Building a brand with inherent financial value to drive investment

SME Publications/ SME XPO 2024

By Andy Lipscombe, below, Director of Brand Strategy, FreshBritain 

There’s often a mystique around successful entrepreneurs, especially the ones that create great brands. This breed of entrepreneurs are highly creative visionaries. They are often inspired by a real, authentic life experience and are driven to make the world a better place, identifying opportunities and a future that others cannot see. As a result, the brands they create come to life in an almost alchemist-like process; they feel “right”, with an innate reason to exist that needs no explanation. This effortless result however, is actually the result of a meticulous process which every entrepreneur should go on.

 

Why securing investment might not be the hardest part of the entrepreneurial process

Accepted wisdom is that one of the biggest difficulties entrepreneurs face is securing enough investment. While that’s true, there’s something that’s actually just as challenging.  And that is that unchartered space the entrepreneur has to navigate when they move beyond the “rough essence” stage and nail down a much more detailed and codified articulation of the brand they want to build.

The essential job of nailing down a brand

Think of this process as similar to the movement from an oral storytelling tradition to the written novel. The latter is immutable, the former can be shaped by anyone who comes into contact with it.  So why is this step so important? An entrepreneur can only work alone up to a point. The time comes when the idea for a brand needs to be communicated, or more accurately, codified – for example with investors, manufacturers, retailers or distributors – on its journey to market.

If the brand is still nebulous and has not been properly constructed, stress-tested and written down at this point, then each person who encounters it may interpret it in their own way. As a result, over time the brand may easily lose its identity and differentiation and go on to fail.

Why building a brand can feel like therapy

So if the “codification” stage is all about communicating and protecting the brand idea, what does it actually involve? With the right kind of professional partner, it can at times feel uncomfortable, exploring difficult territories you might normally associate with coaching or even therapy.

The entrepreneur can expect to be asked about their early years, their key relationships, how they respond to failure, what problem their brand aims to fix and why they are the right person to solve it. Tears are almost always part of the process, but by the end, as well as reaching a proper understanding of the brand, the entrepreneur will likely have a better sense of themselves and why they’ve chosen this particular path.

The entrepreneur’s “genesis story” is what needs to be captured, distilled and codified at this stage. Done well, it’s a powerful means to stoke emotion, and a great brand design will directly connect emotional with financial value, driving the “multiple” by which the business will be valued later down the line.

The role of brand in commercial conversations 

If much of this sounds fuzzy and intangible, there’s also something commercially vital at play. A business is almost always created and built to be sold later down the line. If you can build awareness of that future exit into the way things are done from the get go, then you’re much less likely to have to take remedial action at the point where you look to sell. You can put in place systems and processes that will grow with the business, not have to be stripped out because they only work at a specific stage in a company’s life cycle.

The same is true when creating a brand. When a sale takes place, brand value accounts for 40% of the market capitalisation of a services business; for products/goods, it’s 20% – that’s how important brand is. The codification process is far from being just about “look and feel”; done well, it should speak directly to financial outcomes.

It’s ultimately about designing a brand upfront, ensuring that nothing is accidental and with an eye to a future when it will play a key role in driving successful commercial conversations.  A compelling and addictive brand design recruits and retains consumers which in turn drives turnover and EBITDA; a brand designed around higher purpose and the entrepreneur’s “genesis story”, emotionalises and therefore drives the multiple, which in turn drives enterprise value. If the brand that you are building incorporates aspects that a future FD or investor can identify with and see how to impact, then your chances of commercial success are much more likely.

SME Publications/ SME XPO 2024