What to Do With a Major Windfall

Unexpected Orders

But probably the most common windfall for an entrepreneur is an unforeseen, outsized order from a customer that wasn't even on the radar screen. It happened to Benjamin Lido, co-owner of Convenience Kits International Ltd., a 18-year-old Lynbrook, New York, company that sells travel-sized products, such as toothpaste and shampoo, packaged with combs, razors and the like. For the most part, their products are sold through drugstore and grocery chains, but they do have other customers. One was a small regional airline, for which they put together a diaper kit for parents traveling with babies and toddlers.

"It was a small order, but successful," says Lido, 38. Then, a senior manager working for another, much larger airline saw the kit while she was traveling. She asked about preparing a kit that could be given to business-class travelers who were stranded or who had to deplane without their luggage. Very quickly, that thousand-piece order for small diaper kits led to a larger order for a much bigger and more expensive travel kit.

"We weren't even selling [to] airlines, and all of a sudden we were selling a couple hundred thousand units to an airline," Lido recalls. The windfall continued, as travelers who got the airline's kits began calling to equip traveling sales forces and order incentive premiums for customers. "It just snowballed into something very big for us, and it was unsolicited," Lido says.

An even larger windfall can result if the surge of orders comes from a large group of new customers. Many entrepreneurs who experience sudden and unplanned godsends give credit to unexpected exposure in a large, influential media outlet. For others, it could be a positive rating from an influential organization, such as Consumer Reports magazine. An unpaid endorsement by a well-known celebrity can also work wonders. Even a household name like Nike received a boost when U.S. women's soccer star Brandi Chastain spontaneously shed her jersey on TV, revealing a Nike sports bra, following the team's 1999 World Cup victory.

The Devil's in the Details

1. Plan ahead. If you see a significant chance your company may come into a particular windfall, have a plan for making the most of it. For instance, you could arrange with colleagues or competitors to handle your overflow if a huge order comes in with little warning.

2. Read the fine print. The prospect of a windfall may blind you to normal caution. Just because a contract, order, settlement offer or other windfall has big numbers doesn't mean it's free of big catches. In windfall situations, use the same discretion you would in any deal.

3. Seek advice. Few companies are prepared for outsized sales surges or massive cash inflows. If it happens to you, find other entrepreneurs or professional advisors who have been involved in similar situations, and ask them for options on handling the surge or investing the cash.

4. Look for long-term leverage. A windfall can give you more than a one-time injection of cash. You may be able to leverage an entry to a new market, lock up more of an existing one, or fund investments in new marketing or product development that will pay long-term dividends.

 

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This article was originally published in the July 2003 print edition of Entrepreneur with the headline: A Mixed Blessing.

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