HOW TO ACCELERATE TOY COMPANY GROWTH

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HOW TO ACCELERATE TOY COMPANY GROWTH

It’s been a great joy to jump on board successful growth stories in the Toy & Game business. Quite a few of our clients came to us from a position of havind already accomplished a successful startup process, and wanting to ‘press the fast forward’ button, with funding behind them and some degree of established distribution, product lines, staffing and infrastructure already.

Here’s some thoughts on the most obvious answers to how to accelerate Toy company growth:

SALES/DISTRIBUTION GROWTH

The most obvious place to start in terms of accelerating Toy company growth is in growing Sales. Often times, this is an inevitability – non-mature companies just need to keep plugging away, and if they have relatively competitive and attractive products then the sales will grow naturally and organically over time with persistence.

One of the most effective, and obvious, ways to ramp up your Sales is to hire in more effective Sales people. This is usually a mix of hiring someone with more experience than your first Sales hires, with existing Buyer relationships and with a strong track record of driving Sales growth. Sometimes you get to a level where you need to increase the number of Sales people to increase your Sales capacity. I have helped quite a few companies to hire new Sales people via our Recruitment service. While you can definitely mis recruit in terms of your company culture, or in terms of the suitability of the Sales person you hire, I have not seen many companies regret the decision to ramp up their Sales team. I have seen them regret exactly who they hired sometimes, and so that is why when we help to recruit Sales staff for our clients we make sure to really question and challenge the candidates in terms of the reality of their performance, buyer relationships and methods of selling.

Beyond personnel, we can break down the ways to grow Sales into the following sections:

1.      GROW DISTRIBUTION IN DOMESTIC MARKET

This is often the lowest hanging fruit to accelerate growth for Toy companies. Are there any sizable Retailers you are yet to open up accounts with in your home country? Are there any other domestic Distribution channels you have not yet reached? Are there key product lines which some Retailers are not listing, and if so, why not? Are there Sales Reps, or local distributors/wholesalers who can help you reach all the ‘nooks & crannies’ of your market?

2.      GROW DISTRIBUTION IN EXISTING EXPORT MARKETS

Again, some of the same questions and tactics apply here. If you are working with Distributors in a particular market, do you have enough information to know how well they are performing? I know a lot of distributors, and count many of them as friends I love to catch up with at Trade shows – but let’s be clear, Distributors are inherently likely to disappoint you, because the structure of their business necessitates working with multiple suppliers, and so you will never get as much focus and energy invested into your products and brands by Distributors as you would want. What you do get though is to tap into the Distributor’s strong Retailer relationships and knowledge of the market, and you get a proportion of the time and focus of their Sales team.

The difficulty though is that there is always something new and shiny to sell in the Toy business, and so you have to constantly monitor the performance and the focus of your Distributors. It is perfectly normal to transition between Distributors if they don’t perform for you or give enough of a push to your products, although there are normally only so many qualified and suitable options in each market, do don’t take this step lightly.

The other alternative is to look to set up a new subsidiary in a market you have previously serviced via Distributors. This is not a small step though, if you’re going to start registering a company, hiring staff and offices in an overseas country, you need to be aware of the commercial and legal requirements of the country, as well as the commercial challenges. In fact, arguably the biggest value add I have made for clients seeking to set up one or more new subsidiaries is to guide them in which countries to go direct to retail in first, and in how to approach that market.

One observation I often make is this – I WORKED FOR Hasbro in the noughties, and at that stage, Hasbro as a company was around 80 years old at that stage, and yet still didn’t have subsidiaries in every market in Europe. Another twenty years on, and I believe they have more Sales offices than when I was working for them, but still, just consider that – one of the Top 3 Toy companies in the world did not have all countries covered with direct distribution after 80 YEARS!

So it takes time to build distribution, and when you are tyring to grow quickly you need to balance the growth ambition with the commercial and practical reality that it is difficult and risky to open new Sales offices. So taking advice from those who know the market, and carefully analysing which market gives you the best chance of success for going direct is really important.

