August 4, 2016
I’m a big fan of food media and food startups, as you can tell from some other articles I’ve written on the subject, like how Facebook Food Videos Work Because We’ll Never Actually Cook Them. So when I saw an Inc article about how a food startup can succeed by being different, I checked it out eagerly. But it’s not just applicable to food startups. As far as I’m concerned, this is golden advice for any entrepreneur in 2016.
The basic point of the article is that startups should aim lower rather than higher. Being a sustainable startup is the goal, not getting your first billion-dollar valuation. This shouldn’t be a surprise at this point. VCs have been calling 2016 the “Post-Unicorn era” all year, so startup founders know not to shoot for the moon. But here’s an example of the business model that can do it.
Get 50 Bucks From 400 Customers
The right niche can turn into a million-dollar-a-year business easily. Here are the numbers, as they apply to food startups, from that Inc article I mentioned:
“If you price at $50 per meal for two, and assume that each family will order four times a month from you, you need 400 families to do ~$1M a year. Of course, there will be families of four, and single households in the mix that will introduce complexities, but your average is probably in that 400-family ballpark.
If the food is good, they will stay with you, so over time, once you’ve acquired 400 customers, you don’t have to put in any further work into customer acquisition. You don’t have to grow if you don’t want to either.”
Not all businesses can sustain 50 bucks, 4 times a month. You don’t get that for an app, for instance. But when entrepreneurs don’t look towards scale, they open up plenty of otherwise hidden opportunities. Food is one. Certain services and products might fall into the same category. A boutique olive oil delivery service, maybe? Whatever the item, the model is a simple and sustainable startup.
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