All Systems Grow

New Markets, Licensing and Creating a Chain

2. Take Your Product to a New Market

Dianne Daniel, president of Handle It LLC in Dublin, Ohio, first marketed GripTwist, an industrial-strength twist tie made of foam-covered wire, to ski shops as a ski and pole binder. It soon became obvious that what could hold unwieldy items like skis together could also hold hoses, tools, ropes and other items--so the company began selling GripTwists to hardware stores. Next, Handle It took the GripTwist into sporting goods stores. Daniel hopes the expansion will boost GripTwist sales to $1 million this year.

New market development can help you reach new customers, but reaching too far can overtax staff, budgets and operational systems. Start small, and check progress as you go, says Ed Chapman, managing partner of VizQuest Ventures LLC, a sales performance and market development firm in Waltham, Massachusetts. "Many companies don't consider market segmentation and target their products too broadly," he says. "Take your solution, sample it among a couple of microsegments, and see which ones stick."

3. License Your Product

Licensing shifts the financial risk from a product's originator to a company willing to take on the burden of marketing and advertising, production and distribution. The shift also includes forfeiting most of the profits, but it may be a fair price to pay for the chance to build a national reputation when cash flow is low.

For Taggies Inc. of Spencer, Massachusetts, the cachet of its licensing partner more than made up for sharing its piece of the pie. In late 2002, Scholastic Inc., the children's publishing behemoth, wanted to license Taggies, a line of blankets and toys with satiny tags attached, for a book collaboration. "The relationship brought us into a market we weren't in before," says Danielle Ayotte, 35, co-founder with Julie Dix, 38.

Ayotte and Dix, whose sales increased from $2 million in 2003 to nearly $3 million in 2004, were lucky to have Scholastic approach them first. Most business owners aren't so fortunate. Before you shop for a licensee, make sure your product is patented--or at least patent pending--and have some research showing sales potential. Then, if you don't already know of a company you'd like to partner with, check out trade shows, online databases and local economic development agencies. A licensing agent can also help you find appropriate companies and broker a deal.

Licensees can be picky, and so should the licensor. Davis of Revitalization Partners recommends choosing a partner who can offer potentially high volumes of distribution. While contracting with a large company might mean a smaller royalty percentage, the potential customer reach will more than make up for it. A good licensing partner should also have an established reputation for quality and service and an aggressive plan to market and advertise your product. For a check on past performance, talk to other licensors contracting with your selected company.

4. Start a Chain

A restaurant, retail or service business that's easily reproduced and can be run from a distance is great for launching a chain. But entrepreneurs must know exactly what makes the original store work and what won't easily transfer to a new site. "You have to ask, 'How much of this success is tied to me, my location or my staff?'" says Chris Wheeler, managing director of Ballenger Cleveland & Issa LLC in Newport Beach, California, a consulting firm specializing in financial and business turnarounds. Defining operating procedures down to the last detail, sharing staff between locations to establish the company's culture in the new location, and developing a training program for new employees all help start things off right.

Launching multiple locations can present some surprises. When Zoots Corp., an eco-friendly dry cleaning chain in Newton, Massachusetts, opened the doors of its third unit, the company launched a marketing campaign to herald the new arrival. "Suddenly, we had three stores doing three times the business of our first two stores," says Todd Krasnow, 47, chair and co-founder. The company, which had about $50 million in sales in 2004, found it difficult to meet its service standards. To avoid similar deluges in the future, Zoots cut back on big promotions, relying instead on word-of-mouth and periodic advertising.

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