August 27, 2018
Emerging Brands Must Know About Finance- Understanding Finance Tools & Terms
Emerging Brands Must Know About Finance – Understanding Finance Tools & Terms
Within the FMI Emerge community, there is valuable insight available from more than 40 Emerge mentors.
Creating a great new product with just the right packaging is vital to building a winning brand, but it is only the first step. Gaining the financial acumen to grow and sustain a successful business is equally important.
Randy and Keith both have extensive financing experience and expertise that they are ready to share with the community.
Randy shared his insights on four future failure indicators for many new entrepreneurs:
- A product that doesn’t solve a problem for a very specific demographic;
- Moving too slowly and in too many directions without a clear vision of the target consumer;
- Lack of awareness that a window of opportunity may be closing faster than you know; and
- Seeking confirmation for what you already think rather than asking for help from those who know more than you do.
Keith shared with us from some finance terms that you can’t avoid as an emerging brand.
You need a strong working knowledge of “A” round financing, “B” round, cost of capital, convertible notes and all types of debt financing. If these terms and processes sound like a foreign language to you, you’re not alone.
“Food and beverage tends to have a lot of people who go into business very focused on their products,” said Keith Kohler, president of The K2 Group, “but without a lot of financial knowledge.”
In an industry as competitive as food retail, it’s imperative that you equip yourself with the tools you’ll need to make your emerging brand successful. If you don’t know what some of these terms mean, it’s time to learn them, and to understand how much more there is to the financial side of bringing a new product to the marketplace.
There are two important areas that entrepreneurs must become proficient in as they work to grow their businesses.
The first thing you need to focus on is where to find your funding sources. It will take time for your business to become profitable and you need to sustain it as you go through the stages of growth.
As you work through the growth process, different kinds of financing will be optimum and, at each step along the way, new opportunities will become available.
Next, you will have to understand how much money you need: What are your cash requirements? The answer will be different with each one of your trading partners and channels.
For instance, the agreement you reach with some retailers will be for them to pay you 30 days after delivery, some 45 days, some 90 days. If your business is all online, perhaps the timeline is only the three or four days it takes the credit card company to clear your transactions.
“You need to understand the cash requirements down to the individual customer,” Kohler said.
But relax. It’s not as daunting as it sounds. There is help available to get you to up to speed with the financial information you will need to be successful.
If you are an Emerge subscriber, there are lessons, worksheets and specific information available at moreshelfspace.org to help you navigate your path to success with an emerging brand.
Emerge also provides you with access to curated third-party content that can help you dig even deeper into topics you need to know about. Check out this blog post on how convertible notes work.
Remember, creating a great new product with just the right packaging is vital to building a winning brand, but it is only the first step. Gaining the financial acumen to grow and sustain a successful business is equally important.
For more information on Financing for Emerging brands, subscribe to moreshelfspace.org