Archive for March, 2007

Begin with the End in Mind

March 20, 2007

I think I’m ready to start my own business, but how can I be sure? And once I do get started, do I really need a formal business plan?

To start, I’ll tackle the first part of your question. The way to know if you’re ready to be an entrepreneur is to make sure you can provide thorough and compelling answers to some very basic questions.

What do you want to build, produce, and provide? For whom? You need to be as specific as possible—for example, what type of consumer are you aiming for? What characteristics do they share? Where do they live? At the same time, you need to make sure your market is truly a large market—especially if you want to build a large scalable business.

Focus on a market or segment that’s too limited, and your business by definition will be equally constrained. Also, consider that if the market around you is large and growing, you will have more of a margin for error—time to recoup or readdress the target and a greater chance of success.

You should also be able to identify a “pain” that your product or service will alleviate. There’s truth in the old expression that people will pay more for a pain reliever than for a vitamin.

Know Thyself

Another key question to ask yourself is, “Why am I eager to start this business?” This is a question that relates both to the market and to you personally.

You need to be able to answer why you believe there’s a need for your product or service, why it’s superior to anything else available today, and why you will continue to have a competitive advantage.

Just as important, you also need to know why you want to do this personally. Why are you motivated to start this business? How deep is your passion for it? How far are you willing to go to make it a success? The answer to this part of the “why” question needs to satisfy you fully. You need to be totally convinced that you will succeed. Once you make the commitment, and when investors, friends, and family understand that you’re driven to achieve your goal, you will find people when and where you least expect, willing to assist. This leads to the following question:

Assembling a Team

How will you build your product or service? This is the essence of the business plan and operating plan. And don’t forget to be able to show exactly how you will get it to market. Often, people nail the first part of this question. For example, they have a new patentable approach for mobile search algorithms, a great development team, and a solid timeline. But they often wrongly assume that if they build it, customers will come.

That’s simply not the case. It’s critical to think through your “go-to-market” strategy. What sales methods, approaches, and channels will you use? What creative marketing approaches? Do you have alliances you can form with major companies? Do you have targeted strategic buyers? Have you tested your idea with at least 50 key potential buyers?

And then, of course, there’s the who question: Who’s on your team? Take a hard look at your own skill set. What are your strengths, and what kind of talent would complement your background? Who can you attract to your team? Who will serve on your advisory board?. Who will attract investors? And is this a business that you want to build and run? Or would you consider hiring a CEO at some point along the way? Is this a “lifestyle” business, or are you ready to scale your idea into the next billion dollar company? These are the critical questions.

Winning Qualities

Answering these questions is what forms the basis of your business plan—a living document that morphs every few months but nonetheless is a foundation upon which you build. The days of five-year business plans are long gone; but having a clear crisp five-year vision, and then a solid 12-to-18 month operating plan, will keep you in good stead. There are many resources with templates for good business plans. Keep it simple is my motto. And keep it flexible. Check out the Women’s Technology Cluster for a wealth of resources.

And if you’re ready to think big, it’s worth looking into the research of David Thomson, a colleague who decided not to take the entrepreneurial plunge right away. Instead, he decided to find out just what are the attributes of successful ventures. He lists seven criteria that almost all companies share that not only hit $100 million in annual sales but grow exponentially and hit the $1 billion mark. There’s sound advice here even for the company still in incubation.

So hold fast to your vision, but develop a plan, and begin with the end in mind. Here’s to your success!


The Perils of Being First

March 19, 2007


In July 2001, two young entrepreneurs clad in surfer attire strode into the offices of Juice It Up!’s California headquarters to present top executives with a rather audacious request: prominent display of their new brand on the chain’s menus.

The brand was Sambazon, and its product was the frozen pulp of a Brazilian berry called açaí (pronounced ah-sigh-ee), which was chock full of antioxidants and healthy Omega fats. The fruit was virtually unknown in the U.S., and these two brothers who ran Sambazon Inc., Ryan and Jeremy Black, by most accounts, were the first U.S. supplier. But to Larry Sidoti, Juice It Up! Franchise Corp.’s vice president of development, açaí was just another smoothie ingredient, like a banana or blueberry.

“We aren’t in the business to promote brands,” Mr. Sidoti says he told the Blacks. “We’re in the business to promote Juice It Up!”

To Mr. Sidoti’s surprise, Ryan looked at his brother and shot back, “I guess we don’t have anything else to talk about then.” Explains Ryan, now 32: “They must have thought we were crazy, but if they were going to say, ‘We’ll just sell açaí,’ but not Sambazon, I didn’t see that as even an option.” Fortunately, Mr. Sidoti kept listening, and an hour later the brothers left with an agreement to supply Juice It Up! with açaí — and have it billed under the Sambazon brand.

