Business mentoring and planning

Moulin Roty Soft Toys

Moulin Roty Soft Toys

I thought I’d pass on tips picked up on my mentoring scheme, sponsored by the City of London.

If you look hard enough, there is support out there for start-ups. It can be a lonely existence when you’re working on your own and it’s good to bounce ideas and problems off a network of people in the same boat.

Business Planning and Funding

  • Planning is crucial as the process itself raises questions and you can stress test assumptions in any financial modelling.
  • The odds of success are pretty slim, but don’t let that put you off! 90-95% of businesses fail in the first 5 years. Yikes!
  • Google analytics is a useful tool for market research and can help you gauge how much disposable income there might be in your market.
  • Fail fast, if something doesn’t work, cut your losses, don’t plough on blindly hoping for the best.

Valuing your company

I’m going to return to this topic at a later date as it was what I spent my career in the City doing. However, it is more difficult valuing a new company than an established one.

A general rule of thumb however, is that angel investors will put a maximum value of £0.5m on a pre-revenue business, up to £1m with some sales, and higher than that with a repeat, recurring revenue stream. It isn’t quite that simple as there are so many variables, but its a starting point.

What’s been happening at Sprogs Inc!

So, after a 3 month rest from this blog I thought I’d return to update you. I have been a very busy bee indeed, there never seems to be enough time in the day!

Progress thus far:

Bambie Child's Necklace from new brand Jewel Rocks London

Bambie Child’s Necklace from new brand Jewel Rocks London

Expanded the range to pick up more designers and products, making a push into kids’ accessories including jewellry for little girls, hair accessories and temporary tattoos from a Swiss designer called Tattyoo.

Twitter has been really useful in connecting with my target audience – mummy bloggers – and seeing what they are interested in, along with running a competition to encourage sign-ups to our newsletter. It’s also helped me do market research and find some of these new, emerging designers. Hootsuite is a very useful tool to schedule tweets, which then copy straight into our Facebook account. This way, I’m not stuck at my desk trying to think up new ideas constantly, I can schedule it when I’m in the mood.

Pinterest, a brand new area of effort, has helped me find new product ideas and order my thoughts, create content for my twitter and facebook efforts and will hopefully help get links into our site from an SEO perspective over time. Plus its fun and strangely addictive!

And customer orders have been steadily building!

Business Mentoring and the Power of Twitter

Tomorrow I start a year long business mentoring scheme where I will be mentored for one morning per month, for a year. I heard about this by following my local Chamber of Commerce on Twitter. This is a City of London funded scheme to help women specifically, to avoid the typical pit-falls and prat-falls as they start their own businesses. I will report back afterwards! There are plenty of schemes around so keep an eye out and get us much help as possible.

Elsewhere, I’m trying to optimise the website for search and came across this useful post as a starting point.

The good news is that we are getting customer orders for Sprogs Inc and some good feedback! Things are starting to happen! The Sprogs Inc clothing range is also en route from India and should be here by the end of the week ….

The Behemoth that is Facebook

I’ve been looking at some on-line marketing blogs, which are a bit dispiriting. I discover:

(1) SEO apparently can take up to a year of persistent effort to reap any rewards. I have my suspicions anyway that some SEO practitioners are snake-oil salesmen, and while search engine traffic is vital, it is not necessarily the best way of converting traffic, apparently.

(2) Word-of-mouth and viral marketing through social media, especially the behemoth Facebook – is very effective – apparently.

Les-Parisiennes-web2

I tried a free give-away post on Facebook and this only elicited an embarrassingly feeble extra 10 likes! Hard to compete with multinationals offering free holidays though, and such-like.

I’ve also read that less than 10% of your friends actually see your post typically (FB restricts promotions through an algorithm called Edge Rank to stop spam and users drowning in posts). Mind you there is so much conflicting commentary on the dark arts of FB and Google algorithms that maybe this is an urban myth too.

I am also wary about annoying people, after seeing some FB moaning about how its becoming saturated with advertising and product plugs (although I’m not sure why users expect FB to fund their platform for moaning, for free).

