PODCASTS / E13
JAN 01, 2020
00:18 Welcome to Episode 13, the second in a mini series on founder archetypes. And this time I want to talk about the creative founder. Now I was a little harsh, harsh, harsh on the finance founder in the last one, and that’s because I know those big boys and girls can take it. I’ll be a little nicer with this one because, quite honestly, the people are a little more sensitive. That should not surprise you. And hopefully this series is not pissing off too many of you. It’s meant, really, to be just an approachable toolkit of sort to boost your own self-awareness as a founder, and there really isn’t anyone out there on the internet podcast universe who’s really focused in on this, so that’s why I jumped all over it because I think it’s really important.
01:03 I mean, nobody enjoys the process of becoming more self-aware. It’s painful, I went through it earlier in my career. Many tissues were used. I assure you that founders with heightened self-awareness, though, hire better, lead better, and they interact better with everyone in the industry. Look, folks can smell the naive and un-self-aware. How? Well these are the folks who often pretend that they’re a lot more competent in far, far too many disparate skill sets, or they simply act as if they intend to become such an omnicompetent god-like person. And to be honest, it makes other stakeholders nervous, especially investors, because it’s not believable. There is no such fucking person. It generates forced smiles at networking events. And man, you do not want to generate forced smiles, trust me. That is the networking cause of death. It’s better, honestly, to generate rage than a forced smile.
01:57 Nothing in this short mini series is meant to criticize you or to get you to change your core orientation to the world. If it happens to fit one of the archetypes that I’m describing here, that would be a sad outcome to me. It’s a really about helping you understand the weaknesses that tend to accompany your strengths so that you can solve for those weaknesses with superb hiring and partnering or whatever it takes. Training and coaching even.
02:26 So, I began this series talking about finance founders. I was a little harsh because those MBA dudes can handle it. And honestly, they need a lot more ice water thrown over them before they become self-aware, that’s my experience. This time I want to talk about the creative founder, and this archetype is honestly the most common in the premium end of CPG entrepreneurship. I mean, it’s the majority of the people that you meet at Expo West and Fancy Foods and all these shows. What do I mean by creative? I’m talking about founders whose primary business orientation is to product innovation, not finance, not branding, not marketing, not sales. These are often category geeks who love making new items in their category. I mean, think of the chocolate tiers at Fancy Foods. These people love to make new stuff or folks who solve their own dietary health problem with their own DIY innovation. Now some of these creative founders are also professional health advocates who then turned into CPG founders. That’s a very, very… I mean, it was actually more common 20 years ago than it is now, but they’re still out there.
03:28 Regardless of all these nuances, the creative founder is focused primarily on product and on their ability to generate innovation, on evangelizing that innovation to the entire world. [inaudible 00:03:40] some times, folks, the evangelical thing gets a wee out of control. Just saying. Yikes. Yowza. Creative founder has a set of weaknesses and blind spots unique to them. And I believe that they need to be surfaced very quickly in the entrepreneurial journey if you want to separate yourself from the pack, and if that creative founder wants to develop a focused, fast-growing brand.
04:06 The first weakness is that creative founder generally lacks business experience of any kind and certainly almost always lacks experience in consumer packaged goods. The second weakness is that creative founder is an idealist at heart. Look, I’m not trying to knock idealists. I’m a reformed idealist. But the point is the creative founder is prone to dream a lot without alcohol involved. This can be a strength, but generally leads to lack of practicality that can literally kill a young CPG startup before it has even had a chance to attain minimal viable scale.
04:47 Creative founder guy is often also not particularly well trained in finance, data analytics, or honestly, in my experience, anything related to quantitative whatever. Initially, this is going to produce problems primarily in putting together an accurate P&L. Later on it can cause creative founder to avoid obtaining critical data with which to analyze the business and measure the health of early demand. I would go even farther and say that many creative founders have issues with finance and data and especially data. They personally have issues with those topics. It gives them the jeebie-jeebies. They prefer round corners and soft drop shadows to cells in Excel.
05:31 The problem with all of these blind spots, folks, is that creative founder person, awesome as they are, is operating in a very low net-margin industry, due to the various go-to-market and promotional expenses that are required to grow anything in CBG. There is simply not a lot of margin for error especially in the early years. Shit, my own business has huge margin for error because it costs almost nothing to operate. I’m not bragging. I’m just trying to point out that you have a very, very, very different business model than folks like myself. It is extremely brutal. And that’s why I have so much admiration for those of you who are listening who are in it. It’s critical you accept the margin mechanics that you’re living with. If you get lost dreaming about missions and the next 17 UPCs you want to launch, you will get burned.
06:20 The first time that creative founder gets a distributor invoice payment for almost nothing due to MCB’s onboarding fees, distributor markup, [inaudible 00:00:06:28], they generally have a panic attack of varying lengths from hours to days. This is because as a creative person, they didn’t fucking see it coming at all. “How the hell did this happen,” they ask. Who are these crooks? Finance founder guy, as much as I ragged on him or her last time, they asked a billion questions upfront, and they saw most of it coming. Not all of it, but most of it, which is why finance founder guy, I suspect, though I have not had the ability to put together the database to run the numbers, I suspect that finance founder guy makes it through the death funnel to 500K in trailing gross sales primarily because of that instinct. They have other problems later. At least that’s my anecdotal perception.
07:08 This is why I basically beg creative founders to get training in P&L set-up, accounting, go-to-market cost estimation, markups before they ship their first fricking case. Plan how much of your gross profits will get consumed and honestly, plan for the worst case scenario, plan for Armageddon on your P&L, then be surprised. That’s a much better way to burn a small business. Plan your production needs to exceed your revenue targets. Set a revenue target so you can be accountable to the cold, hard math of your business.
07:38 Creative founders are very willing to take risks with innovative product. That’s why they have produced some amazing things in the last 25 years in consumer packaged goods. It’s honestly why they’re much more innovative than the average innovation team at a big company. This is a cultural risk, though, primarily. It’s the risk of being perceived as crazy by the all-American masses and even by a fair share of their friends and family, right? So they’re ready to take that risk, but nobody should be taking foolish financial risks due to under-educating themselves when the information is more available to train yourself than ever.
08:12 The cheapest antidote I know of is to pay 200 dollaroos to go to the Specialty Food Association, Winter or Summer Fancy Food Show the day before, take their Basics class, it’s all day. They do it twice a year like I said. It’s the smartest money you’ll ever spend, and you will come away from it very well grounded in issues around P&L pricing, the pricing waterfall from the shelf, all the way to your gross profits, to your net profits. You even walk away with a manual.
08:35 I hope this helps a bunch of you embrace your creative founder self. Honor it. Love it. But compensate for it, and make strides to compensate for your weaknesses. Be safe out there,