From My Work-in-Progress Basket

How Good Are Your Products? Why It Matters Even If Your Customers Can’t Tell

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Thursday, December 13, 2018

Delray Beach, FL.- My family has a small interest in a Craft Beer Brewery owned by friends of ours. Because our interest is small and because they are friends, I do my best to limit my input to answering questions they ask, which are few and far between.

But that doesn’t mean I don’t have questions of my own.

Since the beginning, for example, I’ve wondered how much taste matters when it comes to selling beer. Is there a relationship between how good a beer tastes and how well it sells? Is there even such a thing as “good” and “not good” when it comes to taste?

I’m intrigued by this issue because I’ve had to grapple with something similar in almost every business I’ve worked with – questions about the relationship between product quality and sales.

In this particular case, my friends have spent a small fortune working on the quality of their brands. To them, there is a real difference between the quality of one pilsner and another.

They also believe – and this I don’t dispute – that consistency in taste is a very important factor in building a best-selling brand.

But is the taste of one beer really better than another? Or is it just a matter of personal preference?

And if so, why bother trying to make your beer taste “better” according to some expert standard of excellence? Wouldn’t it be smarter to simply find out which ones have the widest consumer appeal?

The fact is, I’ve been thinking about the question of quality in relationship to everything from cigars and wine to art and literature for most of my adult life.

And here’s what I believe: There is an absolute difference. Some Cabernets are better than others. As are some cigars. As are some books. As are some works of art.

But the number of people that can identify or even notice gradations of quality are small. Depending on the item in question, my guess is that less than 10% can tell the difference.

When it comes to cigars and tequila, I consider myself among the minority that can distinguish between, good, bad, and mediocre. I feel the same way about literature and art.

Beer? I haven’t a clue. And I’m willing to bet that 90% of the beer drinking market can’t tell the difference either. Actually, I’d say 98% of the mainstream beer drinking market and perhaps 80% of the craft beer market.

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Miscellaneous Essays

The Best Way to Get Funding For Your Business

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Last week, I suggested that it takes more than an idea – even if it’s a really fantastic idea – to attract potential investors. You need to prove that your idea has legs by turning it into a working model.

But then what? Once you’ve got a working model, where do you go for the money you need to turn it into a business?

In general, there are four sources of capital: venture capital firms, government agencies, commercial banks, and private investors or partners.

If you think your idea might be of interest to venture capitalists, check out the National Venture Capital Association (nvca.org). But for the average entrepreneur, venture capital isn’t a possibility.

As Paul Lawrence explained in his article “Raising Capital for Small Business Ventures”:

Yes, some venture capital firms will invest in new businesses, but such businesses are usually involved in technology or some other high-growth area. Frankly, for most small businesses, venture capital isn’t even an option. It’s rare for a small-business concept to have the kind of mammoth payoff venture capitalists look for.”

Plus, the cost of doing business with these companies is high. It’s basic economics. Their risk is high, so their reward must also be high. Even if you were to interest a venture capital company in your business, you’d be aghast at what they’d want in terms of their ownership position.

What about government grants? Tim Berry, author of Hurdle: The Book on Business Planning, points out that government funding agencies usually have “social” agendas. Grants and loans are available to minorities – especially minority businesses engaged in education, antidiscrimination projects, community services, fine arts, and other politically popular objectives.You can find out if your business idea might be a candidate for government money by checking into any of the government agencies whose purpose is to stimulate entrepreneurship. The best known is the Small Business Administration.

I wouldn’t advise taking this route, though. It requires too much bending to bureaucracy. Too much artificiality. Too much red tape. Getting these loans and grants takes months (or years) of filling out forms. And there are all sorts of reporting and regulatory requirements – enough to slow down even the most patient person. Plus, government-funded business projects have an extremely high failure rate once the funding is withdrawn. That’s because they begin with an idea, not a working model. And the idea isn’t good to begin with because it is based on social policy instead of being connected to profits – which is, after all, what fuels a business.

As for getting money from a commercial bank, I can make this short: Forget about it. The only way a bank will lend you money these days is if (a) you have excellent credit and (b) you can collateralize your loan with assets. If you have good credit and tons of money, you don’t need a bank loan. You can loan yourself the money.

This brings us to the fourth and final option…

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