Growing Pains - 06/94

The quest goes on for new financing as the order level and customer base grows. I've come to the conclusion that our product's popularity and subsequent demand has outstripped our ability to fund the growth through bootstrapping. We find ourselves in the position of needing a major increase in our production capacity. This is due to the ever-increasing backlog and the introduction of our new designs that are receiving great reviews and generating orders already.

I have updated the business plan and am now seeking some major (for us anyway) private investment via some venture capital brokers. Our track record along with our account base, which includes some well-known national retailers, should put us in a decent negotiating position. Anyone who has gone through this, please give me a call. I would like to hear about other companies who negotiated private investment and what they learned. Also, anyone interested in investing, give me a call and I'd be happy to arrange a meeting.

It boils down to being able to take advantage of opportunities as they arise. We have the very real chance of receiving an order from 1 or 2 home shopping shows. These orders could surpass everything we have shipped to date. For a small manufacturer, it's great news but the reality is if we can't fund the required inventory and wages for 90 to 150 days, we may be out of luck.

In addition we have added a major retailer who is placing a test order and, as we have seen with all of our major accounts, will be placing a large order shortly thereafter. And of course the Holiday season approaches again. I've reached the conclusion that the market has driven us out of the bootstrapping business. However, both for Technacraft and the right investor, it could turn into a profitable win-win situation.

Re-working the business plan and doing 5 years of projected income statements really showed to me the advantages of being properly capitalized, if there is such a thing. The money for expansion and product development is available as needed, not whenever we have anything extra. It is the old "it takes money to make money" cliche. Diligence and frugality are still essential but energy once wasted on worry can now be directed to growing the business at an ever-expanding rate.

We are still running into brick walls at the banks. Not enough "hard assets". They'll loan you anything as long as the equity on your home can support it.