3.      SET UP DISTRIBUTION INTO NEW EXPORT MARKETS

Very few Toy & Game companies can truly claim to be present in every country on the planet. Now admittedly, outside the Top 20 or 30 markets, the total available Sales are not so high. In effect then we’re looking at an ever-diminishing returns scenario once we get past the Top 20 or so countries in the Global Toy market. The key point here is that there are nearly always some sticky markets which take longer to crack open. Let’s start with this startling fact – most Western Toy companies have little or no presence in the 2nd and 3rd biggest Toy markets in the world. The 2nd biggest Toy market in the world is China, and the 3rd biggest is Japan. China is difficult to break into for cultural reasons, but also because the vast majority of the world’s Toys are manufactured in China, meaning that supply for the domestic Chinese market is vast. Japan is hard to get into due to almost impenetrable cultural barriers. After 25 years of working in the Toy business, I can genuinely say that I haven’t met many Toy companies who tell me they have distribution into Japan.

So there are reasons why the No. 2 and No. 3 market in the world are difficult to enter, but there is really no excuse not to break open North America and the bigger European markets, and for most countries, filling in the gaps in your distribution matrix in those regions is the quickest and most efficient way to ramp up growth. There are still cultural barriers – if you compare Europe’s 3 biggest toy markets: Germany, UK & France, there are massive cultural, commercial and regulatory differences. Yet for most product categories, you should be able to find some products in your portfolio which fit all three markets (if not maybe you need to review your product selection and development strategies), so if you are in 2 out of 3, or one out of 3 of those markets, then your next focus should be entering the remaining market/s.

By the same type of analysis, if you are selling into France, there is no reason why you should not be selling into Spain & Italy, which are also good-sized markets.

Looking at North America, if you have some U.S. Sales already, then you should be able to achieve distribution in Canada, which is often ignored as it’s so much smaller a market than the USA, but anywhere else in the world, Canada’s c. $2bn USD to $2.5bn market (data according to Canada Toy Association website) would be considered significant.

So the first step is to identify the gaps in terms of countries reached, and then to work out a market-by-market plan to enter.

4.      SET UP AMAZON IN MORE COUNTRIES

Amazon has bene a massively disruptive force in the Toy business for a decade or more at this stage. In some markets and in some categories, Amazon may capture more than a quarter or even as much as one third of the total Toy market. That can’t be ignored. In modern times, you will never a). Maximise distribution and b). Find a bigger opportunity than accessing consumers around the world via Amazon’s platforms.

There are significant challenges inherent with Amazon though – their pricing policies & practises cause significant commercial challenges for other players in the market, and your Amazon business is not that likely to be the most profitable part of your operations.

Fundamentally, the biggest challenge for Toy companies in managing Amazon is that you are in effect managing a tech platform interface, so you need to have the skills, experience and resources to manage the platform and to effectively compete with your competitors.

The advice I normally offer to people asking me about how to do more on Amazon is this: talk to someone much younger than me! There are some really good Amazon agencies – you need specialist help to advance in this specialist space, so identify well renowned agencies and work out a plan with them. Or hire the best Amazon management people directly out from your more established competitors, this won’t make you popular, but is likely to make you successful!

5.      SET UP D2C BUSINESS IN ONE OR MORE COUNTRIES

I remember back in time when Toy company Sales teams would cause great friction if you tried to launch Direct to Consumer initiatives. They would argue why are we competing with our own customers? Things have long since moved on from that perspective prevailing though. Don’t take my word for it – just check out the 3 biggest Toy Cos:  Lego just reported D2C sales increased by 14% in H1 2024. In addition, Hasbro’s Pulse and Mattel Creations are now well established and selling bespoke exclusive products direct to consumer.

We should put this in context though – all 3 of those massive Toy companies have access to extremely aspirational I.P. that they own, control or license, and most Toy companies don’t have that. As such, I usually own recommend D2C based on particular needs and advantages our clients may have.

6.      SET UP ALTERNATIVE DISTRIBUTION EFFORTS

One of my favourite things to do in the Toy business is to be told that it is really hard and doesn’t pay back much to focus on alternative distribution channels versus existing major customers, and then to prove those doubters wrong by delivering big incremental Sales revenues via just this type of non-traditional Retail channels. The size of opportunity here and the directions you can head into does somewhat depend on your product category, but for a simple example – much of the Toy category does not sell in to Gift channels in some major markets, as the margin structure is more generous to the Retailer versus traditional Toys. But it’s quite easy to re-spec, and restructure margin offerings to access these distribution channels.

Wherever a Retailer (of any type), venue, organisation or visitor attraction has heavy footfall or eyeball traffic, there is a chance to sell, you just have to think outside of the box. From product promotion on TV to influencer exclusive products through to promotional product opportunities, there is a world of opportunity off Toy shelves and Toy related e-commerce sites. It takes flexibility of approach, and an inquisitive not easily dissuaded mindset to find these opportunities.