One cornerstone of entrepreneurship is to be at the forefront of trends, pushing the envelope to find and deliver the next big thing. But being ahead of the pack can also be a tough place to be, and — as the story of Sambazon shows — being first can be even tougher. From educating consumers to outmaneuvering new rivals and perfecting packaging, trailblazers like the Blacks face a raft of challenges.

“The first guy on the beach usually gets shot,” warns Jeremy Black. “That’s the danger when you are a small guy, a pioneer.”

Today some half-dozen serious players with names like Zola and Bossa Nova compete in the açaí space. Billion-dollar beverage giants, including Coca-Cola Co., PepsiCo Inc.,Anheuser-Busch Cos., as well as Bolthouse Farms Inc., are adding the fruit to their beverage lineups. Procter & Gamble Co. recently infused açaí into its Herbal Essence shampoos and conditioners. As a result, sales of açaí products catapulted to $13.5 million in the 52 weeks ended last October from $435,000 in the same period two years earlier, according to natural-food tracker Spins Inc.

Amid it all, Sambazon, which now has 100 employees, has more than survived. The San Clemente, Calif., company’s sales totaled about $12 million last year, and the Blacks this year expect sales to increase by 50%, and to turn a profit. Their products are distributed at such stores as Whole Foods, Wild Oats and Jamba Juice, as well as many conventional grocery chains, while Sambazon açaí is found in hundreds of other companies’ products, including those of Stonyfield Farm and Häagen-Dazs.

Is the company’s future guaranteed? Not yet. But how the Black brothers made it this far offers a road map for others forging new ground.

What exactly is açaí? That’s what Ryan Black wondered on a 1999 turn-of-the-century surfing trip to Brazil, where he marveled at the crowds downing bowls of the frozen purple mush. Açaí grew atop palms dubbed the “trees of life,” and locals waxed about its mystical powers of vitality. Workers would shimmy up trees, pluck the berries into baskets and send them by boat to processing plants, where the skin was scraped off the seed, blended with water into a pulp and then pasteurized and frozen to preserve its nutrients and flavor — a curious earthy blend of chocolate and red wine.

A health-conscious former college and (briefly) pro football player, Ryan Black sensed açaí would appeal to mainstream U.S. consumers craving healthier fare. After raising $100,000 from friends and family, he and his brother began setting up an infrastructure in Brazil to harvest açaí organically and do it in a way that protected the rain forest and promoted fair trade. The trouble was, almost no one stateside knew what açaí was — or even how to pronounce it, for that matter. So how could they get their story out with no real marketing budget?

The answer was, essentially, to be traveling professors on their own. They would personally teach the nation what açaí was all about, by visiting stores and giving the stuff away.

From the beginning, the Black brothers hit music and environmental festivals and marathons, setting up booths and building a grass-roots following. They canvassed smoothie vendors, their first customer base, blending açaí into drinks, leaving literature behind and hawking their broader mission. “They’d put on quite a show, going from store to store and putting on this Barnum and Bailey act,” recalls Mr. Sidoti of Juice It Up!, which now has 130 stores in California and other states. “It helped get people behind them.”

Such education is crucial if you’re introducing consumers to a strange, new product. Steve Demos, now a member of Sambazon’s board, spent 28 years struggling to educate consumers about soy before his company, White Wave, hit the jackpot with its Silk soy milk. Mr. Demos believes it’s imperative for Sambazon to “feed people everywhere you can.”

Even as Sambazon segued into mainstream retail outlets, even as it received some $9 million in outside financing, it pressed on with its educate-the-customer-by-giving-it-away approach. Sambazon spent $500,000 last year on store demos, doing 50 a week. Top retail executives took note. “Typically, smaller companies don’t have payroll to compete with bigger players who can kick in money for advertising,” says Chris Jacoby, a category manager for Albertsons grocery stores. “But Sambazon has been first-class in terms of setting up demos. I run into their reps in our stores more than any other company.” Adds Whole Foods Market Inc. president Walter Robb: “Guys like this, you keep an eye on.”

In the meantime, açaí buzz spread. Best-selling author and dermatologist Nicholas Perricone extolled the fruit on Oprah. Early last year, a study touting the robust antioxidant properties of açaí was published in the Journal of Agricultural and Food Chemistry. This year, foods from the Amazon “such as açaí” are among top supermarket trends, according to Mintel International, a trend-spotting firm based in Chicago and London. The key for Sambazon is to now take advantage of the rising tide and not fall behind its competitors, which can take advantage of the trail that Sambazon has already forged.

Concedes Ryan Black: “Açaí is moving a lot faster than Sambazon.”

Deciphering the best way to sell açaí wasn’t as easy as with, say, a new bottled water. Frozen berry pulp in small blocks — Sambazon’s original item — was fine for smoothie bars, but not for mainstream retail. In other words: How did consumers want to consume this new product?

