It's a Stretch

Planning Ahead

It goes without saying that many entrepreneurial companies manage to negotiate the impasse. Licensing, joint ventures, progressive expansion--also known as bootstrapping--and other techniques allow their capacity to grow to the point where they can achieve precisely the kind of success its ideas qualify it for. If you anticipate facing such a Catch-22, the first thing to do is plan for it before you need to, says Jeffrey S. Davis, chair of Needham, Massachusetts, small-business management consulting company Mage LLC.

Set up adequate financial controls and record-keeping to convince a potential lender, equity investor, licensee, partner or other entity you are a worthy recipient. Find out what the various sources of expansion capital require. Know, for instance, that banks will lend money against purchase orders but probably won't advance funds until you have the order actually booked. Also study how to negotiate with banks, VCs and others. "Good entrepreneurs think some of these things through ahead of time," Davis stresses.

Don't neglect the human component, either. A big prospect's reluctance to place a sizable order may be due as much to your lack of qualified employees as to a dearth of financial or production wherewithal. Greg Kelly, CEO of 20-person Biotech Corp. in Glastonbury, Connecticut, found it relatively easy to outsource manufacturing of the natural herbal supplements he sells through national drugstore chains. But he still wasn't able to get the big orders until he hired salespeople--who had experience selling to those customers--away from his competitors. "The main thing," says Kelly, 43, "was surrounding myself with people who already had the relationships set up to get in to see the major chains."

Sometimes the absurdity of a Catch-22 is only skin-deep--or, as the case may be, as deep as the clothes you're wearing. John Curtiss, a sales and marketing consultant with Houston-based Silver Fox Advisors, says that failing to look like a worthy supplier can be as big an impediment to selling to big customers as your financial status.

"Act the part," Curtiss advises. That may mean wearing a power suit for meetings with prospects or renting offices at a prestigious address. It may also mean having the poise to refrain from making promises you aren't sure you can keep.

"Anybody can promise the moon," says Curtiss. "But when you can't deliver, that'll be the last sale you make. The trick is to portray yourself with staying power, without setting up expectations in your customer's mind that you can't meet."

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This article was originally published in the January 2002 print edition of Entrepreneur with the headline: It's a Stretch.

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