ENTER NEW PRODUCT CATEGORIES

Once we get beyond the simple answer to growing Toy sales – i.e. just sell more, then we can start to look at more strategic angles. One of the most obvious ploys is to expand your product offering into new (normally adjacent) product categories. The most successful path here is to work out why you have been a success so far, and to identify your competitive strengths, and then work out which product categories suit your strengths.

Let’s start here with a basic and hard to disagree with premise: there is no Retail Buyer on earth desperately waiting for new vendors to come and sell to them. There are literally millions of existing Toy products out there for Buyers to choose from. Therefore to succeed in the Toy business you fundamentally have to embrace competition. It is your products against the other guy or gals products.

One key self-reflection you need to make before choosing to enter a new product category is why you were successful so far in your existing categories. Was it something specific to that product category, was it something within your innate corporate DNA? Was it a trend insight? A gap analysis?

You don’t normally want to base your business plan on a me-too approach. You should ideally start with a key insight or competitive difference/advantage where you can sustain your advantage. It is true that once you are an established vendor, your Buyers will often look for more products and more categories from you so that they can maximise their vendor operations and get more products from a company group of people they now trust. But if that’s all you have, those very same Buyers will soon drop your products when someone else comes in offering something new and different.

ACQUISITION

The Acquisition strategy can be joined with the previous strategy. Often acquisitions occur in order to add a new raft of product and product category opportunities to an established company’s offering. The best example of this might be Spin Master’s acquisition of Melissa & Doug, as Spin Master’s corporate release at the time claimed: “The highly strategic and complementary acquisition will bolster Spin Master's position in the children's entertainment industry.”

The chance to buy into an existing and complimentary market adjacent to Spin Master’s existing Retail focused offerings was too good to miss.

Acquisitions are not always merely about adding new products and categories. Sometimes they are about buying access to distribution that would otherwise take too many Sales cycles to build up. Often times when a Toy company successfully secures growth funding from investment firms, they need to progress quickly in order to meet the requirements of their investors. Sometimes the founders may see their shareholding diluted if they fail to meet growth expectations. Investors normally seek a 3-to-5-year payback, which is not that long in an industry where there is an annual selling cycle. So if they buy another company which has established trading accounts with key retail targets, the company can then leverage those trading accounts for more listings of the core product lines and grow much more quickly than they would do otherwise.

The acquisition process can be very involved though, and there are many mistakes and omissions that can be made, so thorough due diligence is required. We have consulted on some of these transactions, and the biggest mistake can be to fail to recognise how much value is in key members of the Sales team. It is therefore normal practise to offer a golden handcuffs deal to the Sales people in the acquired company for at least 2 or 3 Sales cycles.

MARKETING ACTIONS (including Consumer & Trade Marketing, plus Trade shows)

If you have managed to establish your company, products & brands without any significant marketing, then there is an argument for not pursuing marketing as a growth driver, because there is a risk that you could achieve similar revenues and sales per sku with an added investment and therefore lower margin.

But it depends on how quickly you want to grow and how you can adapt your business model as you grow. The start point for marketing should normally be meaningful investment at the point of sale where it can make the most obvious and direct difference to Sales. This can be quite difficult to achieve in bricks and mortar retail, because Retailer compliance is not always guaranteed. There are plenty of trade ‘campaigns’ or ‘activities’ I have been persuaded to sign off which never happened but were more just an injection of extra funding to the Retailer. Meaningful investment and campaigns at trade level are things which allow your products to stand out and to be more prominent i.e. end caps, pallet displays or counter displays.

The same principle actually applies online. If you can invest your marketing $£€ on driving motivated traffic to somewhere to buy the product, you will get measured and tangible return on your marketing investment. There is no doubt that today you can find Influencers with a big reach who can help to promote your stuff, but that should be secondary to driving tangibly measured sales via whichever e-commerce sites suits your model. For example, you may have some of your budget deployed on Amazon, but you might be better off to invest in driving sales via Walmart.com, on the basis that strong sellers on Walmart.com are more likely (generally speaking) to lead to the in-store listings which have the potential to drive huge volumes.

Speaking as someone who has spent $tens of millions on consumer marketing, I have a few fundamentals before I recommend spending a dime. Strategy comes before execution. What does that mean practically speaking – start with this: who is your consumer and purchaser target demographic, what message do you want them to receive and what action do you want them to take. Once you are clear on those points you might be ready to invest money in consumer marketing.

