• The Astral Consulting Group

Marketing is the Most Important Focus of Startups? Think Again…

Updated: Sep 16

ACG:

So, you have just taken the leap of faith. Started your own business. Bid adieu to the stability of a nine-to-five, health benefits, and a 401(k)-contribution program in pursuit of a dream you have held close for years. You know it will be an uphill battle and the odds are stacked against you. But there is a chance at a silver lining. A chance that five, ten, or fifteen years down the line, you will wake up every morning with sincere enthusiasm to get to work. A chance to build a vision-driven enterprise that brings your creativity and expertise into the world. A chance to grow a nest egg that will provide generational wealth for you and your family for many years to come. Sure, most businesses go belly-up after only a few years, but yours is different. You have the ambition, determination, and willingness to push your business to succeed even in the face of extreme adversity. All you need is to get the word out there, and the snowball will start rolling on your path to prosperity.  Time to get real. According to the Small Business Administration, 20% of businesses fail in the first year. Another 50% will fall after five years, and only about a third will survive to see their ten-year anniversary. But of course, you already knew this. The real question is why do most small businesses fail? Chances are, if you quit your day job or otherwise have poured hours of time and resources into starting a business, you truly believe in your idea. And you should pat yourself on the back for this; it's truly a special gift in life to find something that you are so passionate about. Moreover, if you are putting many of your eggs in this basket, you’re almost certainly willing to spread the word: talking with neighbors, friends, family, and coworkers, not to mention advertising on websites and social media, ensuring that you’re getting your mission statement out there. Vision is at the core of most entrepreneurs, so they accordingly invest much of their time spreading that vision. It comes naturally as you want to share your enthusiasm with the people in your life. 


Unfortunately, many entrepreneurs fail because they overinvest their time into sales and marketing. Accompanying the expansion of platforms like Facebook, Linkedin, and Instagram is an increasing desire for social capital and approval, especially among Millennials and Generation Z. True, you learn in business school that companies like Nike and McDonalds are able to deliver shareholder value through their brand. But these two juggernauts didn’t build billion-dollar brands by concentrating their efforts on how they were perceived by their peers. Instead, they disrupted stagnant industries by delivering products of undeniable value and driving growth from understanding their financial strategy from the inside out. Phil Knight founded Blue Ribbon Sports (the predecessor to Nike) in 1964 after a formative travel experience in Japan. Knight understood that Japanese factories were able to manufacture the original Onitsuka Tiger running shoe at a cost so low it justified creating the shoes in Japan, shipping them across the Pacific, and selling them in the United States. When the partnership between Blue Ribbon and Onitsuka Tiger terminated in 1971, Knight was able to create the Nike brand running shoe and grow an empire. His key value driver wasn’t necessarily the shoe itself, but rather the supply chain that created considerable gross margins by lowering his cost of sales. In turn, Nike was able to bring much more of its sales down to the bottom line, which of course fared well with banks and investors. Moreover, Nike’s operational efficiencies created access to reliable cash flows that helped fuel its expansion.  Indeed, brand is still important to the development of a small business. It is by definition unique, and there is some tangible value in differentiation. But it is important not to become myopic around the idea of brand and marketing. At its central function, a business is in operation to make a profit. Some companies find auxiliary purposes to drive their operations, such as Patagonia’s mission to save the planet, but compelling as the idea may be, Patagonia won’t be able to save the planet if it doesn’t manage its finances properly. Even if Patagonia allocated 100% of its net profits from sustainable operations towards cleaning up the oceans, it wouldn’t be able to operate if it didn’t pay the rent at its retail locations, maintain the overhead expenses at its manufacturing facilities, or take care of Uncle Sam.  If you’re thinking about starting a business, or already have, I’ll leave you with a bit of advice. Hold onto your vision, your dream, your chance at a silver lining. It’s what will get you out of bed every morning and maintain your energy as you burn the midnight oil. Understand what is driving you, but don’t brush off the three things you need to maintain in order to get you there: the income statement, balance sheet, and most importantly the statement of cash flows. Sound financial strategy stems naturally from a comprehensive understanding of these statements and your overall financial vision.  You’re probably doing more marketing than you realize, and the number one reason businesses fail in the United States is inadequate financial resource planning. Time is a finite resource, so if you’re spending much of it agonizing over the wording on a LinkedIn post for your business, maybe allocate some of that energy towards brainstorming ways to wholly improve your business operations and financial standing. Finance can be a daunting subject, especially when the picture isn’t pretty, or you lack the technical knowledge to understand it. That's why it is important to ask for help where you need it. There is an immense amount of resources at your disposal that can help you achieve your dream, which are invaluable in challenging times like these.


Additional Resources:

More on Patagonia More on Phil Knight


The Astral Consulting Group approaches every business case with a clean slate, and applies our unique framework to build a workflow to suit each client's individual needs. Our founding partners come from engineering backgrounds, and understand the importance of reasoning from the ground up. As such, we combine this "first-principles" style of thinking with a holistic growth mindset to evaluate each case from both the top-down and bottom-up. This creates a comprehensive process unique to each solution we develop, and gives our clients insight into both the granular details of their business and the high-level strategy and vision to propel them forward.

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