Three years ago, together with Mikhail Oreshin, I founded the company "Tsar Almond". Today the business is in a phase of rapid growth, with more than 100 million in turnover and 10,000 completed orders. Previously I told you about our experience in the nuts and dried fruit market in my blog on VC.ru. In previous articles I gave a brief analysis of the mistakes, failures, achievements and findings of the "King of Almond" team.
In the new publication I have tried to structure the experience I gained in 2018-2021. My goal is to share practical knowledge with people who are planning to start their own business or have just started a business project.
Let's go!
Tip 1: Choose your market niche carefully
Three years ago, I didn't pay much attention to the area of business. Together with my partner, we believed that it was possible to make money in any industry. It was simple: produce a quality product, don't ignore the desires of customers and market trends. Now I realize that not every niche is good for the aspiring entrepreneur.
The key problem is oversaturation of the market.
The big players have long ago divided its segments among themselves. Small firms are forced to sell the product at a minimal margin. This is exactly what Tsar Almond faced. We decided to work in the nuts and dried fruit segment. Stalls selling these delicacies were present in many shopping malls, galleries, and eco-markets. My partner and I were convinced that clients would easily accept a new player in the market and buy the usual set of nuts and dried fruits from him.
Reality, as Thanos observed in "Infinity War," is full of disappointment. "The Almond King was incurring operating losses. Yes, turnover was gradually increasing. But with it, so did the loss. We asked ourselves, "What's the problem? Poor quality merchandise, accounting errors, low demand season?" The answer was simple: you can sell packaged nuts at a competitive price only if you buy large quantities of raw materials. In the niche in question, the purchase volume was measured in standard containers, the contents of each of which cost about 7 million rubles. The purchase of two types of nuts would have required an investment of 14 million roubles. Neither my partner nor I had that kind of money. What did we do? We found a free segment within a large market niche. In our case, this segment turned out to be gift sets of nuts and dried fruit. At a certain point I realized that the big companies were selling nuts as raw materials. It is useless to compete with them. Beautiful packaging, fast delivery, a wide product line - all this is offered by dozens of brands. At the expense of these solutions we will not be able to win the trust of customers.
Gifts of nuts and dried fruits proved to be a real boon. Each set is unique and tailored to customer needs. Variability is what attracts customers to the King of Almond product. Big companies offer quality, but extremely standardized solutions. We are ready to adapt our kits to the wishes of the target audience.
Recommendation: look for a market niche, which will allow you to sell a high margin product. The company will begin to make a profit when selling the product with a twofold markup in relation to the cost of production. A threefold markup will ensure the sustainable development of the company and enable you to invest in modernizing production and hiring better staff. Do not forget about marketing: the cost of attracting new customers is impossible without making a profit.
The next problem is the unformed market.
In the book "Blue Ocean Strategy," there is a fragment devoted to new market niches. The authors beautifully described the mindset of the aspiring entrepreneur: "I've come up with something unique, my idea will blow up the market...". Typical rookie mistake. In reality, nobody needs a unique and complex product more often than not - customers are conservative and not willing to pay for dubious innovations offered by inexperienced entrepreneurs.
Example of niche search in WordStat
Tip: Before you go to market with a breakthrough idea, read the book "Ask Mama (How to Talk to Your Customers and Prove Your Business Idea When Everyone Lies?)" and test your idea using the algorithm described by Robert Fitzpatrick.
Tip 2: Focus on a limited group of products
In the first year of King of Almond, I believed that our losses were the result of a small assortment. My partner and I radically expanded our product matrix. I later realized that this action was a colossal mistake. Are you working without profit? Reduce the product line! Do not think about the product range: there is always a marketplace or online store which offers tens of thousands of competing products.
Complexity of choice
"Tsar Almond" became profitable after reducing the product matrix. We focused on products with high margins. The effect was fantastic-the company's turnover increased almost tenfold. In a matter of weeks, "Tsar Almond" reached the break-even level and began to generate profit.
Recommendation: Try to focus on a small number of products. Product matrix of hundreds (but not thousands) of items will allow you to study the habits of the audience, understand the problems of customers and offer the most appropriate solution.
Expansion of the assortment should be started at the stage of sustainable development of the company. A simple example: you sell wooden tableware, your product is in steady demand from customers, the brand has gained fame. In this case, you can think about launching your own production of table setting sets. You should not become a designer, manufacturer and seller of wooden tableware in the early days of the company.
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