PLAYING AT BUSINESS EPISODE 49 – The Four Lifestages Of Toy & Game Companies (transcript)
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Hi, welcome to Episode 49 – Playing at Business podcast.
- I’m your host Steve Reece.
- In today’s episode we’ll be taking a look at the four lifestages of toy & game companies & why knowing which lifestage the company is in is critical to develop winning strategies for business, sales, product, marketing etcetera.
- Before we get onto that, if you would like to find more news, analysis and insights on the toy & game business, check out:
- You can sign up for our Free email newsletter – the Reece Toy & Games Report on those Blog sites, sent out most Fridays with link to our latest published content including notification of new podcast episodes
- If you find this podcast, or those Blog sites interesting or insightful, please do share them with your friends and colleagues in the business – we want to provide free to as big an audience as possible.
- We offer consultancy services to toy & game companies:
- In particular, I work as a board adviser or non-executive director for a limited number of companies, check out kidsbrandinsight.com/services
- We also provide Strategic Sourcing Consultancy via ToyTeamAsia.com
- To find out about sourcing Toys & Games in India, check out ToyTeamIndia.com
- OK, so with all that preamble out of the way let me first explain why it is important to identify the lifestage your company is at:
- The reason being that companies tend to need a different attitude to risk, organisation, process, staff selection approach and much much more.
- Your entire way of thinking and acting is affected by your lifestage.
- Over the last 20+ years, I have worked for, with and observed from afar thousands of toy & game companies and people. What becomes very clear over time is that there is wisdom in the saying that you have to cut your coat according to your cloth…meaning that while as start-up may want to float on the stock market it is not a realistic short-term goal for a typical toy company start up.
- Whereas a large corporate toy company finds it really hard to move quickly and to be truly flexible and entrepreneurial because they have so much existing structural baggage.
- I liken it to a sports team which has a salary structure, so the entire squad has to fit within that structure, and even if they want to bring in a new star player, if they can’t fit that player into their structure they need to ether pass most prudent), or destroy the wage structure to get the player leading tot all the other players wanting a big pay raise as you already showed that your pay structure was rubbish!
- Having set the scene, let’s take a look at the 4 lifestages of toy & game companies:
- STARTUP/PRE-START UP
- At start up stage, a company usually has no sales (although if the founders are wise they will have set up some demand in advance of pushing the actual formal company launch button.)
- Staffing is very limited, usually limited to the founders at launch in the toy & games biz.
- It tends to take several sales cycles to establish new distribution, even for experienced industry people with contacts and relationships with key buyers and distributors around the world.
- Therefore, the start-up phase in the toy & game business usually lasts for as long as two or even three sales cycles – that’s 2 or 3 years folks, which is a long time to have limited revenue and highly constrained cashflow.
- That’s one reason why people who succeed with a start up in our business tend to either have significant funds put aside to pay themselves in advance before the company earns enough to pay them, tend to be young with low living costs or start the business as a side gig.
- Many businesses are started by people who are really excited to be working in a fun industry on fun products which will usually benefit the lives and development of children. This excitement doesn’t always last long beyond the first painfully grinding conversations with the sharp end of the business i.e. retailers.
- Successful start-ups in our business become adept at operating on a shoestring while developing ‘WOW’ products. If they are wise they will try to sell on an FOB only basis (even though this is harder) vs manufacturing at their own cost and risk, and then paying shipping and warehousing costs on stock they are not yet sure they can sell!
- POST START UP GROWTH PHASE
- Once a company has successfully navigated the start-up process and has brought to market a number of products for which there is some degree of demand then they tend to embark on an exciting if challenging growth spurt.
- Firstly, they start to recruit some of the larger national players who have seen how well the company’s products are performing.
- The product line tends to expand with extensions of the launch product lines and perhaps new standalone products and brands.
- Staff count starts to grow, especially with regards to the Sales & Commercial teams.
- Successful companies tend to focus to some degree of success in their own market first before looking to rollout internationally. Many companies who get past start-up phase flounder at the next stage due to stretching themselves, their teams and their cashflow too thinly.
- Cashflowing growth starts to take up more and more management time at this stage of the company’s development.
- ESTABLISHED MARKET PLAYER
- The third phase of development is where the company heads towards being an established market player.
- At this stage the company has usually backfilled departments and head count has risen significantly.
- Customers are now purchasing habitually from the customer (with a push from the sales team).
- International distribution is growing – with either direct retail relationships in most major markets or distribution partnerships at least.
- The company starts to introduce more process in order to manage the ever-growing challenges of co-ordinating the team and outputting good saleable products.
- The vast majority of toy & game market sales are delivered by Stage 3 companies.
- The 4th and final stage of toy company growth is Corporatisation.
- A very good relatively recent example of this phase would be Spin Master.
- Founded back in the 1990s by college friends, Spin Master is today a stock market listed company with revenues of somewhere in the region of $1.5bn dollars.
- In recent times the company has appointed corporate COOs or CEOs in order to adapt to the more corporate position of the company today, with a large global workforce, offices around the world, massive marketing spend and movies and other content/gaming executions under way.
- Corporate companies, especially when stock market listed, tend to walk a fine line between driving quarterly earnings to pacify the stock market, while also having to plan more long term versus companies in the other phases due to the size and complexity of the company.
- Decisions and market moves which would once have happened instantaneously tend to take longer at this stage due to the number of people involved in decision making. Wistful executives sometimes want to push through rapid projects or product developments which the company is no longer set up to execute on.
- More positively though, corporate companies find it easier to access finance which increases the stability and security of the company.
- They also tend to acquire other companies in order to fuel growth. By this stage they are normally long established in the key product categories where they have competence. Acquisition allows them to buy in existing brands to further secure the foundations of the company and to access new categories and markets.
So, that’s the 4 stages of toy & game companies. As you can see, the point is to be aware of what lifestage your company is at before setting new strategies or pursuing major new initiatives, because the likelihood of success may depend on fitting new projects to the position and stage of development of your company!
- And that’s about all we have time for on episode 49 of the Playing At Business podcast
- So, we hope you enjoyed this podcast if you did, please give us a good review or rating on the podcast platform you are listening to, and a reminder again to check out our Blog websites: toyindustryjournal.com and www.boardgamebiz.com
- Please share the podcast with your friends and colleagues in the industry and stay tuned for new episodes coming soon!
- If you’d like to find out more about our Consultancy services, which we have delivered for more than 100 companies around the world at this point, please visit KidsBrandInsight.com/services In particular, I work as a board adviser or independent director for a limited number of toy & game factories. So, if you would like senior level advice, resource and inputs to help you drive growth in your business, feel free to get in touch.
- For information on our venture helping toy companies find manufacturing in India, just head to ToyTeamIndia.com
- For Strategic Sourcing consultancy go to ToyTeamAsia.com
- That’s all for now, I’ve been your host Steve Reece, this has been the Playing At Business podcast and we’ll see you next time.