Recently, I was mixing it up with a close colleague from the bike biz. He’s what I like to call a ‘charger’. Smart, funny, gets sh*t done kind o’ guy. Proof? He’s the big bang spark that helped put together a pretty cool brand in the bike accessory biz. Better yet, they make money doing it. For comps sake let’s just say his company is on the high side of the $0-$25mm annual revenue range.
During our spirited discussion I purposely pushed a few buttons (what are friends for?) and got him to admit that despite his brand’s cool factor status, technically he’s a speck of a star in a Trek & Specialized universe. It triggered some ‘size is relative’ neurons up top because all of a sudden the brainiac hops on his soapbox and in full blown testification mode booms….“From now on if you’re not a $15mm company you won’t be able to survive in the bike business” (BTW, in the past the magic bionic number was the more Austin’esque $6mm figure, but now adjusted for inflation, competition and consumer expectations it’s closer to $15mm.)
Anyway, He’s right. And considering his experience he speaks with credibility. To me? This mofo is the Steve Austin/Bionic Man of the bike business. He helped take a small fledgling company with a nice product idea and said “We can rebuild you” and that they did, growing and flourishing ever since. I love this planet!
This Bionic Man’s $15mm theory, especially from a supplier’s standpoint makes lots of sense. When you run the numbers, that $15mm number doesn’t seem so crazy after all. If you’re going to play in the normal bike distribution world you’ll need to hike up your big boi pants and devote most of your cash needs into inventory and receivables. For those without enough dough? Your product development, marketing, sales, etc. will falter and eventually you may be pulled into a black hole, it’s a slow death.
And since it’s always good to scare yourself a few times a year please read my infamous short list of what a supplier is connected to. Then immediately put a paper bag on your head and breath hard repeatedly.
Before the sale: website, advertising, collateral, referral from others, online reputation, blog, core community reputation, location, signage, your front window, retailers around you.
The sale experience: product/service touchy-feely (overall retail vibe), point of purchase displays, product performance, assembly, delivery, sales floor effectiveness.
After the sale: product quality and longevity, loyalty programs, billing/financing/layaway, customer service, warranty, database, events, top of mind awareness.
OK, pull the bag off now and take a few more deep breaths of fresh air. Reality check?....it’s not cheap or easy to build a branded product line and maintain it. If you’re a super small company my big wish for you is to get from super small to small and that means getting as close to the $15mm number as you can asap! Just think, you might finally have enough budget to do what you’ve been wanting to do. The bonus? You’ll still be small and nimble enough to challenge the big establishment brands. Think of it this way, $15mm could give you enough scratch to buy a new bobcat to run competitive circles around the big brand bulldozers.
Right now you’re probably asking yourself…..“Self, what happens if I can’t be a $15mm brand?” Then it’s about being clever, super focused and carving out small profitable niche slices off the big boy’s pie.
Pro: These super niche slices may be narrow but they can be deep which means consumer loyalty & good margins.
Con: You’ll probably have to make some sacrifice. Some examples? A super small supplier may focus on key regions/markets, may attend just one trade event and/or choose to sell direct to consumers. As you’d suspect the list is quite dependent on your current situation.
The wrap-up? Whether you’re a supplier or a retailer there’s a new revenue benchmark to strive for if you want to stay in business. If you hit the magic number in today’s unpredictable market economy it’s like standing in a pool of water that’s right up under our noses. It’s tight but you’re breathing baby. If you miss the magic number the water level rises just a bit forcing you to stand on your tippy toes to keep your business breathing. And that’s not easy to do for long periods of time.
P.S. – If you’re wondering who I’m talking about? It’s Andrew Herrick and his lovely cohorts, the Crank Brothers.
(Gregg Bagni is President of Alien Truth Communications, a Colorado based brand and strategy firm. He calls himself as a ‘conslutant’ because he spreads love to businesses ranging in size from $5mm to $400mm in annual revenue).