Top Two Mistakes Founders Make With Buyers

Top Two Mistakes Founders Make With Buyers

There is nothing worse for a high potential, emerging CPG brand than to enter the right retailer the wrong way and thereby to squander inventory (potentially lots of it) that could be moving faster elsewhere.

It’s essential to seek partnership with high-potential retail chains, i.e., a partnership with their merchandising team. Yet, it’s equally vital to be able to walk away from a buyer who refuses to meet your baseline criteria.

Do you even have baseline criteria? Walk away standards for specific accounts?

I meet many founders who are way too over-eager going into buyer meetings, often fueled by brokers’ financial interests, to be honest. This naïve approach often coincides with a “yeah, sure!” approach to negotiating all critical elements of the deal.

The first negotiating mistake founders make is not to get super clear on their ‘walk away’ criteria for the specific account. And these criteria may vary. Contrary to what some might think, any Kroger deal is NOT worth it just for the sake of being in Kroger. Not, if you’re on the bottom shelf, over-promoted with the wrong TPRs, bullied into circular ad fees that will underperform for a new trademark (circular readers are looking for deals on brands they already use regularly, not you).

The second mistake is to not listen carefully for two things: a) what is motivating the buyer to say ‘yes’ (i.e., their personal and business criteria) and b) how impressed they are in you as a founder/team. Before and during your buyer meeting, you should be listening for what motivates them to say ‘yes.’ As a small business producing very little profit compared to large brands on the shelf near you, you can’t expect buyers to be excited about the financial benefit of having you on the shelf. You should be listening for agreement that you are incremental as a premium brand. But, perhaps more important than this, you should be listening for belief in you and your team as both a brand and as a business. If you don’t hear enthusiasm, you may need to work much harder to build the relationship either now or later.

What you want to avoid is winding up in a buyer meeting with a lukewarm buyer who then says ‘yes’ but only if you violate your walk-away criteria (i.e., good shelf visibility, the minimum number of items, strategic SRP for that channel, opportunity to place secondary displays, limited and health TPR program, etc.).

The weak ‘yes’ that winds up with unprofitable, crappy placement happens ALL the time in retail when founders become spineless and/or are (mis)led by unscrupulous brokers chasing case volume growth and the commissions of the initial orders from the buyer.

Think smarter about growth. Learn how to negotiate well with buyers. If you are a founder and you’d like even more advice like this, please take my Founder’s Quiz and you’ll get signed up right away for my VIP e-mail list. Each month I write a special, timely white-paper (here’s a sample) for founders new to the industry.

Dr. James Richardson

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