Brand Equity Requires Constant Reinvestment


TBA picThere’s no treading water in the market stream. Some say, “Sink or swim.” We always like to say, “Swim upstream or get washed out to sea!”

What really distinguishes so-called serial entrepreneurs from their cousins, the merchants, brokers, and individual service providers, is their constant reinvestment in brand equity.  For them, it’s not enough to just build themselves a job, or even create a legacy for their kids to inherit. For them, they are building a brand with the express purpose of monetizing its value at some future date. No matter what business they are in, they know they are in the brand-building business.

Every market sector has its key metrics that must be achieved before serial entrepreneurs can even think about monetizing on their brand equity. These metrics include, but are not limited to: annual volume in units and dollars; market penetration and share; rate of growth; and regional performance.

So, no matter what you are selling, there is a number you have to achieve to be an attractive acquisition, merger, or public offering. And to get to that magic milestone requires constant reinvestment in growth.

Serial entrepreneurs are not necessarily in it for the current profitability because they reinvest their profits in growth. In other words, they often don’t get paid until the end. What happens if they try to get paid early and just coast for a while? The competition takes over, they lose their momentum, and actually start backsliding.

Interestingly, few first-time entrepreneurs realize this and have the mistaken idea that their business should support them. And it may, to a degree. But the more profits the owners take out of their company, the more likely they will be trapped in it. If they stop working, there’s no more income, and no one will buy them because they have not yet achieved the key metrics.

When business owners finally discover that they have to grow or die, many are discouraged. We advise students of entrepreneurship and clients alike that if they want to monetize their brand equity, they need a strategy for the long haul. They need to be ready to swim upstream for quite a while. They need to be working for that payday in the future.

Contrary to popular belief, your brand does not have to be huge to be acquired or to attract a merger with a big capital infusion. It just has to show that it is screaming in a small sector of the market or geographic area. Your acquirer can do the math and figure out the scalability.

This is why we recommend that brand builders start small and get the reputation of being a “hot mover” even if in a small area, rather than a mediocre or “slow mover” in the wider market. Sometimes it’s better to never have been in a market that to have been there and failed. This is why it’s essential to have your own representatives to police each new market you expand into. That’s one of the big areas where the reinvestment in growth is essential.

And when that pay-off day comes, what do serial entrepreneurs do? Retire? Not hardly! After a well-deserved hiatus, they are right back at it, on a new venture.