WHAT IF BOOMING DEMAND CATCHES YOU BY SURPRISE?
Startups must be ready to face the pressure when they come up with a popular product
Omar Shahban and Fahd Javed are facing a challenge that would be the envy of most startups. The cousins are co-founders of Gravid, designers and sellers of weighted blankets that have been consistently selling out since the launch of their online site in May.
As a former physiotherapist, Shahban saw a mainstream market need for a product that had typically been used for people with autism or anxiety disorders.
“These have been around for several decades. We just repurposed them.”
The upscale, aesthetically pleasing modern design definitely struck a chord with buyers yearning for the comfort and security of this type of product.
Growth was always something they considered in their planning, Shahban says. “Even at the initial stages we had a long-term goal in mind and a line of sight into how to scale. We never wanted bottlenecks in the business flow.”
But long-term planning quickly turned to short-term catch-up, Javed says.
“We certainly didn’t think it would scale as quickly as it did. The product was market fit from the get-go. Every month was double what we forecasted the previous month.”
They already had a reliable manufacturing partner in China. The next step was outsourcing fulfilment to a warehouse partner. With the escalating demand, however, lead times got longer, with some customers waiting four to six weeks for deliveries.
Now the focus is on working with partners to get their lead times down and eventually achieve nextday shipping, Shahban says. That includes shifting to another warehousing facility that offers better integration capabilities with their technology.
“We should be able to get to the point where we can fund inventory properly without taking on debt. That can really work out well as long as we have calculated every risk.”
Tara Bosch, the 23-year-old founder of SmartSweets in Vancouver, started a company and also had to face skyrocketing demand sooner than expected. She began the business in response to a market need for a “smart sweet that kicks sugar.”
She came up with the idea and recipe while at university, where she was selected to join The Next Big Thing accelerator program. By the summer of 2016, she had launched her product online and through retailers.
“It was just myself with my own recipe. It was funny because different mentors told us don’t be too pie-in-the-sky with forecasts, and to be realistic. But my forecasts were completely blown out of the water. Within the same month of launching, I had really underestimated my forecasting.”
With that kind of demand, supply couldn’t keep up, she admits. “The inventory and supplier side took time to catch up. That was my largest pain point.”
Bosch says she managed to find some “really great manufacturing partners” and was able to focus on how to create efficiencies and shorten lead times for raw materials and other supply chain needs. After the first year, she has improved overall lead times considerably. That’s a good thing, given she is on track to have signed up 2,000 retail outlets in Canada by end of 2017, and possibly 10,000 by the end of 2018.
Having the systems and processes in place helps considerably, she adds. “That has allowed us to scale significantly. We now work backwards from our end goal, and develop a roadmap from that, identifying potential roadblocks and hurdles through partnerships and investment in systems and processes. We make sure we have the tactical measures in place so our internal team and our partners can act on it.”
The bigger concern for most startups is lack of demand for a product or service, says Dan Kelly, president and CEO of CFIB. “But one of the biggest problems for a startup that hits on something, is their ability to scale up. That puts all sorts of pressure on them when they are caught by surprise.”
Too many delays, and a company stands the risk of losing customers. “Businesses always need to look at the ‘what if’ questions,” Kelly says. “What if this does go really big, really quickly? Often the first question investors ask startups is how their idea can scale. Yet most entrepreneurs never even think of that at first.”
Finding reliable partners to help you scale can be incredibly important, he adds. “It often means looking overseas for goods manufacturing. Getting the right partnerships is time well spent.”
Even with that, if you do find yourself short on inventory, there are a couple of things a business can do, Kelly says.
“You can spin it as a good news story. If you do it right you can build additional excitement for the product and people will be keen to get it. And awesome customer service can also go a long way to ensuring customers hang in there with you.”