In terms of media and what %age of your budget to spend where, I can no longer recommend TV advertising. There has been a long period of time where the pay back and impact on sell through was difficult to justify, but where Retailers still demanded TV investment. We have to be past that point now. If you have children yourself you will know how little TV many kids today actually watch, they are more likely to be on platforms like Netflix or on YouTube, and as they get a little older, on social media i.e. Tik Tok.

Influencer partnerships can be viewed as integral today as TV was back in time, although the influencer has to match the audience you are targeting and have sufficient metrics to register. You also need to get value for your money, one or two actions are not likely to cut through unless the influencer is top level, at which point they will be very expensive to work with.

Of all the growth drivers detailed in this article, spending money on marketing is the one I would be most careful/reticent to deploy – and bear in mind my professional development was to a degree through working in Toy company marketing departments, there is some strong evidence for my feelings on this.

We run a Toy & Game business growth accelerator program. We have run this program with many up and coming companies, and we run through our process to review your progress to date, identify your strengths and weaknesses versus your competition and to ramp up your Sales efforts. If you want to find out more on how this service works, just click here: https://www.kidsbrandinsight.com/services 

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PS Just one final thing...we have been using AWeber as our automated email software since 2011. We have many tens of thousands of email opens since then, might even be 100k+. We still use AWeber because it is intuitive and easy to use, and offers easily understandable metrics at a minimal price. If you want to check out AWeber for your own email marketing, just check it out here:  https://www.aweber.com/easy-email.htm?id=377817 

The 5 Stages of a Toy Startup: Navigating Your Path to Success

The 5 Stages of a Toy Business Start-Up: Navigating Your Path to Success

Starting a toy business is an exciting and challenging venture. From initial concept to a thriving operation, the journey involves several distinct stages. Understanding and navigating these stages can help you turn your vision into a reality. Here’s a breakdown of the five critical stages in launching and growing a successful toy business:

1. Pre-pre Launch: Laying the Groundwork

The Pre-pre Launch stage is where your Toy startup dream begins to take shape. At this point, you're focusing on research and ideation. It’s essential to understand the market, identify potential gaps, and refine your product concept.

• Market Research: Investigate current trends in the toy industry, analyze competitors, and understand your target demographic. Are you catering to toddlers, tweens, or collectors? This will influence everything from design to marketing.

• Product Development: Begin prototyping your toy. Focus on innovation, safety, and the play experience. Engage in early testing, gathering feedback to refine your product before it hits the market.

• Business Planning: Craft a solid business plan. This includes defining your brand, setting short- and long-term goals, outlining financial projections, and planning your go-to-market strategy.

This stage is all about setting a strong foundation. The more thorough your preparation, the smoother the subsequent stages will be.

2. Pre-Launch: Building Momentum

The Pre-Launch stage is where you transition from planning to action. This phase involves generating buzz and finalizing all details before your official launch.

• Brand Development: Solidify your brand identity, including your logo, packaging, and messaging. Your brand should resonate with your target audience and stand out in a crowded market.

• Marketing Strategy: Develop a comprehensive marketing plan. Utilize social media, influencers, and pre-orders to create anticipation. Early engagement with potential customers can help build a loyal community even before your product is available.

• Logistics and Supply Chain: Ensure your manufacturing process is efficient, and establish relationships with suppliers and distributors. Consider the logistics of packaging, shipping, and handling returns.

The Pre-Launch stage is crucial for building anticipation and ensuring that all operational aspects are ready for the big day.

3. Launch: Hitting the Market

The Launch stage is the culmination of all your hard work. This is when your toy officially enters the market and starts reaching consumers.

• Marketing Execution: Implement your launch marketing campaign. This could involve a combination of online ads, influencer partnerships, PR events, and social media promotions.

• Sales Channels: Whether you're selling online, in physical stores, or both, ensure your sales channels are ready to handle demand. Monitor performance closely and be prepared to make adjustments.

• Customer Engagement: Engage with your customers actively. Encourage reviews, respond to feedback, and create a sense of community around your brand. Positive customer experiences during the launch can drive word-of-mouth and repeat sales.

The Launch stage is exciting but demanding. Stay flexible and responsive to ensure a successful market entry.

4. Growth: Scaling Up

Once your toy business is established, the focus shifts to growth. This stage is about expanding your reach and increasing sales.

• Product Expansion: Consider expanding your product line or introducing variations of your existing toy. This keeps your brand fresh and offers more options to your customers.

