The problem with the World Wide Web is the “world” part. This week, over my protests, one of my startup, ecommerce clients, a health and beauty product purveyor, is attempting to accommodate a large order from an unknown customer in Indonesia. It will not end well.
Consider the circumstances. My customer, let’s call it NewFirmXYZ, launched its online sales effort four months ago and has grown modestly since. Traffic and sales are increasing, as is its social media presence. Should these trends continue for another six to twelve months it may be ready for outside investment. Right now, NewFirmXYZ is just another unknown company trying to establish its brand identity.
NewFirmXYZ fulfills its orders via FBA or through a small, local fulfillment center. Now, it is investigating international freight fulfillment services, customs brokers and payment mechanisms, all for an order that will yield less than $1,000 in gross margin. The logistics are daunting. My entrepreneur and his partner have spent a great deal of time trying to make this sale happen.
Time that would have been better spent growing domestic revenues.
I have encountered this problem many times. Like a starving man lost in the woods who assumes every poisonous toadstool is edible, many entrepreneurs think that every potential sale is a good one. What could go wrong with that club store opportunity? That one-time, cross border sale? That unknown wholesale account demanding 90 day sales terms? Sadly, the answers to these questions are often be learned the hard way.
Why do entrepreneurs blindly accept advice on some topics and not on others? Tell them to form an LLC rather than a C Corp? “No problem.” Suggest an equipment lease rather than a purchase. “OK.” Tell them to decline a particular sales inquiry? “Are you crazy?” For some reason, sales advice is the most often unheeded . . . which never ceases to intrigue me. Didn’t someone once say that the key to effective selling is being a good listener?
Mr. Dragone has spent the past twenty years as an acting/consulting CFO for a number of start-ups in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He was a co-founder of Keurig.