If you've started taking sales, spoiling your customers and acquiring more of them, your business is well under way. Now, it's time to do what it takes to scale a business past a million dollars. Here's the case study of Hanny Sunarto and her first brand, NeatPack.
Hanny, a chemical engineer by trade, started NeatPack in 2015 with her sister and husband. The idea came to them during a hike in Bali when the zipper on Hanny’s sister’s backpack broke. At that moment, Hanny’s sister looked at her and said, “You’re the engineer, why don’t you create a better bag?”
So, she did.
In three years, Hanny grew NeatPack to a 7-figure business. She was passionate about helping their customers to “spend time traveling, not packing.” The company offers high-quality travel products focused on durability, functionality and innovative designs.
After hitting 7 figures, Hanny ran into the same plateau many e-comm business owners hit. Launching a business and getting it to a million dollars in sales requires a certain skillset. A bootstrapping entrepreneur can often handle this part alone. But if you want to scale a business past that point, you need help. Bringing on an investor and advisor may be the way to go.
That's what Hanny did. In late 2017, she worked out a deal with Ryan to bring him on as an investor and advisor.
I can help take an entrepreneur who grew a seven-figure business on her own and work together with her to grow it to new heights.
Ryan Moran
Here are six game-changing lessons on scaling a business you can use:
#1: Focus on Your Strong Suit
Ryan says that one thing Hanny did really well was taking the time to craft unique products. Hanny also had the marketing skills needed to build a 7-figure business. However, to scale a business, Ryan recommends a shift. The owner must focus on what they do best. In Hanny's case, that was creating and releasing new products.
Making this shift may mean you need to bring on team members who are skilled in marketing and many of the other tasks you used to do.
“Ryan has proven success in brand building. He’s also excellent in internet marketing,” said Hanny, “which is not my strong suit. My sister and I design all of our products. We take the design very personally.”
#2: Go ‘All In’ on a Singular Skill
Ryan believes in “going all in on a singular skill.” This is a lesson he learned from entrepreneur Gary Vaynerchuk. Gary once told Ryan that he became successful by maximizing a singular skill and applying that to the businesses he impacted.
He now focuses on developing what he’s deemed his most valuable singular skill, which is developing successful, profitable, physical product brands.
Ryan, who has helped inspire hundreds of 7-figure businesses, has been part of an 8-figure business and exit, and helped students get to 8-figure businesses and exits, believes the most profitable thing he can do with his time and brain as of now is to “help these 7-figure businesses scale.”
“If I’m going to get to my nine-figure payday goal, I am going to have to help a lot of people get what they want, which is a successful business with an exit at the end of the day,” explains Ryan.
#3: Give and Take in Negotiating: Terms of the NeatPack Deal
Initially, Ryan was not comfortable with the deal terms Hanny was asking for, but they were able to negotiate, play with the numbers and come up with a valuation and flexible arrangement that made them both happy.
Ryan wrote Hanny a check for $85,000 in exchange for:
- An initial equity stake of 17.25%, with the option of Hanny earning back 7.25%, to bring her back to the initial 10% valuation she was comfortable with
- If Hanny does at least $100,000 per month for two consecutive months, within the first 12 months, she receives a portion of the equity back
- Hanny gets another portion of the equity back for hitting $1 million in EBITDA within 18 months
- And she receives a third portion of the equity back for hitting $2 million in EBITDA within 24 months
- By hitting all three markers, Ryan’s investment would be reduced to 11.11 shares, or 10%
These terms gave Hanny the ability to get the initial 10% valuation she wanted.
“This arrangement requires Hanny to prove she can put in the work and time with the advice I’ll give her and opportunities I’ll open up for her business,” says Ryan.
“I’m not going to come in and tell her how to run NeatPack,” adds Ryan. “She knows how to run it, but I’ll serve as her advisor and help her network with the right people.”
#4: Don’t Bet on ‘It’s Better’ As Your Company’s Differentiator
“It’s better is a terrible differentiation,” warns Ryan. “I don’t like to compete on price and I don’t like to compete on better.”
Ryan believed NeatPack had many differentiating factors to lean on that weren’t just “it’s better.”
According to Ryan, NeatPack brought something unique to the marketplace because:
- Hanny had the skills and took the time to design each product to be a little unique.
- NeatPack sells high-end bags at a higher price, so isn’t competing on price.
These are attractive factors for an investor, says Ryan, as it gives:
- Enough room to play with on the product and pricing side
- A profit margin large enough to be able to market the products aggressively
- Broad appeal in the travel space to buy media and advertising
#5: New Capital to Scale a Business, Now What? Picking Two Biggest Opportunities for NeatPack
With the $85,000 Ryan invested in NeatPack, he and Hanny decided on the two biggest opportunities to rip open and go full force on now that the business had some flexibility:
- Pursuing additional retail outlets. Ryan and Hanny decided to take the three best-selling NeatPack products with good profitability on Amazon and focus on getting them into large, retail outlets.
- Dialing-in Influencers: What influencers have a huge audience and would make the most impact if they talked about NeatPack? Ryan encouraged Hanny to make a list of the biggest ones, and to take it to a level higher than just the “travel blogger.”
#6: Bet on the Jockey Instead of the Horse
Ultimately, Hanny is the “star of this company,” said Ryan, and in this deal “I’m without question betting on the jockey instead of the horse.”
Ryan’s “proud to represent NeatPack” and is betting on Hanny’s:
- Care for her products and ability to meticulously design them all.
- Ability to work hard and implement new advice.
- Capacity to develop some new skills to scale the company from seven to eight figures.
- Proven track record of developing grit for long enough to hit pay dirt.
“It’s incredibly rewarding for me to see an individual blossom into the type of entrepreneur they can be and know that I had a hand in helping them get to that point,” said Ryan.
“There’s nothing more exciting than watching someone light up when they think about the potential of their business and realizing the ripple effects of the world responding to this thing you created.”
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