I think we will simply have to spend some money with them and see what happens!

The cheapest option seems to be using promoted posts that start at £4, and it guarantees that your page fans see it, and their friends at a sliding extra cost. It would cost around £30-40 for a few thousand to see it.

This link is useful on this topic, and on-line marketing in general.

A bit of light relief though with a big box of Moulin Roty toys arriving from France.

The Uphill Slog Starts – Marketing Budgets

I’m feeling rather overwhelmed at the moment, and working every spare moment. Still some unhelpful deficiencies in the website which makes uploading new product lines a very tedious and slow task, and now that I’ve hit 100 products, I have to upgrade to pay the e-commerce provider more for the monthly subscription.

I’ve been trying to work out what a realistic budget for marketing should be, without completely annihilating any potential profit (although of course business are usually loss-making in the first year).

So I had a quick scout of Asos’s financial report and accounts (not my benchmark sadly, but interesting nonetheless!). I see that they spend around 10% of their operating costs out in marketing, the vast bulk being staff and warehousing unsurprisingly. This equates to only less than 5% of their sales. I presume that as they now have an established captive customer base, then marketing has become more about maintenance than build-out – they do after all have 10.5m customers in the UK!

I came across this useful article that makes sense for small companies “as a general rule, your ecommerce marketing budget should be something like 15% of revenue, and analytics and measurement tools should represent less than 5% of this (that’s 5% of the 15%)”.

The article also highlights a typical breakdown of what is reasonable to spend on a small website $2,500 although I think realistically a basic e-commerce site would cost in excess of£10,000. Luckily our outlay on this has been zero other than our time pheeeeew.

 

VAT – dull but essential

I initially elected not to become VAT registered as kids-wear is zero rated and my turnover is not over £77,000 unfortunately, which is the threshold at which you have to. However, I realised that some UK based agents for EU designers, and EU designers themselves require a VAT number from me so that I don’t pay VAT at all, or so that I have a means of reclaiming it. I guess the whole point of the EU is that its a level playing field to ease trade, partly by equalising tax regimes etc.

Its all been very confusing and three phone calls to HMRC elicited different levels of clarity on the issue. I do learn that it is illegal to charge VAT without registering, not that I will be charging. There is clearly no merit for many small businesses in volunteering for registration as its an extra cost passed on to their customers unless they themselves have a VAT number also.

I decide there is no downside to me registering anyway as a couple of EU designers are asking for it and otherwise I have to swallow any VAT I pay as a cost – I’d also discovered that you can reclaim VAT you pay on business-related expenses if you’re registered. Accountants can charge in the region of £400 every quarter to do your VAT returns, although it looks easy enough to do it myself and there will be only a handful to do anyway.

While registering on-line for this (an arduous process) I also decide to elect for an EORI number or Economic Operator and Registration Identification Scheme. This may ease importing, but I envisage only using it rarely, if at all. These numbers only take up to ten days to get.

All you need to know can be found here.

Beware choosing the correct e-commerce platform!

I’ve spent the last few weeks still in early start-up phase ordering stock and re-doing the website – well Matt has helped with all the vital technical know-how. Despite researching e-commerce platforms we soon discovered that our first platform was very limited in enabling us to do basic but key things like promotions, and coupons. So we’ve had to migrate everything over to a new platform aaaahhhh! Software tools can help move it over, but aren’t perfect we find so there’s a big manual slog. Better to switch now before we have many more product lines.

Our new platform does most things we need but its main drawback is being able to click and drag products around to order items on each page. Stylistically I think the website looks great, but its not quite how I want it because of this major limitation. We will just have to make do and finesse this over time.

Direct marketing

We already have a marketing email provider hooked up through our website, but it will take some work to get the first Sprogs Inc email going, particularly until we get a loyal, core customer base. Such an email will most likely be considered a direct marketing email which means we can’t send it unsolicited to people. Regulations related to direct email vary by country but its a bit of a no-no here.