Fateh Singh (Fattybhai to his friends) looked worried. He was sitting with his mentor, popularly known as the Bearded Professor, in a neighborhood bar. And he looked… well, worried.
You see, Fattybhai had started a wonderful startup called NoCheeni.com, aimed at that massively growing number of diabetics in India who just couldn’t give up sweets. And those who did not want to become diabetic. And those who wanted to shave just a few millimeters from the meter and a half around their respective equators. And…
But you get the idea, don’t you?
Sugar-free candy was a booming market, and that’s why he started NoCheeni. He had set up a high-tech manufacturing facility, with all the latest bells and whistles to ensure standardized and hygienic products which he sold through Amazon and Flipkart, as well as through his own website.
Sales were good and increasing month by month. But to grow further, it needed to add manufacturing capacity. And for that, he needed funds. Unfortunately, he failed to convince investors. And now you can understand why he looked worried.
“Fattybhai, let’s analyze your business using the well-known PERSISTENT framework,” his mentor began. “Most investors use this framework – or something similar – to evaluate startups before making an investment decision. Therefore, before contacting them, you should evaluate your startup using the same framework. Ok ?”
“Okay,” Fattybhai replied.
“So let’s start with the ‘P’ in PERSISTENT, which stands for PROBLEM. Are you solving a problem for someone? Of course you are – the problem of people who want to eat sweet things without consuming too much sugar. right?”
“And then we have the “E”, or PROFIT MODEL. Not only do you need to fix a problem, but your customer needs to be willing to pay you for it. Otherwise, you are running a charity, not a business. And in this case, the customer is paying for the candy, so you To do have a BENEFITS MODEL. »
“Next, the first ‘S’ of PERSISTENT, namely MARKET SIZE. Obviously you should be in a space that is large. Otherwise, you will simply stagnate after one point. Now the candy market in India is HUU-GE. No problem. But it is also a busy market, with Haldiram, Bikanerwala, KC Das, and all those lesser known hawais in every nook and corner of the country. It’s never a good idea to enter a crowded market and try to compete with existing players. Fortunately, this is where you were sensitive – you identified a NICHE within this market – the ‘N’ in PERISTENT. A NICHE where you provide sugar-free candies. This NICHE is less crowded – so you are not in direct competition with existing players. It’s also big enough for you to grow and not stagnate.
Fattybhai was beginning to understand and he nodded. But that’s when the professor said something that made him think.
“Fattybhai, every business has RISKS – the ‘R’ in PERSIST. And one of the biggest RISKS is competition. That’s why you need a BARRIER TO ENTRY – the ‘E’ of PERSISTENT – which keeps a potential competitor out of your business. Or at least makes it more difficult. Now, if you have an INNOVATIVE solution (the “I” in PERSISTENT), especially one that is hard to copy, it can build your BARRIER TO ENTRY. But do you have one? Anyone can make candies without sugar, right? There is no magic formula. »
Fattybhai nodded regretfully, “Unfortunately, it’s true.”
“However, you can build a BARRIER OF ENTRY over time,” the professor continued. “You see, when there are a lot of similar products on the market, your brand can be the differentiator. After all, we are talking about food products, and people here would be concerned about both taste and hygiene. And they would like to buy a known and trusted brand. Tell me, do you have a mark?
“Yes,” was the immediate response, “NoCheeni!”
The professor shook his head,
“No my friend, it’s not a brand. At least not yet. It’s just a name. It only becomes a strong brand once enough people hear about it, come back to buy it, and maybe recommend it to their friends. And for that, you have to…”
“Growing up fast,” Fattybhai concluded. He was now taking the lead. “If I grow the business quickly, I’ll get a lot of customers and hopefully the brand will build. But for that, I would have to add more and more crafting ability. Which means a lot of time and money, right? »
But now Fattybhai didn’t wait for an answer. You see, he was thinking. And with a distant look in his eyes, he said, “Sir, I see where you’re coming from. My current business model requires too much investment and time to build additional capacity. And so I can’t grow fast.
The teacher smiled tenderly at Fattybhai, like a hen might smile at her favorite chick. “Exactly, son. Your business cannot grow quickly. In other words, it is not SCALABLE (the second ‘S’ in our PERSISTENT framework). And if you’re not SCALABLE but your competitor is, what happens? Well, he grows faster than you, builds his brand more successfully, and you end up dry!”
“And what do you need to do to ensure you have a SCALABLE business? It’s simple: just outsource your manufacturing to partners. Standardize all processes using the single facility you have in place, then make sure they are implemented by each of your partners. You do the branding, marketing and distribution. Most importantly, you don’t need to increase capacity to grow It’s your partner that needs it. And as a result, you have a much more SCALABLE business model.”
For the first time that evening, Fattybhai beamed.
But the professor still hadn’t finished. “Fattybhai, there are two other things in our PERSISTENT framework. ‘T’ for TEAM, which starts with the founders. I have known you for some time and I know that you are passionate, ambitious and very, very hardworking. So you tick the TEAM box perfectly.
“And finally, the last bit – the second ‘T’ in PERSISTENT – namely TRACTION. Are you getting customers? Are they coming back for more? Is your revenue growing month on month?”
“Yes they are,” Fattybhai blurted out in excitement. “So all I have to do is outsource my manufacturing, make sure quality standards are met, and my business becomes SCALABLE. A perfect PERSISTENT business model.
And Fattybhai almost jumped, as he demanded – no, demanded – a refill of his beer.
The bearded professor offered one last piece of advice. “If you have launched a startup or are planning to start one, evaluate it under the PERSISTENT framework. Not only will this help you secure funding, but it will also increase your chances of success.
And then he raised his mug of beer. “Cheers!”
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)