AskPiers: #2

First things first. It's #worldmentalhealthday. It is OK, not to be OK.

You asked and I have answered with some input from my network of entrepreneur with experience. Questions from Alexis, Steve and Mutiny Shaving on scaling fitness, whether to scaleup a lifestyle business and how to manage growth, fulfilment and packaging. #AskPiers #ScaleUp

Taking fitness to the next level

Hi Alexis. I am not 100% clear whether the coaches are looking to #scaleup training individuals or whether they are focusing on 'train-the-trainer', but the same feedback broadly applies. Personal fitness is a huge opportunity, and it is growing as exercising, and consideration of nutrition becomes a way of life instead of a hobby or a 'diet'.

There is a lot of ground to cover, but here are some headline thoughts for them to consider. To raise finance they need to be able to formulate a plan that demonstrates that they can provide investors with a return if things go well or that a lender will be repaid.

The personal training market if crowded and you can find almost anything from HIIT to Crossfit to callisthenics in most towns and cities. It is obviously hard to scale a single person providing training in a physical location. Even to open several studios, the team will need to step away from training clients over time to concentrate on running a business. The need to scale depends on their ambition - I know trainers who rent space and earn a very nice living out of it. Even though they may have to reduce time with clients in the gym to run the business, they need to remain current and can train high profile clients for PR or the very committed - look at the roll-out of studios by the celebrity trainers. Some personal fitness businesses have created a 'system', such as those that promise a fitness model body in 12 weeks. This is both the result of training and strict nutrition management. Again, it's about changing attitudes, behaviours and lifestyle choices. A 'system' can be branded and detached from the founders. Remember Zumba. A system can also be shifted to digital, or virtual (see below).

If they are focused on train-the-trainer, the opportunity is equally as significant. The demand for fitness professionals and trainers drives the demand for new trainers. The quality of trainers varies greatly, from the elite to those who are winging it and could injure a client (or themselves). Again, to #scaleup they need to think about developing a brand and a system or methodology that belongs to them. They want trainers to want to be trained by them and, ideally, you want clients to recognise the training background of their trainers as a mark of excellence or at least competency - like having a degree from the 'right' University. People wouldn't let an unqualified engineer fit their boiler so why let an unqualified person loose on their wellness? Few clients ask to see proof of adequate training. Ideally, your colleagues would raise awareness of their training amongst those who use personal trainers, but that could be too expensive as it requires consumer marketing and PR. This is where they can leverage social media to cut through the noise, directed at both fitness professionals and potential clients. They then have the opportunity to take their alumni to market and wrap a business around them with all the support they require so that they can focus on the business of training and not admin and marketing. This all exists, but nobody has quite cracked it yet and scaled - there are gyms, train-the-trainers, fitness professional (and freelancer generally) support and then there are the booking apps.

They should look at delivering their training online or even using AR or VR. Look at Peloton - clients purchase a bike for thousands of dollars and then interact with streamed classes. Some of the trainers delivering live classes are becoming fitness rock stars. This may not be one-on-one personal training, but one fitness professional can deliver a class to many and therefore scale is possible. There are clearly not the same as one to one training, but it is scalable. Apps showing people how to do a squat properly add limited value, especially given you can find almost anything on the internet for free.

As a friend in the business recently explained to me, fitness is going live.

Scaleup up a lifestyle business?

Hi Rob. I posted a Venn diagram recently showing that your business and career choices should ideally be found in the intersection of (1) passion, (2) market opportunity and (3) skill-set. I am involved in businesses that were meant to scale and became lifestyle businesses and lifestyle businesses that were hugely successful and then scaled. In fact, some of the most successful companies in the world began as lifestyle businesses where passion resulted in amazing products, marketing and customer service. Given that 4.3 million of the UK's 5.7 million small and medium-sized businesses have just one owner-manager employee, the vast majority of businesses are in fact lifestyle businesses.

This can be a very personal question and depends on your ambition as well as the business model and scalability. It is hard to scale up a hyper local business providing a solution for a specific local need or a craftsman. A lifestyle business works around you and your day and commitments, but they certainly provide the foundations for scale. You can, perhaps unwittingly, extract deep insights into customer needs and the service they require or expect. You may solve a problem with code for a local client that many others share - globally.

A lifestyle business is more likely to be built around passion and skill - two of the circles in the Venn diagram. The question is the market opportunity and the scalability of the product. The internet and retail over social media mean that you can reach a global audience interested in beautiful products that are a niche within a niche. A business started on the kitchen table to supplement the founder's income to send their children to a better school could become a global brand due to a passion for the product, craftsmanship and authenticity. This was the story of the UK's Cambridge Satchel Company, which I judged in a competition in its early days.

I am going to boil this down into two questions for you:

1. Do you want to #ScaleUp? The pace can be managed, but it is likely to involve more work, risk, employees, new stakeholders such as investors, senior management and investors or lenders. You should not rush to build a strong business. If you want to own the business into your dotage and then hand it down to your children, external equity investors may not be an option as investors will eventually expect a liquidity event to get their money out.

2. Can you #ScaleUp? Is there a market? Do you have the skills? Can you produce more product or deliver your service efficiently and generate a profit?

If there is demand and you can deliver and generate a margin, you can scale up, and you need to work out the size of the opportunity.

It then all depends on your answer to question #1.

Packaging, fulfilment and managing growth

Sounds like a nice problem to have! But, with growth comes complexity and the need to manage resources, and cash flow, tightly. I have first-hand experience as an investor in several businesses that have had nightmares with packaging, suppliers, terms, deliver, minimum order quantities and even printing errors resulting in stock being pulled from shelves.

I saw that at least one key product was out of stock online.

I have reached out to two people to provide some first-class advice. One is a successful entrepreneur who built and sold a well-known brand, and the other is an entrepreneur I backed who has been through the packaging and fulfilment mill.

My advice is to reach out to other businesses with packaging that you like and ask them to recommend suppliers. Sounds simple, but it works, especially if they are non-competitive.

Keep your initial product assortment low and minimise the number of unique components and even product lines. The more lines you have, the more inventory risk you have - some will move, and some won't so focus. Share your components and pack types. Fewer variables will allow you to manage stock, ordering, growth, cash flow and risk. However, you have to learn to forecast demand and growth, manage it carefully and crunch the data for insights - this is a core competency you need to develop. If you don't measure it, you can't manage it. Review order volumes after marketing campaigns or promotions and use the data to build a forecasting model. This is a core competency and something you have to master.

This advice came from both the experienced operator and the startup founder - outsource everything. Push as much of the work and complexity as you can onto a partner, even if it costs more.

There is a growing number of online logistics partners capable of managing the whole customer journey from receiving orders to picking, packing, shipping, payment, handling returns and even first line customer service. If you use an e-commerce solution such as Shopify, they may have fulfilment partners that already. Try Amazon (FBA), James & James, Johnson Logistics etc. to see who can take the most off you hands at the right price.

You can then focus on perfecting your forecasting and growth.

Thanks to my expert operator friend and also Vini whose food startup, Vini & Bals, I backed on Dragons' Den.

If you have a question to #AskPiers, join the ScaleUp with Piers Linney group or tweet @pierslinney . If you have comments to share on this article use #AskPiers2

60 views0 comments