• Marketing Optimization: Analyze the performance of your initial marketing efforts and optimize them for better results. Experiment with different strategies, like seasonal promotions or bundling products, to boost sales.

• Partnerships and Distribution: Explore new distribution channels or partnerships to reach a broader audience. Whether it’s entering new retail chains or collaborating with other brands, expanding your presence is key.

Growth is about building on your initial success and pushing your business to the next level.

5. Consolidation & Normalization: Sustaining Success

The final stage, Consolidation & Normalization, is where your business becomes a stable, enduring entity. The focus here is on sustaining success and establishing long-term profitability.

• Operational Efficiency: Streamline your operations to reduce costs and increase efficiency. This might involve automating processes, renegotiating supplier contracts, or improving inventory management.

• Brand Loyalty: Continue to build strong relationships with your customers. Loyalty programs, regular engagement, and excellent customer service can help retain your customer base and attract new ones.

• Financial Management: Monitor your financial health closely. Ensure that your revenue streams are stable, and that you have strategies in place for managing any downturns or challenges.

  
  

This stage is about solidifying your position in the market and ensuring your business is resilient and sustainable.

Conclusion

Starting a toy business is a journey of creativity, strategy, and perseverance. By understanding the five stages—Pre-pre Launch, Pre-Launch, Launch, Growth, and Consolidation & Normalization—you can better navigate the challenges and opportunities that arise. With careful planning and execution, your toy business can grow from a simple idea into a beloved brand that brings joy to children and collectors alike.

If you would like to find out more about how we have worked with more than 200 Toy startups and about our Toy business Consultancy services, just click here: https://www.toyindustryjournal.com/toy-business-consultancy

PS Just one final thing...we have been using AWeber as our automated email software since 2011. We have many tens of thousands of email opens since then, might even be 100k+. We still use AWeber because it is intuitive and easy to use, and offers easily understandable metrics at a minimal price. If you want to check out AWeber for your own email marketing, just check it out here:  https://www.aweber.com/easy-email.htm?id=377817 

TOY START UPS & BOARD GAME START UPS: TEN TIPS

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TEN TIPS FOR TOY & GAME START UPS

Over the past nearly a decade and a half, I have advised c. 200 startups in the world of Toys and (non-digital) Games. It’s been joyful to celebrate the success of many of those companies. Obviously, some didn’t make it, because that’s how the world of startups goes: attrition and failure are all part of the journey for entrepreneurs in this space. I’ve been reviewing my notes, and there are some observations I can share below, as well as some recurring advice I have given over time which highlight some recurring patterns in successful startups. So here’s some tips for those who have newly or recently embarked on a Toy or Game startup company:

1. HURRY UP & WAIT: TIME vs PATIENCE

First things first, let’s get real about how long it takes to build a new Toy or Game company: We operate in a business with a primarily annual sales cycle. That means that one go round is a whole year of your life. Even if you are running the best start up in human history (which sorry to say is unlikely), it is going to take you YEARS to build your company to any level of success and years longer to get anywhere near maturity.

New market entrants often come into the Toy & Game business expecting to break all the rules, disrupt the market and so on because they read in entrepreneur books that’s what you need to do nowadays. The bottom line is this – you can break quite a few of the old rules today and be successful, you can even go (in effect) direct to consumer via Amazon and hit as much as a quarter or a third of the market, which you could not have done historically. But if your business plan fundamentally requires you to get listed in Walmart across the USA in Year one, and to start selling in to them whenever you are ready, versus when they proscribe you need to then think again. It just doesn’t work that way. In a couple of hundred companies we have advised, it has never once worked like that regardless of how disruptive the company, product or concept was.

I have seen really successful business people screw up their entry into the Toy biz by failing to plan for the reality of the sales cycle and the time needed to set up sales distribution.

Here’s the bottom line…don’t give up the day job unless you can afford to live on your savings for three years. Even when you are successful, and your business is growing your business will be to money what a famished teenager is to the cookie jar in your kitchen – greedy and never satiated! (More on cashflow shortly).

Be prepared for the fact that setting up sales & distribution in the world of Toys will take a lot longer than you want it to.

2.      VALIDATE YOUR PRODUCT/S EARLY, CHEAPLY & QUICKLY

We all understand that you think that your product is amazing, and that’s important, because the process of trying to sell it can grind you into the floor even if you love the product (if you are lukewarm to the product expect all hope to be crushed quickly by a cruel world where there are thousands of products to choose from and where yours is much less interesting and seemingly unique for all the professional Buyers you will try to sell to than it is to you)!

