How to Launch a (Spirits) Company Tales of the Cocktail 2014

1. August
18,
2014
ENTREPRENEURSHIP – A REFERENCE
Initially put time and effort in developing a compelling business model and venture design to help you get started.
But when you start, lock them up and don’t look back! Listen, analyze, adjust, adapt; total perseverance and
maximum flexibility.
There are no recipes for success, but there are common reasons why entrepreneurs fail:
1. Personal conflicts in the founding team
2. Poor cash flow management
3. Unclear vision for the business
4. Not focusing on customer needs
STEP BY STEP PROCESS
A. Define Business Model
• Two parts: 1) Activities associated with making something and 2) activities associated with selling it.
• Tell a story; Who is the customer? How do we make money in this business?
• Beware of solutions in search of a problem – what pain are you solving?
• Beware of being all things to all people – getting early traction is key; what niche segment is most likely to
like/need what you have to offer?
• Don’t confuse Business Model with Strategy. Business Models describe how the pieces of a business fit
together, but don’t factor in competition. Dealing with competitors is Strategy.
• Don’t confuse an entrepreneurial opportunity with a business opportunity; why you? Why would you win
compared to another player with the same idea? (e.g., passion, knowledge, experience, networks, access to
key resources…)
• Is your product a Pain Pill or merely Vitamin? (if you won’t pay someone to solve the problem, it’s vitamin)
First step is to create your Elevator Pitch. This is one way of doing it: “To <customers>, that <problem being
solved>, we offer <solution>. Unlike <reference set>, we provide <unique advantage>.”
Assess and further develop the entrepreneurial opportunity (which, remember, is different from a business
opportunity):
1. WINDOW OF OPPORTUNITY
• What has changed to give rise to the opportunity?
• Why has it not been done before?
• Is this the right time to enter?
• Real customer pain? Usual indicators are:
o Customer-invented workarounds
o Customer complaints
o Excessive prices for substitutes
• Focus on what your customer is trying to accomplish, not on comparing product features
2. USER ADOPTION
• Is the solution focused on specific problems / pains and is it easy to understand?
• Does it allow users to do things in a simpler, faster, better, or less costly way?
• Is the value added important enough? (who would value it most?)
• Are there adoption hurdles? (Can users experiment and are results visible?)
• How do I reach the end-user? (Channels, decision-makers, and buying cycles)
3. MARKET
• How large is the potential market (bottom-up calculation)?
• How do I make money and how much can I charge?
• How much share / how many customers are needed for financial break-even?
• Do I have natural growth paths? (breadth of offering, geography, customer segment)
the86co.com
154
Grand
St,
New
York,
NY
10013
917.576.5106

2. August
18,
2014
• Define your market
o Your market is not a billion Chinese, or the $200 billion in spending for category X
o Your target market is the specific set of customers to whom you deliver superior value
o The test: what sales will you walk away from and why?
4. FEASIBILITY
• Is this something established companies cannot do or won’t do? Why?
• How much capital and time to cash flow break-even?
• Are there other barriers to entry? (technological interdependencies, regulatory barriers)
• What could go wrong that would kill the venture? (list all assumptions)
The next two items will assess whether this is an excellent opportunity as opposed to just a good one:
5. SCALE AND SCOPE
• Does the business scale on the supply side? (Can I leverage scale without consuming resources and
attention?)
• Ditto on scope (if I make soccer balls, maybe I can also make soccer shoes, i.e. leverage my existing network
of customers/suppliers)
• Are there any key dependencies or bottlenecks in the value chain?
6. SUSTAINABILITY
• How can I induce other people in the industry into becoming partners and support me? (as opposed to
compete with me). Transform potential competitors into partners and allies. Revenue sharing agreements,
small equity stakes, strategic value to powerful players.
• Why won’t the value be competed away quickly? (Control of key resources, customer lock in)
New ventures will always fail when competing with established firms at their own game. Established players will
still win the contract even with 30% higher prices, particularly in less cost driven areas where reputation is
important
B. Structure Founding Team
• Team Composition
o A clear leader
o Complementary skills/knowledge
o Role Allocation: one person for each key activity area – assign clear roles to each founder (may
change over time)
• Ownership proportional to contributions
• Effective decision making processes
• Conflict Management
• What kind of entrepreneur are you? All partners should have roughly the same ambitions for the venture:
o Lifestyle Entrepreneur
o Growth Entrepreneur
o Social Entrepreneur
C. Define activities
• Sourcing
• Company Setup
• Accountant
• Legal
• Marketing Approach
• Sales Force
• What else?
the86co.com
154
Grand
St,
New
York,
NY
10013
917.576.5106

3. August
18,
2014
D. How to secure first clients
• Price?
• Connections?
• Web page?
• What else?
E. Cash, cash, cash!
Nobody will give you money in the beginning. Except maybe your parents. And you will need cash because nobody
will extend you any credit either. And CASH FLOWS ARE YOUR LIFE BLOOD! Some ideas:
• Friends and family – Ask but be VERY CLEAR that this is extremely high-risk and that chances are,
frankly, that they will never see this money again.
• American Express – Awesome. Amex do more for small business than any politician ever did. You can get
unlimited credit early as long as you pay once a month, it buys you some very valuable time. And the
points you accumulate quickly can go to business trips, etc.
• Factoring – Once you have sales, you can “sell” your invoices to a factoring company and get cash early.
This is expensive but may be worth it.
• Mezzanine Loans – High risk, high interest.
• Government grants
• Personal savings, etc…
Please don’t hesitate to reach out to me if you would like to discuss an idea, if you have any questions or if I can
just generally be of any help.
Thanks for listening.
Best,
Malte.
the86co.com
154
Grand
St,
New
York,
NY
10013
917.576.5106