Almost 80% of CPG startups fail because of various reasons. Some launch products that aren’t compelling enough to thrive in the market, while others miss the mark on their products, make financial mistakes, price their goods too high, and ignore the importance of marketing and branding. This guide for CPG startups will help them look out for common mistakes that should be avoided to ensure a successful business.
Entering Conventional Retail Quickly
Getting your CGP brand into conventional retail is not necessarily an achievement. Though conventional grocery stores typically offer far-reaching distribution, this can be a downfall for your CPG company, especially if you’re selling natural or specialty products.
Making a jump to conventional means your brand may fail to meet supply demands. Moreover, making your products stand out among dozens of other goods is difficult.
Neglecting Profit for Growth
CPG startups often believe raising capital and topline growth are more important than solid financial health. But this is a misconception. CPG experts suggest there should be a balance between profit and growth in the business. The challenge with always aiming for topline growth is losing track of a plan to achieve bottom-line success.
Raising capital and always focusing on growth at the expense of raising debt can have various consequences for CPG business startups.
Ignoring Unit Economics
A CPG business startup is prone to failure despite having more demand and millions of dollars in annual returns because of failing to manage gross margin. Regardless of customers loving your product and the buzz you generate, if the unit economics directing costs and revenues associated with a product unit doesn’t work, your business will fail.
Mismanaging Cash Flow
To ensure your company survives, check the cash currently moving in and out and predict inflow and outflow in the future. Unfortunately, many CPG brands fail to realize how important cash flow management is. A business that doesn’t have enough cash to buy things won’t be considered a business. It’s easier to manage cash flow by categorizing it into strategic cash flow and technical cash flow.