above. Obviously budgets change but strategies and tactics generally follow a similar map in this example.**
What didn’t I cover in terms of needed skill sets? Be a good communicator. Regardless of science or marketing-confident, you have to be a good communicator. I say communicator but I really mean salesperson. Life is about “selling” people on your vision, product, etc. Without being a good salesperson, you will reach a very low plateau that will be difficult to overcome unless you bring in a partner that is extremely proficient in that area.
Finally, I wish all you aspiring sports nutrition supplement “moguls” the best of luck. You are entering one of the most competitive CPG niches in the industry. If that scares you than this world isn’t for you. It is exciting and you should enjoy the ride. It is truly one of the few hyper growth capable industries that can be explored with light capitalization.
Please note: This article is over simplified and there is obviously other cost allocations and advanced tactics/strategies that I did not speak about or give enough words. If you have questions or comments, please comment and I will either answer or write about it in another article.