This article was published in the September 2022 issue of Pet Food Processing. Read it and other articles from this issue in our September digital edition.
New companies, regardless of industry, often aren’t competing with established businesses on a level playing field from the get-go, as it takes some time for a staff to click, marketing to be done and operations to run smoothly.
Still, a savvy small business will have a plan in place to grow and eventually scale their business to a level of equality. The trick is not to try and grow overnight and hurt any chance of success.
For instance, Earth Animal was founded in 1979 by Bob Goldstein and his wife Susan, and its original mission remains to provide wellness and longevity solutions for companion animals. Based out of Southport, Conn., the company now offers a complete range of food, treats and remedies not only in the United States, but across 12 international markets. But that growth came with some careful planning and a sound strategy from the beginning.
“We don’t believe in growth for growth’s sake… we don’t necessarily want to be the biggest company in pet, but we do want to be the best,” said Stewart Shanley, chief executive officer of Earth Animal. “This means bringing products to market that are truly different and better than what is already out there, and then connecting these offerings with families and animals via thorough sales and marketing programs. We make a plan once a year, which is co-authored by the leaders of all our key functions so that departmental plans all ladder up to the company’s overall goals.”
Another example is Tampa, Fla.-based Better Choice Company, which acquired independent pet food brand Halo in 2019 but made the initial decision to combine Halo with its existing brand, TruDog. The company took some time to evaluate its strategy before making that leap.
Scott Lerner, former chief executive officer of the company, noted that identifying immediate needs versus long-term wants is an essential part of scaling a small business.
“Resources are inherently scarce, whether that is time or money, and it’s important to embrace that you aren’t going to be able to do everything at once,” he said. “Once you’ve found the right team, stay laser focused on your goals and don’t be afraid to make tradeoffs. In our case, one of those key goals has been driving long-term gross margin expansion while increasing revenue. In practice, this means avoiding entering lines of business that might drive revenue in the short term but may have negative long-term effects on the overall health of our business.”
Over the course of the last two years, Better Choice Company has made the strategic decision to bring the TruDog portfolio underneath the Halo brand umbrella, and has focused on partnering with some of the largest pet food retailers to launch new products exclusive to certain channels.
“Looking to the future, our goal is to become the most innovative premium pet food company in the world, and by 2023 we expect to generate approximately $100 million in gross sales across three continents,” Lerner said.
Phelps Pet Products dates back to 1966 when Dick Phelps first entered the pet market. Although the company has evolved, transformed, and grown over the last 55 years, Phelps is still an active member of the company’s board at the age of 94. The company also has other long-time former executives who remain active board members and key stakeholders.
“Looking to the future, our goal is to become the most innovative premium pet food company in the world,” said Scott Lerner, former chief executive officer of Better Choice Company.
That strong foundation has helped the Rockford, Ill.-based company scale from a small business to one of the most innovative and collaborative dog treat partners in the industry.
Rick Ruffolo, chief executive officer and president of Phelps Pet Products today, noted that once the company identified its growth vision, it needed to assess what the strengths were, where it struggled, and what it needed to fill those gaps in capabilities and service.
“The outcome of this discussion came down to people and capabilities,” he said. “This assessment enabled us to be focused on directing investments into finding the right leadership, skill sets, and the training/deploying of key personnel within the organization. We also were able to invest in new equipment, new processes, new ingredients, new techniques, and additional certifications to help us differentiate ourselves from the ‘me-too/knock-off’ private label suppliers that are out there.”
Today, Phelps Pet Products offers a diverse and comprehensive assortment of custom “clean-label” meaty dog treats and has the certifications, supply chain and know-how to stay successful.
Ruffolo learned the concept of “go slow to go fast” from Les Wexner early in his career when he was head of innovation at Bath & Body Works.
“There is a natural tendency to want to ‘Go! Go! Go!’ and chase growth all the time,” he said. “However, if you look to move faster than your organization is ready to go, that often leads to disappointment in customer service, sales, quality, and ultimately, profitability. ‘Taking a beat’ before sprinting ahead provides you and your team with the opportunity to walk through potential scenarios, concerns, and opportunities to avoid miscues while using the time to plus up the idea before you execute it.”
And while he’s not suggesting slowing down simply to slow down, he noted it is vital to have the important discussions with cross-functional team members, customers, vendors and the board to ensure you gain the full benefit of their perspectives.
In almost every case, smaller, high-growth businesses need to rely on external sources of capital to be successful — whether that’s to fund a new business initiative, a product launch or even general working capital.
“We don’t necessarily want to be the biggest company in pet, but we do want to be the best,” said Stewart Shanley, chief executive officer of Earth Animal.
With that in mind, Lerner shared there are two important things to always keep in mind.
“Minimize the time a founder and management team spend raising capital, and don’t be afraid to have cash reserves on hand to avoid multiple raises, even if this means it might be slightly more expensive,” he said. “Also, make sure that you and your capital partners share similar expectations for growth and risk tolerance. Many high-growth businesses have failed due to capital partners setting unrealistic expectations for growth that ultimately lead to risky decisions.”
On the flipside, keep in mind that a cheaper cost of capital often means more control and less risk for an investor, which may hamper a founder or management team’s ability to seize a market opportunity, Lerner added.
A smaller company will often need to look for outside help, be it from friends, other businesses or lenders, as it plans its growth.
In fact, Shanley noted this as one of the keys to a successful growth strategy.
“We have always had good support at every stage of our growth,” he said. “We had strong support in the early days from friends and family, we took on growth capital at the right time and now have a great relationship with our bank to help us manage working capital.”
To develop its strategy, Better Choice Company intentionally partnered with external groups that brought new perspectives to the pet industry.
“In our case, that meant working with marketing and design agencies that weren’t afraid to think outside the box,” Lerner said. “Applying this example more broadly, look for partners that share and are passionate about your vision, and try to structure commercial relationships that line up with long-term business goals.”
He also noted that having channel experts in-house is a key to growth and, in the company’s case, developing channel-specific strategies has been a fundamental key to success.
“If you have a small team, you can utilize external parties to help drive success, but a focus on continually building strong relationships with key partners to jointly drive growth is something that third parties can’t replicate,” he said. “Strong partnerships with aligned incentives often translate to high growth.”
Growth won’t happen overnight, which is why having a plan in place is a great way to ensure you are hitting growth marks at certain intervals.
For instance, Earth Animal has spent the last five years developing deep specialisms in the key areas it believes are needed to be successful, and has elected to organize the company by sales, marketing, product — including innovation, quality and regulatory — operations, finance, talent attraction and development, and international, supported and enabled by the company’s legal, project management and business intelligence functions.
“It’s really about staying true to the mission of the company as we grow and making sure we have good levels of alignment on where we are going as the company headcount increases in number, as well as making sure we have clear, well-governed action plans to support our vision,” Shanley said.
Lerner’s biggest piece of advice on scaling up is to understand that it’s better to do a great job at a few core things than a mediocre job at everything.
“If one or two strategies are proving to be successful, don’t be afraid to devote time, resources and energy to push the envelope, even if it’s at the expense of other, less important initiatives,” he said.
Shanley noted the most important thing is to have a clear plan forward.
“It’s okay to change your mind and iterate as you go, but make sure you always have a thorough and up-to-date plan that describes where you are going and what moves you are making to get you there,” he said. “And remember, you only fail if you give up.”
Ruffolo noted the more you learn before you go all-in, the more likely you will find success.
“In the end, despite all of the potential issues — in my experience — it is far better to innovate than to imitate or to stagnate,” he said. “If you are not moving forward, you usually are falling behind your competitors.”
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