The reality here is this, having been a deluded product inventor/developer myself a few times and having spoken to many hundreds of creators over the years, the successful ones a). Validate their products and the potential appeal of their products early & quickly with people who’s opinions matter and b). Move on from emotional commitment to their creations and onto hardnosed selling mode quickly after creating. c). Ditch those products which the market clearly doesn’t want for valid reasons.

Let’s be clear here, any one who has been around a long time in this business has seen someone flogging what seemed like a dead horse around year after a year, and then see them heroically make it after years of effort, focus and lost opportunity elsewhere, but that isn’t really the best way to do it. Even if you have something quite good, the market will often not automatically embrace it, it takes effort, grind and persistence, but the trick is to be persistent enough to get in front of enough of the right people to validate or not validate the product. Don’t be persistent in a bloody-minded way, when your persistence would be more effective on a different product. Across the last 15 years or so of advising startups, we have seen more than you would expect mortgage their homes and/or take on life altering levels of debt to chase a dream that is unlikely to be achieved.

PLEASE validate whatever it is you want to bring to market as soon as you can before incurring heavy expense.

Ways you can validate your products:

1.      The target recipient – go and test the product with at least a dozen people who fairly represent a cross section of those consumers the product is aimed at. Your family are fine to start with, but seek out the most cynical hard to please people you know – you want people who will take great pride in being blunt, or even rude about the product, because if you can get past their scrutiny you might just be onto something.

2.      The target purchaser – this can be different from the recipient, it might be a parent or grandparent, it may be a spouse, but talk to both receiver and purchaser to validate – if you have an amazing product the recipient wants, but it costs $5,000, then the recipient will love it, but the purchaser will ask you what you have been smoking to try to sell a product at that price!

3.      Retailers – maybe you are lucky, and you are related to or know someone who knows a major Retail buyer who will give you the time of day, but as that is unlikely, I suggest you go and befriend an independent retailer or two in the space you are looking to enter. These people are clearly passionately committed to this business, and usually love the products. They know consumers and they understand how established Toy & Game companies think and operate. If you ever manage to get a meeting with a Mass market Buyer, and they are the first Retail Buyer of any kind you have spoken to, then you already screwed up. Find a way to get Retail validation or rejection of your products before you jump on board a train which might not stop for a decade, or which might crash horribly deeply wounding all on board (that’s not just hyperbole, I have done both successful and unsuccessful start ups myself and while the former made me euphoric, the latter caused deep emotional stress which took years to get over). Your local independent retailer will often be very approachable and give you more time than you merit in terms of what you can do for their business (just remember & celebrate them if you make it big).

3.      ADAPT TO MARKET DEMANDS

You will have a perception of what the market wants, but if the market opportunity is clearly in a different direction, then most often following that different direction towards where the demand is at is likely to lead to success. Let’s say you developed a product which is highly sophisticated and aimed at high end department stores, but the market is clearly indicating the product fits better as a lower end product with lower end presentation and lower price point, follow the demand if you want to make Sales. Or you could dig your heels in I guess and pass up on opportunity because you know best. I’d rather have the Sales in the bank, but each to their own 😊.

4.      LACK OF CASH IS A KILLER

This should be the least surprising tip listed here. Cashflow is king. We all know this, the challenge is the elongated cashflow cycle of the Toy & Game business can be hard for new companies to handle. If you start selling in September this year (2024), you might ship product a year later, and if you are lucky, get paid 30-60 days after the retailer receives the product. So you could be looking at an extended 14-month cashflow cycle. Don’t act like it’s a surprise when you have no money left in the summer – you have been warned, it’s a long cycle.

And what happens if things don’t go to plan? (Which they often won’t). Let’s say you launch some new products and one or two fail badly and just won’t sell off the shelf (over time everybody ends up experiencing this issue – in the interest of transparency, despite having sold the most successful Game of all time, I also conceived and sold the worst selling game of all time).

When you bring a real dog of a product to market, your Retailers will probably want clearance funding, and you’ll likely to have to closeout excess inventory at a loss. What does your cashflow look like now heading into the next selling cycle? I always advice my clients that the decision to launch a new product line is a decision to put at risk 2 selling cycles i.e. 2 years’ worth of cashflow.

Bearing that in mind, does that change the importance of Tip 2 – Validating your products? I think so, and certainly the most successful companies I know in this business spend nearly as much time and resources on validation as they do on creative development.

