How pre-sales marketing can solve your cash-flow problem as a small business owner
Updated: Apr 23
Taking out the guesswork on stocking items and keeping the money flowing
If you are a small business owner you already know that liquidity is one of the key factors to keep your business running. Now imagine this: You have created a cute little mascot or merch (or insert another item of your choice here) for your followers and fans which you would like to sell at some point in your online store.
You are going to order a certain amount of the items and you will have to pay the producer before you are able to sell it. With this sales model several issues need to be considered. First, you will have to guess how many pieces you will need. Second, you will have to spend some cash on items you can't know if they will sell. This is the risk of launching a new product. Usually producing larger amounts will make the price cheaper and you will be able to sell it for a higher margin. Hard to find the sweet spot without any previous sales numbers as reference.
Another issue coming on top of this is the current situation with the global supply chain delays. I've heard of containers being blocked for several weeks or longer. Which means all the money AND your items are literally stuck on a shipping container.
One possibility to ensure that you won't have to block your money and keep your cash-flow positive is to create a pre-sales marketing campaign. That means you will offer an exclusive sales for your followers and clients before it even hits the store. Your clients will be able to get their hands on a limited edition first. And as it is a pre-sale they are most likely be willing to wait a bit longer for the delivery. Just make sure to keep up the communication with them during the time until delivery.
Another option is to create a landing page with the product first and test market it in forms of running ads for it. Just without a payment option and see if people would buy it. Let it run for a while and see if this landing page created some interest. And then you can make a better guess from there before buying anything for real.
"But what is with a crowdfunding campaign on kickstarter" I got asked. This is one of many possibilities, of course. Crowdsourcing is a great option. But might not work too well for you if you don't have a great product and benefits to offer for your backers. You just have to be aware that this works indirect. That means instead of investing into marketing your brand you have to move all you fans onto kickstarter first. There is a higher risk of loosing people along the process. And in addition you will pay to market kickstarter.
Another idea is to offer tokens on the blockchain for your clients. Which they then can exchange into physical products. If you are using the blockchain, in my opinion it would be key to think about additional benefits. The downside of this is that you most likely will only reach the early adopters of this technology. So it would depend on your target group to decide what makes sense. But this can be a great options for musicians to raise funds for producing an album or organising a tour and growing life-long supporters by making them part of your success early on. But this is another topic that would deserve a whole new post.
There are several factors to consider before making a decision on how to finance a product. A pre-sale is a great option. You can calculate the minimum amount you would need to earn a good margin on it. So if the funding fails you just refund your clients and you know that the product wouldn't have worked. This might save you a lot of money. Or on the other side, you order only what was paid for already, and in the best case you exceed the minimum funding and you can buy at a cheaper price and increase your margin per sale.
And here comes the daily dose of self-marketing: I can help you setting up your marketing and advertising strategy and create an action plan on how to move your company forward and generate leads for your business. Contact me here.