Mr. Demos of Silk soy milk recalls his own battle on this front. “We went through hundreds of iterations of soy foods. We made hot dogs, hamburgers, dressings, dips and entrees before we found milk.” Putting Silk in clean, familiar refrigerated milk cartons took away the “weirdness” of the soy category, he says. Mr. Demos sold his company to conglomerate Dean Foods Co. in 2002.

The Sambazon brothers threw a lot of spaghetti at the wall — perhaps too much — trying to find what would stick with consumers and simultaneously protect the taste and superfood qualities of açaí. They tried boxed juice packs that would be shelf stable without refrigeration, but they thought it distorted the flavor. “We had test runs that cost us over $10,000, and we were doing less than that in [monthly] revenue,” Jeremy Black, 33, says. Going into refrigerated coolers made more sense. They started with a smoothie product in 2003 that had a 30-day shelf life, but realized that wasn’t a long enough window to get bottles shipped, stocked and sold. So they went looking for a packer that could bottle and flash-pasteurize the açaí so it would be stable for 90 days. Finding that partner delayed their entry into bigger stores and required a $1 million investment.

In the meantime, the company launched a line of açaí pill and powder supplements and a juice line. It’s still selling its frozen smoothie packs and recently introduced a sorbet. In total, Sambazon now has 26 flavors and makes of products, which has spread it thin on a manufacturing level. “The business guys say, ‘Which ones are you going to go big with?’ ” Jeremy Black says. “The fear is that as we take it to the next level, we’ll have too many moving parts.” He plans to cut out nine products this year.

One of the hardest tasks with both being first and then competing against new rivals has been honing the brand message. When consumers don’t even know what the product is, how much can they really think about the rain forest?

Consumers, says Mr. Demos of Silk, “think, ‘It’s great, warm and fuzzy that you are saving everything but the whales, but…all I care about is saving my sorry ass, and if you can do that with your food, great. If not, I gotta keep looking.’ “

To that end, Sambazon has boiled its message down to simple slogans such as: “Superhealthy. Supertasty. Superfood,” and “Get with the purple berry.” It now relies on its Web site to explain its social work in the Amazon. And it has scaled back the size of the word “açaí” on its bottle, focusing more on promoting the Sambazon brand to stand out. Given all its competitors, “the calculated gamble is people might be looking for açaí and miss our product,” Jeremy Black says.

The surge of açaí players has tested Sambazon in several ways. In 2003, the Blacks sued a rival, claiming his açaí company used similar marketing verbiage. “It was really rough,” says Jeremy Black. “They sent out all their [marketing material] to our customers. We were very fragile, and barely making any revenue.”

The lawsuit cost Sambazon $25,000, and the imbroglio underscores the fragile nature of nascent competitors. The suit was settled with the defendant, Amazon Preservation Partners Inc., agreeing not to use certain phrases such as “Amazon Açaí” or “Power Fruit of the Amazon” in its marketing. But today the company’s Zola juice products are in some 3,000 accounts nationwide competing directly with Sambazon’s new juices, and the rivalry is intense. Chris Cuvelier, Zola’s founder, says it was never his intention to create confusion among consumers. Still, he adds, “some people out there are more litigious, and some people just want to be entrepreneurs.”

Larger rivals brought other obstacles. “The big companies…want to wait and then jump in and blow it up bigger,” Jeremy Black says. “The danger is then that someone can take it from you.” For instance, Sambazon’s açaí products sometimes get stocked inside the coolers of Odwalla açaí juices; Odwalla is owned by Coca-Cola. Because Coke distributors are in stores several times a week, the Blacks say Sambazon product often gets pushed to the back of coolers. The only way to fight this is to get more Sambazon sales staffers into stores — a costly order.

Meantime, growth has brought trade-offs. Once Sambazon began signing deals with other big juice chains, Juice It Up! stopped promoting the Sambazon brand on its menus. “I don’t blame them,” Mr. Sidoti of Juice It Up! says. “But loyalty like that is a two-way street.”

The crowded field and Sambazon’s success has raised another predicament: whether to sell out if an offer is made. It’s a choice not totally up to the Blacks; their angel investors now own one-quarter of the company. “I was in one board meeting, and I said, ‘I started this to do positive things with the world and to do good in the Amazon, not necessarily to get a big payout,’ ” Ryan Black says. “And one of these guys looked me in the eye and said, ‘Well, the problem is, then you went out and took $9 million of other people’s money.’ “

Signs suggest they can stand alone for now. Sambazon açaí products accounted for 10% of total frozen-fruit sales in natural-foods channels in the year ended January 2007, according to Spins. And by one account, their early Juice It Up! gamble has paid off as planned. Says Mr. Jacoby of Albertsons: “When I think of açaí, I think of Sambazon.”