New Venture Lab: Equipping Christian Entrepreneurs

Question

I have developed several formulations for natural personal care products from skin creams to toothpastes and balms, etc.  I have a relationship with one contract manufacturer that can produce some of the products and I’ve been working with two large consumer packaged goods companies in hopes of getting some sort of deal done with them, e.g. selling or licensing them a formulation, but it is slow going.  I am considering raising capital and creating my own brand for my products and taking them to market.  What advice would you give me?

Answer

If your sweet spot is product development of natural personal care products, I would tend to think that you should stick to that rather than try to build a company, build a brand and build retail distribution on your own.  Not only would you need to raise a lot of capital to do that, venture capital extremely hard to raise (see this topic link for more info), you will outside of your main area of gifting and expertise and you will lose control.  It seems to me that you are a product development company and not a consumer packaged goods company.  I would suggest that you open up your deal pipeline beyond just the two companies you are currently dealing with.  Since Tom’s of Main and Burt’s Bees were both recently sold to very large multi-national corporations (Colgate-Palmolive and Clorox respectively), I would think that there would be a great deal of interest on behalf of those buyer’s competitors (such as P&G and others) to adding natural personal care products to their own product lines if they do not already have a similar line.  Large companies are always looking for high-growth acquisitions and product-line extensions and they completely get the fact that the organic and natural segments of nearly all products on the store shelf is growing in the range of 20% per year compared to about 2% for typical products.  I would think that smaller, more aggressive companies might be a good target as well. 

Here are some practical steps I would suggest:

1. Spend some time building a market database of all of the personal care and consumer packaged goods product companies you can think of and list the types of products they currently have in their portfolio and look for overlaps with your current products.
2. Add the names, titles and contact information for their key managers and executives that have the responsibility for new product development.  You can use LinkedIn to search for titles such as New Product Development Manager, Market Development Manager, etc. and network your way to the right people.
3. Write up a succinct and informative one-page PDF that clearly lays out a description of the products you have developed and how they are unique.  You may want to include some market information if you have it in terms of demand, growth, competitors, etc.  (By doing this, you are going to make it easy for the more junior product development staff to build interest in their organization to do a deal with you – you are feeding them their talking points if you will.)  You may want to modify this for each prospect that you contact so that it is perfectly targeted to their organization, e.g. leave off the directly-competitive product and focus only on the holes in their current product lineup.  I suggest that you make it clear that you are willing to work with them along multiple dimensions on a spectrum of potential deals, such as: outsourced product development, selling formulations, licensing formulations, manufacturing products (through contract manufacturers), private labeling, co-branding, etc.  This gives them choices to choose from and makes it more difficult for them to reject your approach outright.
4. Write up a detailed specification sheet in PDF form for each of your products that clearly lays out more details on the product.
5. Make contact with all of the product development staff you can get to in the all of the target companies you’ve identified in order to significantly expand your opportunity pipeline.  Attach the one-pager to make it easy for them to grasp what you have and what you are trying to accomplish.  I would suggest that you hold the detailed specifications for the next level of information after they’ve signed a confidentiality agreement and after they’ve expressed real interest in your products.