FROM -$20K TO $90M IN 5 YEARS, HOW TO BUILD A MASSIVE CASH COW BUSINESS
Ten years ago, two college dropouts built eight figures small business empire in less than five years, with no money, little to no help, and $20K in debt.
Most small businesses don’t make it to the five digits club in their first year or two, let alone survive the slaughtering competition of the marketplace.
Jake Kassan and Kramer LaPlante, the founders of MVMT watches, have put 600,000 watches on the wrists of style enthusiasts across 160+ countries around the globe.
But how did they do it? And can we take the same strategy and apply it to build a massive small business cash cow? Let’s find out!
Before we dig into strategy, let me brief you on the MVMT story.
The MVMT story in a nutshell
MVMT watches is a widely known small brand for selling minimalist and premium-looking watches and eyewear to customers aged 18 to 34.
They used to sell their products online and directly to the end customers.
They only sold watches on their online store; there were no retailers or intermediaries.
They claim they were entirely self-funded. However, the founders ran a couple of crowdfunding campaigns on Indiegogo and raised around $300K.
The money gave them enough cash to buy inventories and build a professional website.
In the beginning stages, they offered a collection of six minimalist watches with a simple and unique style at an affordable price.
Jake and Kramer turned to Alibaba and outsourced the manufacturing process of the watches (possibly to China).
For marketing, they collaborated with videographers and style enthusiast content creators that travel across the globe to showcase the watches in different gorgeous locations, landscapes, and environments.
MVMT Social Media Marketing — Instagram
Once MVMT gained momentum through social media, the founders offered new models, introduced the women’s category, and invested in paid social media advertising such as Facebook, Instagram, and Pinterest.
The Movado Group acquired MVMT for $100M in 2018, and the founders are living happily ever after.
That’s the story of MVMT in a nutshell.
How to build a massive cash cow small business with a physical product
MVMT has become a small business cash cow, which might sound like a stroke of pure luck; however, Blendjet, Electro Threads, Sand Cloud Towels, Boom Cosmetics, Bombas Socks, and many other online brands have achieved similar results as well.
Is it possible that there is a recipe for building a massive online business? And if so, then what is it?
Putting luck and the right timing aside are two of the most critical components of building a cash cow; I believe these businesses have many things in common.
I have identified a few steps and patterns that you can leverage to increase the probability of creating a highly profitable small business with a physical product.
Step1. Pick a product with an existing high-demand market.
Most previously mentioned examples have nothing special regarding product invention or innovations.
They are a set of everyday products. However, there is a constant demand for such commodities.
In 2013, people used to wear chronograph watches; nowadays, many people use blenders to make smoothies on the go. Most women apply makeup and skincare products, and most people will wear socks every day.
There is nothing incredibly innovative or groundbreaking in terms of the product’s functionality, but what was an intelligent decision about picking the product is that if you buy it once and like it, you will need to repurchase it.
Simply because there are new styles or you ran out of it and needed to refill.
This type of product allows the brand to sell to the same customer more frequently and increases the average value of each buyer.
Step2. Give your product a marketing twist.
To differentiate your product from the rest of the commodity products of your category, it needs to have a slight marketing twist; it has to be a bit exaggerated or sophisticated if you will.
It needs to have the “wow, that’s cool” or “oh, I never thought of that” or “hey, look, that’s weird” effect.
This effect gives people and influencers a reason to talk about your product or show it off on social media, and in return, it drives word of mouth and builds the ripple effect around your brand much more quickly at a lower marking cost.
If you head to YouTube or Pinterest and search for the most Instagrammable Ice cream or coffees, you can find some cool stuff that you never thought of, and those products can jump up, and that’s what you are looking for to include in your product.
Give Your Product a Marketing Twist — YouTube: Joey Graceffa
In the story of MVMT, they emphasize the design as being chic and minimalist rather than overly complicated or cheap made of plastic.
With this marketing twist, they built the marketing within the product, and that’s genius.
Step3. Turn your product into a sophisticated brand.
To sell many products to many people, make them believe this product is made for them, and branding is your best tool to build that illusion around your product in the customer’s mind.
If branding is done with the proper positioning, branding allows you to narrow the focus of your offer toward a specific group of sophisticated people.
This marketing trick will allow you to build an image around your product that makes this group of people develop a particular perception of your brand.
If your brand image matches their self-image, they will believe that your brand is made for them, and they have no other choice but to buy your product.
Luxury brands such as Chanel, Dior, and L.V. Do it all the time; how do you expect them to sell a $100 shoe for $1000?
If you head to MVMT and look at the design of their watches, then head to Alibaba and search for watches, you will find similar, if not the same models.
MVMT did not reinvent watches or offer highly sophisticated designs as luxury brands do.
