Keith Smith is co-founder and CEO of Payability, which works with suppliers to accelerate payments from online marketplaces, giving entrepreneurs the working capital needed to grow their businesses. Previously, Keith founded and ran multiple startups, including; CyberMortgage, Zango, and BigDoor. Keith lends his time to early-stage startups via Techstars and serves as an adviser, investor, and board member for multiple tech startups.
We’ve seen it time and time again, a consumer product is launched and becomes so popular it’s immediately sold out. Either you’ve been the consumer paying highway robbery-like prices for the Tickle Me Elmo, or you’ve been on the product side: punch drunk on sales but scrambling to fill orders. We know that keeping up with demand isn’t always easy, so here are some ways to set your company up for successful rapid growth.
Strengthen Your Supply Chain
The goal is simple: keep your product available and the quality high. You don’t want Amazon to be out of your product right at the moment people are thinking about it and looking for it. And remember, you’re building your reputation. Don’t allow your customers’ first brand experience to consist of waiting weeks for back-ordered items.
You need to invest in keeping your product available no matter what it takes like express shipping or expedited manufacturing — both worthwhile investments.
An easy, forward-thinking solution is to partner with a group purchasing organization (GPO). GPOs often have no membership costs and can help you avoid gaps in your supply chain, no matter how big your startup gets. GPOs can quickly deliver hard-to-get products — and at a better price than an in-house procurement manager could.
With more customers becomes more responsibility, and the need for more employees to step in to support your growth. Even if you’re an Amazon Vendor and depending on their customer service team, the end user is still your customer.
Take a hard look at your current team and go through some “what if” scenarios: What if your sales double? Triple? 10x? How could the current team manage? Most likely, not very well. So you’ll need to identify where the gaps will be and determine how many team members you need to fill these gaps in anticipation of growth.
Next step is anticipating how long it will take to hire and ramp up these new employees. How long will it take to fill those positions? How long to onboard and ramp up employees to fill the gaps? You can look at your past hiring stats or compare to industry trends. Then work backward from your expected growth surge.
But really, you just need to start hiring now. And have hard deadlines and a plan as to when you need to bring in contractors, freelancers or contingency recruiters to fill those gaps.
You want to test each process along every stage of your product’s journey to ensure that even during times of rapid growth these processes remain strong. In order to do that, identify which stages are fixed (meaning they have to happen regardless of 1 customer or 1 million customers) and which stages are variable (meaning they are impacted by customer growth).
Then similar to your “what if” analysis of current team size, input these growth numbers into the processes and find out what breaks at each stage and then work to remedy these breaks. For example, say you typically send out orders in boxes of 50. What happens when Amazon submits a purchase order for 250? Do you have the manufacturing capacity, storage and packaging materials to fulfill this larger order?
Boost Working Capital
The biggest problem that product startups run into is lack of cash to fulfill purchase orders. Most wholesale buyers like Amazon don’t pay until 60 days after you’ve delivered on the Purchase Order.
As your business expands, and you look for new distribution channels, expect to wait months between when you deliver a product and when you get paid for it. If you only sell one unit at a time, that’s fine. But what if you sell thousands at once? If you can’t fulfill the last few hundred units until you get paid for the first thousand, you’re in trouble.
Without working capital, your company can’t grow.
Unfortunately traditional small business loans require you to be in business for 3-5 years, run credit checks and look-backs at prior sales.This archaic bank loan structure just doesn’t work for small growing businesses, but you can look for an alternative finance solution, such as a payment accelerator like Payability. As you scale, you’ll find that because of wholesale payment terms, you have a lot of money “sitting out there” in accounts receivable when you really need the working capital now – and that’s how Payability can help. For a small fee, Payability pays you once Amazon has accepted your invoice. That’s nearly 60 days before they would usually pay you. Then Payability is paid directly by Amazon on their standard terms, so you don’t have to worry about repayment. Accelerating your earnings gives you the cash to fund your growth: new hires, new servers, and new products.
You know what they say, the biggest predictor of success is preparation. Being prepared for growth means that your product will never be out of stock, your customer service levels remain high and your customers can buy your product when they want it.
If you already have sales on Amazon Vendor Express or Amazon Vendor Central, check out Payability, we’ll help you get the working capital you need to prepare for and support rapid growth.
If you want to know more about what Keith Smith does and how Payability helps companies to be more efficient with their revenue stream visit their website.