5.      APPROPRIATE LEVEL OF PEOPLE FOR EACH STAGE OF YOUR COMPANY GROWTH STORY

When your business first starts, you will find that you (and whoever you start the business with) are doing most of the work across functions. Over time to succeed you will need more people to more effectively fulfil key functions. One of the hardest balancing acts is to recruit great staff, but to manage your over heads so that you have the right level of good people at the right time in your development. At some point you will need more discipline, more structure and more processes, but introduce all that too early and you can kill the entrepreneurial drive required to get the enterprise off the ground in the first place.

The audience reading this newsletter is Global, so employment laws and practises vary, so the following advice should be tempered with local laws and employment regulations and practises, but the smaller your headcount is, the more critical each person in the company is. If you find you have made a recruitment mistake early on, then the more hardnosed you can be about correcting your mistake the better the chances are that you will make it out of startup phase.

I have been the right person in a role and then grown the business to the point where I was no longer the right people, and I have hired people who also saw the role they started in outgrow their experience and level of performance. This is normal, and so you have to be good at managing this. It’s not easy to decide that someone who was an early hire is no longer the right fit for the job role that was created around them, but it happens, and the better you are at managing this scenario the more likely it is your company will go through the phases successfully.

If you and anyone else you founded the business with are not focused on or good at Sales, then I would seriously consider over recruiting and over paying for a Sales person who has a good track record, is hungry for Sales and bonuses, who has strong existing Buyer relationships as well as knowledge of how the Retail buying system works. If you wanted one tip from this newsletter which would represent metaphorically pressing the fast forward button it would be this one. Clearly you have to be able to pay your Sales person, but they will normally be the best investment you can make if you hire well, so if there is one role to over invest in near the start of your journey it is Sales – more on why that is in the next tip.

6.      FOCUS ON WHAT WILL MAKE THE BIGGEST DIFFERENCE, NOT ON THINGS YOU LIKE TO DO OR WANT TO DO

Another major mistake startup founders often make is obsessing about non-critical details.

Over time, successful founders will recruit people to do the tasks and to run the functions which they are not good at running. This explains why often times where you have 2 or three founders you end up with a successful business, because responsibilities are usually carved out early on, and so the business begins with two or three people being pulled around within their own slice of the pie instead of being pulled everywhere across the pie, which is what happens often when you have a single founder.

But in terms of priority, there are only three things that matters when you start your business: 1. Sell 2. Sell 3. Sell

Arguably you need the product before you can sell, and that requires either great creative skills or sourcing/product selection skills, but the reality is that good sales people can (and prevailingly do) sell average products.

You have no business before you sell something.

Routinely I advise start up founders who are lost in the intricacies of packaging or manufacturing, and I have to advise them that agonising over a production process when you have no customers and no demand for your product is pointless.

EVENTUALLY you absolutely do need a safe, certified product to ship, but that’s so far down the road for a completely new start up that it is almost an irrelevance until you get some Sales traction.

The most successful companies focus on building momentum in the key areas and not the less critical factors.

If you just want to come up with cool ideas and execute their product development then you need to find other people or organisations to do your selling for you. Because the harsh reality is this – there are hundreds of full time Sales people with bags of experience and contacts in this industry who find it hard to persuade Retailers to buy and list their products, do you as a new market entrant really think you can compete with these experienced full time people in a few spare moments you allow yourself after agonising for days or weeks on product details which won’t matter if you can’t sell the product? Get real to get successful!

7.      MANAGE INVENTORY COMMITMENTS WITH GREAT CARE

It’s much easier to buy inventory than it is to sell it!

Speaking as someone who has had a garage full of unsaleable inventory from my own ill-conceived ventures, and as someone who has visited numerous failing businesses which had excess inventory literally falling out of the windows of their warehouse, my advice is to order inventory with great care.

Eventually you will have systems and teams of people who argue and bicker about how much to order of which products and when, and that will help to make your inventory management process efficient. But to begin with, every purchase order you place is an existential risk to your company, so you should treat the enormity of that decision to the appropriate level of due diligence. Make it harder for yourself to order stock from your factories. Formalise a process. Involve other people. Perhaps even incentivise your Sales teams by the level of inventory on hand as much as by Sales achieved – that’s how the big Toy & Game companies do it. Find someone who acts as a brake on placing inventory orders, in established companies this is often someone from Finance, but before you have a business of a size which merits a Finance person let alone a Finance department, you need some brakes as well as some tailwinds when it comes to ordering inventory.

