“I’m going to disrupt bacon, I know it’s a bold move considering there are so many bacon retailers out there but I’m passionate about bacon and it’s ripe for disrupting….. the idea came about because I couldn’t buy bacon the way I wanted to buy bacon and everyone will want to do the same”
At this point on we have two options, be real and do a back of the beer mat calculation to see if it’s a go-er, or rely on someone else to stump up the cash to fuel our wayward ideas. Fear of failure is one thing, fear of putting your own blood sweat and tears is something else.
We can business model canvas it, lean it this way and the other way (there are excellent books on this) but first I think it comes down to some basic maths. All hail the beermat!
As I don’t have a beermat to hand I’ll use a Moleskin, the hipster’s beermat, and doodle it from there.
So I have my team and they all work from home, handy as they’ll all use their own internet and save me a fortune in furnishing out an office, the latest funky coffee machine, pool table, fridge, light, heat, power and so on.
I need a team, the books have told me, I also know first hand it’s painful if you don’t. To pay the team I need to have revenue to the tune of 11K a month and it’s at this point why most man/woman in the middle operations die a slow and painful death.
In retail, especially in small retail the worst place you can be is between the retailer’s customer and the retailer. They’re quite territorial and protective of their customers, rightly so.
Also there’s the small matter of you, the team, it’s small therefore coverage becomes a problem and you’re essentially working to the locality or the 10K rule as it’s known in retail. The majority of sales will come within the 10K radius of where you are.
As a guess I’m guessing my average customer purchase will be £7.00 and I need to take my 10%* as I’m the man/woman in the middle. So that’s 70p. I’m handling the card processing then I’m liable for the processing fee too (but I could pass that onto the retailer afterwards).
So back of the Moleskin says I need over 16K transactions per month, call that 800 per day based on a five day working week (not everyone buys bacon on a Saturday or Sunday).And you have a duel sales pitch to do, one to get customers downloading your method of interacting with you and then the sale to the retailer to partner with you. That’s okay you hired a marketing person with no marketing budget to get on the phone and pound the ground. Man/Woman in the middle startups are not easy.
Funding might be available but this is an odd double edge sword. It might be handy to get you up and running (build app and backend etc) but it can give this false sense of security that you’re onto a winner because you got the funding.
Let me make it easy, you’re not.
The poor pen pusher that processes the funding applications is not passionate about your startup, they might use it once or twice but they’re not the customer who gets your logo tattooed on their chest.
For me personally it all boils back to those numbers. Can my “product” make that sort of money so I can sleep well at night, not have nightmares and show my face in public? No freebies or “it’ll be good for your profile” back scratching. That doesn’t put food on the table, sometimes these are good things but they should be the minority cases and not the majority.
You might get on to an accelerator who will expect you to mingle with other’s who had the same dream and now collect around the water cooler and realise from the exhausted looking faces that you’re all in the same boat. This time though you have to find n amount of customers for the next time you walk through the door. If you took a large dollop of cash from an angel or VC expect worse treatment in subsequent board meetings as it all hinges around one metric, “did you hit your revenue targets?”.
From disrupting bacon has now become a fresh living hell, if you’d taken a bank loan to fund this (notice how you didn’t try as you just knew what the answer would be) the manager would be on the phone every day asking about what revenue you’d taken….. at least you’d written it down on a beermat.
I don’t want to put you off I just want you to see what you’re letting yourself in for. The idealistic view of having a tech startup is glossed with shiny things and odd media headlines of the ones who made it. It doesn’t go into much detail for the other 98% who put everything on the line, including sanity, to not come out of the other side.
If you can cope with that then I wish you all the best on your man/woman in the middle startup journey.
* – probably most of the retailers profit margin another reason why these things fail