If you have a middle schooler in your family, you will know that homemade slime is sweeping the schools in the US. Even WSJ wrote an article on entrepreneurial middle schoolers building businesses to sell homemade slime to their friends.
As an investor (Dad) to one such slime business CEO (11 year old daughter), I have a first hand view of how she is building her business. Not surprisingly, many of the principles apply to other start ups:
Back of Envelope Proof of Finance Model
Her slime business started when we were driving around town hunting down clear glue in retail shops for her to make slime for herself. When trying to locate a source online we realized that there is a 5x markup for glue at the retail level compare to buying volume. A bit of math back and forth between the two of us convinced this potential investor that there is a business, and the budding CEO decided to take on the responsibility.
Lesson: Difference between a hobby and a business often is the financial model.
Leverage Technology Early
The CEO first worked out the pricing model with pencil and paper. As a tech savvy investor I spent some time teaching her how to use google sheet to verify her model, and she immediately see the benefit of having a easily updatable pricing model. We also decided to use another sheet to track orders and production status. That turned out to be extremely useful as orders flow in.
Lesson: Technology is a time saver. Seek out help if you need to as early as you can.
Energizing your Early Potential Customers
When the CEO's older brother's friends were over at the house, they asked whether they can try their hands on making slime. Instead of turning them down, the young CEO offered up her supplies and taught them how to make their own slime. The boys were impressed with the process, and the product. Soon, one of the boys became a evangelist for the slime business at school. Reaching a differ market segment (an upper grade) he brought in a lot of new sales.
Lesson: word of mouth marketing is important, especially at the beginning. Energize potential early adopters.
Tune your product line Often
Initially the slime company offers basic slime as well as many add on options: different colors, scents, fluffy and more. Their customers were delighted. After taking in a large batch of orders, the CEO, who is also the primary slime maker, realized that it takes too much time to fill each orders because each order has to be individually tuned. They changed the product line, announcing to their new customers that they will make batches of the same product and rotate through the product line periodically.
Lesson: Design your product for manufacturing. If the cycle time is too slow, reduce product variety.
Manage Your Partners
The slime company has four founding partners. They brainstormed their business together. Once orders started to come in, it became obvious that not everyone has interchangeable expertise. The CEO is also the only person that fully understand the techniques in making, especially the more complicated, slime. The founders has to divide up the work functionally to maximize outcome.
Lesson: Leverage founding members individual strengths.
Customer is Always Right
Not too long into the business, one customer asked for a refund because she was not happy with the product. While the partners all know that there was nothing wrong with that particular custom made product, they kept their cool and accepted the return and refund. It is important to keep the customers happy. At the same time, they updated their order form to explicitly says "no refund"
Lesson: Customers are always right even when they are not
Surprisingly, the slime company has no real competition in this middle school community. There were a few people who started to sell slime but soon gave up after they realized how much work it takes to make and sell.
Lesson: Business is hard. Perseverance and hard work is the only way to succeed.