In our industry, inventory expense (manufacturing & shipping) cost as much as a third of revenues. So you don’t want to get this wrong. Excess inventory can literally kill your business.

8.      CONGRATULATIONS YOU GOT A BIG BREAK WITH A BIG OPPORTUNITY, NOW PUT EGGS INTO OTHER BASKETS

We all know someone whose parents were never satisfied when they were children. They would do well at school, perform some chore or win a competition in one of their hobbies or past times, and there would always be one parent for whom it wasn’t enough, and who always expected more.

That’s how successful Toy & Game startups think and behave. The first major breakthrough for a new company is so exciting for everyone involved, it creates an electric atmosphere in the company, and it creates momentum when dealing with external partners who suddenly pick up the phone to you and might even start chasing you for preview appointments.

Success in this business though can be thoroughly transient – many a company has launched a new Toy to market and had a big hit for a year or two, only to see that successful product fade out of the market place as consumes and Retailers moved on to the next things from other companies. The more successful your products are, the more likely it is that ‘me-too’ products at low prices will start to flood the market. Success is only rarely permanent in this business! Products are only occasionally perennial.

So, as soon as you have a success, don’t leave all your eggs in that basket, spread the love and build up more eggs in more baskets for the security and stability of your company.

9.      BEWARE OF EXTENDING CREDIT

Beware – not everybody pays their bills. Some fail to pay because they go out of business or are struggling. For example, when Toys R Us Inc. went bust, they owed $136 million to Mattel, $59m to Hasbro, $33m to Spin Master and $32m to Lego (according to reports in the L.A. Times).

The bottom line is that extending credit can be a massive risk for new companies. There are ways round this – you can sell FOB from the port near the factory so that you get paid earlier in the process and don’t take on inventory risk to the same degree, you can use factoring and other credit instruments. You could demand upfront payment of cash – while this latter measure is not normal when dealing with Retailers, it should be standard practise when dealing with closeout deals.

I have plenty of issues due to people not paying their debts on my CV/Resume, and every single incident caused severe problems of one kind or another, whether that was cashflow impact for the business, or a limitation to my ongoing career prospects.

So please – as a startup, be wary of blithely extending credit here, there and everywhere. You may need some expert advice on this area to get the best deals but also to make sure you get paid one way or another. There is nothing more exciting than getting big orders from new customers, but there is also nothing as devastating as not getting paid for those orders.

10.  TRADE SHOWS ARE A CRITICAL ‘PILGRIMAGE’

People do business with people. That cliché just about sums up the value of Toy & Game trade shows. Admittedly you can sell via Amazon’s algorithm and perhaps never have to interact with a real person, but much of the market still operates exactly how it has always operated – via inter personal contact. Buyers need to get to know you, to take your measure and to work out if they can trust you and trust your company to be part of their supply chain.

The best way to meet Buyers when you are a start up is via Trade shows. There is no better way to schmooze, sell and to display your wares to those that are in the business of buying similar products.

Over 25 years, most of my most successful results have been heavily influenced by or somehow derived from industry Trade shows. The one thing that never gets cut in my schedule or in our company budget is Trade show attendance.

You do need to be efficient when you start up of course, some shows are more successful than others. If you are a typical Toy & Game business, I would suggest that you might benefit from exhibiting at your home country Trade show. After that if you still have budget, then the Spielwarenmesse in Nuremberg is typically the best to meet international distributors and Retailers from around the world. Beyond that, you need to decide based on the specific needs of your business.

By the way – the topic of which Trade show companies should attend is the question I get asked most often. So I recorded a podcast episode to answer this question as broadly as possible, to listen to that podcast episode, just click here: https://playingatbusiness.libsyn.com/ep-107-which-toy-game-trade-shows-should-you-attend

These tips admittedly come from a fairly jaded perspective after a quarter of a century in this industry now and nearly 1.5 decades of helping startups. You might be the company that breaks all rules and bucks all precedents, I hope you are, but I have seen a couple of hundred companies come into this market and we have advised them at various stages of their journey. There are very few who succeeded who did not either adopt these 10 tips early in their journey, or didn’t do so, made mistakes, and then course corrected accordingly.

I wish you well with your journey.

Seeing new companies we have helped turn into the established companies at trade shows, on toy shelves and across the world of Toys & Games gives me great professional pride and fulfilment. Sometimes one of our clients goes onto become a major player, you might just be the next :)

Bon chance and remember “audentes Fortuna Iuvat” - Fortune favours the BRAVE.

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