Pushing The Envelope

No matter how much guidance you get when starting a company, nothing can make or break your business like your own decisions. In mail order, this lesson is especially important. Because their catalog has been successful so far, the Buffintons are considering seeking venture capital to expand the business. "We're definitely looking to grow," Len says. "But at what point do you consider bringing on venture capital to take that next step in the marketing plan?"

Maxwell Sroge doesn't believe Brown Wrapper needs venture capital to expand. He says he has nothing against venture capital groups but warns, "You have to give away an awful lot of your business to bring them in." Instead, he suggests the Buffintons continue to mail small quantities, building their retained cash, and gradually increase quantities as they learn which lists work and which don't. "I would hold off going after venture capital groups for as long as possible," says Sroge, "because it's the most expensive money you can borrow."

In addition to sticking with small mailings, Sroge suggests going back to previous customers time and time again. "The fastest way to make money in the catalog business is to mail more frequently to your known customers," he says.

Schulte and Chilcutt agree. "You can't neglect the customers who have already paid you money. They've already proved themselves," says Schulte. "Your in-house list is the most valuable. You should create new offers to sell to these people. Direct marketers are not necessarily concerned with the first sale but the second and third. That's where a lot of [business owners] miss out because they don't think about cross-selling or any other type of selling to their house list as much as they should." (See "Returns to Sender" on page 124 for more on cross-selling.)

The experts agree that keeping Brown Wrapper's fulfillment in-house is an inspired idea. "There's nothing better than talking to customers yourself," says Sroge. Using an outside service is fine for huge mail order companies, according to Sroge, but he urges the Buffintons to continue to handle fulfillment themselves because "nobody will ever take better care of your customers than you."

This article was originally published in the February 1996 print edition of Entrepreneur with the headline: Pushing The Envelope.