How to Not Be Swamped When Sales Finally Begin Flooding In
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
Entrepreneurs know success doesn't come easily but what surprises many of them is how much work it is when it finally does come.
When you are making something people will pay for, demand will eventually jump. Then it's time to graduate to the level after startup, which is scaling supply to meet demand. Don't expect demand will scale up linearly. Be on your toes for when it rains because it will definitely pour. You need to be prepared to commensurately scale up supply when demand scales up exponentially.
Here are seven insights into the challenge of soaring demand from entrepreneurs who have met the challenge.
1. Fix the bottlenecks. When demand shoots up out-of-the-blue, every bottleneck in your supply system will be exposed terribly. Inevitably, it is the manual tasks that get hit.
After 800Razors.com started gaining traction, co-founder and president Philip Masiello realized it took 16 man-hours to make 1,000 branded package boxes but less than two hours to fill them all. By making changes to the package mechanism, Philip's team got immediately ready to take up larger orders.
2. Learn to delegate. Betsy, the single-named founder of the Portland-based jewelry retail store Betsy & Iya, had been hand-bending wires herself for so long that she had a hard time delegating to her employees when the time came for her to start. Today, she channels that aspect of her nature into maintaining high quality standards for her designs.
“As each new maker has come on, I’m just as exacting and specific about how I want the pieces made,” she said.
When you've handled all aspects of your business yourself for a while, it's hard coming out of the “control freak” mode when demand scales up. You need to adapt. Growth is personal, not just business.
3. Invest in infrastructure. We have all been taught to bootstrap our business but here comes a time when an entrepreneur needs to bite the bullet and expand infrastructure.
Peter Mann, founder and CEO of air purifier maker Oransi, found suddenly rising demand inevitably brought stock-outs and delays filling orders. As a starting up enterprise, these are not good signs. One of the best decisions Peter made was to secure financing for his company's own warehouse units. His customers never faced delays again.
When Tracey Noonan, owner of Wicked Good Cupcakes, heard that her company was accepted to appear on ABC SharkTank, she immediately knew demand would probably rise. She invested in two, large, 1200-square foot commercial kitchens and storefronts. That helped her successfully maneuver the demand spike when it eventually happened.
“Our options were to sink or swim. We chose to swim faster than we ever knew we could. It was awesome!” she said.
4. Create larger awareness for products. This might sound counter-intuitive but that is what Julie Busha, CEO of Slawsa, a condiment available in more than 5,200 stores in North America, did when demand rose.
Julie realized an inventory system that allowed bulk manufacturing is more cost-effective in the long term for her food product business. She saw demand rise as an opportunity to look farther into the future. Ultimately, Julie decided to actively market her product on behalf of her retail partners. That helped her sell her products faster, which eventually justified her decision to invest in a bulk manufacturing unit.
5. Do the math. By constantly monitoring your growth and production rates you will better prepared to take on the challenge of a demand spike when it arrives.
Michelle MacDonald is the founder of Sweet Note Bakery, a manufacturer of gluten-free bagels in Philadelphia. Since hers was a B2B business, Michelle's strategy was to always keep her production capabilities higher than demand from current accounts. When Michelle was one account away from her maximum output, she had already hired a helper to make the bagels with her.
6. Learn to prioritize. As demand scales up, it is tempting to attend to customers and channels the same as when you were a smaller business. But it's simply not possible.
According to Jojo Hedaya, the co-founder of Unroll.me, it's extremely important to prioritize.
"There’s always a million-and-one things you can do, and figuring out which one of those things is number one is huge,'' he said. "For example, we had thousands of users on a waiting list for email providers we didn’t support. We couldn’t just support every provider at once. It wouldn’t have worked as well. We had to decide which email providers Unroll.me would support first so that eventually each user would receive optimal service for whichever email provider they're using.”
It is important that you are not too optimistic and adventurous when a demand spike happens. Monica Wreede, owner of Accessory Connectz, ordered more than a thousand sell sheets for a trade show she attended.
“(I) have more than half sitting here,'' she said. "I can not use them anymore due to my price change. It devastates me every time I look at them! It is money down the drain!”
Monica sums up the feelings of every entrepreneur when she said, “As the orders flood in, it scares me because I never know if I will have the dollars to purchase more supplies to fulfill orders.”
All quotes sourced from Anand Srinivasan's book How We Did It : 100 entrepreneurs share the story of their struggles & life experiences.
Related: How to Cope With Overnight Success