What they did was pretty genius; they branded that $15 watch with a personality and a story of discovery, style, and affordability.
They made the customer believe that the $15 made in china watch was worth $1000 and the customer was buying it for $90 as a great deal! I think that’s a genius strategy.
Step3. Market test your product, pre-sell it and generate some cash.
The fastest method to validate your idea and see if it’s scalable is to market test it.
To get valid data and insights about the demand for your product, you need to pre-sell it to a large group audience.
With this step, you shouldn’t rely on a couple of friends and family members; you need a large sample.
The best approach is to run a crowdfunding campaign on large-scale platforms such as Indiegogo and Kickstarter, backed by an effective marketing intensity and effort.
You can display the prototype of your product or produce a low quantity inventory working with local white-label suppliers.
Follow what the data tells you; if people validate your concept and make noticeable sales, you have an excellent offer.
If there is little to no demand, you have two ways to go; the first is to pivot your idea and find a different product, and the second is to give up on starting a business and start looking for a job.
Step4. Outsource Your Product.
If done with the right partners, outsourcing can save you a lot of money; working with white-label suppliers can make your production cost more competitive and efficient.
They can also help you focus on marketing and growing your business rather than worrying about creating your product.
When you outsource, your priorities shift from product creation to quality management; you double down your effort on product inspection and delivering the best quality.
This critical step will make it much easier to scale the production of your product to reach a lot more sales at a lower manufacturing cost.
Step5. Build a small marketing and growth team.
If you can make it to this point, you are a hero, but I’m afraid that building a massive cash cow requires more than a single hero.
To grow your business fast, you will need a team of highly specialist marketers, including a growth marketing strategist or manager, data scientist, social media specialist, and customer happiness expert.
The strategist plans and orchestrates your brand image and growth; the social media specialist is to grow your brand awareness and develop relations with content creators.
The customer happiness expert delivers the best customer service and experience, and the data scientist is to find what marketing strategies, channels, and tactics are working and what aren’t.
Without this professional team, your business will unlikely get close to eight figures, regardless of how passionate you are about your product.
Step6. Build your website and sell directly to consumers.
Develop a functioning website that runs fast and smoothly; it also has to be well presented visually.
Customers can easily navigate your site, gain clear information about your product, and place an order without errors and frustrations.
Don’t worry about retail stores or wholesale.
Control the entire customer experience, customer service, pricing, promotions, and marketing of your product.
Step7. Create a marketing momentum.
When I was working in Shanghai as a senior marketing director, we used to tell new customers with no appetite for marketing the following:
In this competitive market, if your brand doesn’t take off in the first three months, it has little to no chance of taking off for the rest of its existence.
To build a cash cow, you need as many people to notice your brand and get excited about your product as fast as possible.
The fastest way to get people excited about your product is to create a product lunch marketing campaign around your brand for a minimum of three months.
Influencers marketing, by far, is the fastest, most effective, and cheapest method to reach a large audience and get them excited about your product.
We don’t have to be geniuses to realize that people, especially the young ones, like to imitate other people they like or admire; they also want to express themselves through particular brands with a specific style, voice, and purpose.
When you associate a stylish watch with a cool influencer in a gorgeous setting or environment, you build a halo effect around your product.
Multiply that effect by 40 influencers within three months, and now we are talking, people will see your product everywhere on social media.
You not only made everyone talk about your product, but you also gained their total attention and trust.
You can look for influencers by yourself on social media, which can be frustrating and challenging to manage.
Or, you can search for social media influencers platforms such as Heepsy and get more effective results. (by the way, that was an affiliate link. I will earn a commission at zero cost to you if you subscribe to their excellent service. Thank you for being supportive).
At this level, you need cash. It doesn’t have to be a lot, but enough to reach to media, collaborate with influencers, and stock inventories.
Many businesses shy away from asking for money or cannot generate enough profit to exit this stage and move to the next step.
Step8. Scale your business.
Once you gain momentum and reach $500K to $1M in sales, scale your marketing to paid advertising.
Once you reach $5M in revenue, add a new product, or expand your product collection.
You also have to widen the distribution of your product, sell to more locations nationally, or grow internationally; you can do that direct to consumers online or work with distributors and wholesalers to expand the distribution of your brand.
Focus on building a business with a culture and specialized teams; shift your attention to building a lifestyle brand rather than thinking about selling products.
Find a product people use regularly, then give it a marketing twist.
Sell the story of the brand and the lifestyle associated with your product.
Market test your product on large platforms.
Delegate critical marketing and growth responsibilities to professionals early.
Sell direct to consumers, control the customers’ experience and the brand image.
Build marketing momentum as fast as possible.
Use data and analytics to determine what is working and what isn’t; once you find what is effective, 10x your budget and effort.
Scale your business within three to five years.
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