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From the Entrepreneur’s Perspective: How do I know if I’m ready to pitch to a buyer or move my biz to the next level?

Some criteria by which to evaluate if you are ready to move your business to the next level:

SALES

How are your sales in your existing channels? Are they strong enough to justify moving forward? When I say strong enough, I mean can you weave a story that captures the attention of a buyer so they want to listen to you (my in-store and/or online sales have doubled in the last X months – and give #s; I am selling X units per store per week; I can increase your top and/or bottom line margins by X; my product was just featured in X media and the response has been so incredible that I have seen my sales do what?)

If your sales are strong, go for it and pitch.

If they are not, evaluate why. You don’t want to be at the next level until you work through your kinks (i.e. packaging/messaging unclear; fulfillment issues; problems with the product itself). It will cost you money, time, and you may ruin your chance of doing business with this retailer if you pitch too soon. Take your time to work through whatever the kinks are first, then go and pitch.

CASH FLOW

Do you have the means to finance the investment at the next level? What if the retailer is XYZ and they want $10K in new vendor fees, X thousands of dollars in slotting (free product), and they will pay on scan (meaning you get paid for product as it scans/as it is purchased). That’s a hefty investment and YOU guarantee the sale (meaning that if it doesn’t sell, you pay to have it returned at a surcharge).

Can you (and are you willing to from a risk standpoint) finance the MONTHS it will take you to get paid (you manufacturer in early January, your inventory is ready to ship from your overseas manufacturer in late Feb., you put it on a boat for 4 weeks to get to the U.S. (end of March), it gets sent to your warehouse (beginning of April) and then you ship to the retailer (in April). Then, it takes time for the retailer to load it to their warehouse and get it to their stores and onto the store shelf (in late May/early June). This is approx. SIX months of floating that inventory and you still have not made a sale! Then, what are the payment terms (pay on scan, Net 30, Net 60, Net 90)?

This is a REAL scenario of doing business with the big guys. The regional chains, independents, online retailers, boutiques, etc. do not have these same burdensome requirements, but they do each have their own set of criteria. Evaluate each retailer’s terms closely.

TIPS

1. You can always walk away from an opportunity if it’s not the right time.

2. Grow organically so that you can be IN business.

 

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