There's still another way to get where Galvin needs to go. It's by selling what he can to small clients who may, over time, provide enough profits to gradually expand to the point that he can service larger customers. If your current small customers grow enough, they may even turn out to be as large as or larger than that big prospect who today remains just out of reach.
That's what happened to Brad Stillahn. In the early 1990s, Stillahn, CEO of Denver-based Adstick Custom Labels, began looking for customers who had more growth potential than the single-location florists and other small retailers he provided with pricing and other labels. One of the companies he hooked up with was a local chain of sandwich shops called Quizno's that had about 40 locations at the time. "Because we were both small, we developed a trust-based relationship," says Stillahn.
Today, Quizno's Corp. owns or franchises more than 1,200 units, and Adstick is still the primary supplier of labels to the system. "The advantage to us is that now we have an operating model to take to another large company with hundreds of locations," says Stillahn, who has 20 employees. "Three years ago we would have been hard-pressed to do that."
Finding high-growth clients meant a major shift in marketing and positioning at Adstick. AlumiPlate's Galvin is facing a similar shift for different reasons. His large prospect wants to use his plating to protect hydraulic fittings for agricultural applications. That's a high-volume, but not particularly high-margin, business. If Galvin bootstraps, he'll need to focus on high-margin, lower-volume applications, and that takes a different sales approach.
He thinks he's found one in semiconductor manufacturing, where key parts of chip-making machines are now made of exotic, costly metals to withstand highly corrosive chemicals used in the plants. Plating saves chip-makers more money, and the higher prices they'll pay make the smaller volumes economical for Galvin. "We'll just have to go after smaller customers where the value proposition is different," Galvin says.
In some ways, lenders' and others' refusal to accept AlumiPlate's proposition is a good thing. Small companies that stretch to take on very big customers can find themselves in an uncomfortable position. "You can easily become totally dependent on that client," says Davis. Entrepreneurs may leave themselves open to potentially ruinous price pressure from that one, all-important customer. And, should the customer cut back on orders or stop ordering altogether, the effect could be catastrophic. "You think it's hard to ramp up?" Davis asks. "It's generally harder to ramp down."
For now, Galvin hopes to avoid being overly dependent on a single client, but he still wants to be able to service big clients by growing gradually and safely. But meantime, he's still looking for someone to loosen the purse strings and help him claw his way out of his Catch-22. "Eventually," he says, wearily but hopefully, "somebody is going to give us the money, and we'll find that big market."
|START A GROWTH SPURT|
Mark Henricks is Entrepreneur's "Books" and "Smart Moves" columnist.
- Adstick Custom Labels
(800) 255-7314, www.adstick.com
- AlumiPlate Inc.
(763) 786-3788, www.alumiplate.com
- Biotech Corp.
(800) 507-8802, www.biotechcorp.com
- Mage LLC
(781) 449-8366, www.mageusa.com
- Silver Fox Advisors
(713) 467-5900, www.silverfox.org