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Network: November 1989

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Growth Money

We heard from several readers in response to the September Network queries. One person had an idea for Bill DeVane Sr. of RIPP Products Inc., which makes handcuffs and restraining devices for police and emergency medical personnel (Restraint of Trade, September). DeVane was wondering how to raise $100,000 for his growing business.

DeVane should form a limited partnership, marketing shares to police officers' associations, defense attorneys, and people working in emergency medical care. I doubt if he'd have much trouble selling 25 to 30 units at $5,000 each. RIPP Products could be the general partner. DeVane would retain control of the business and could build in a buy-back agreement, giving the limited partners a good rate of return. This approach would allow him to raise the $100,000 he needs to grow his business while exposing his product to new markets.

R. Harvey Neuman

Fort Worth

Cooking Up a Company

Paul A. Ely of Hampton, Va., wrote in September about his idea for creating a business around his mother's blue-cheese salad dressing recipe (My Mother, the Entrepreneur, September. "Where do we go from here?" he asked. One reader suggested that Ely keep asking questions:

Mr. Ely needs a solid business plan. Without one, any entrepreneur is in danger. He and his mother should ask themselves several basic questions: who is my target market, and how will I reach them? What are my costs? How will I finance them? Then there are personal questions: how much time can I devote to this project? What are my goals? There are publications and experts they can consult. I have found Develop Your Business Plan by Richard L. Leza and Jose F. Placencia (Oasis Press, 1988) to be particularly useful.

Mary Darlene Dunwoody

Vice-President

Bookkeeping Services Inc.

Stoughton, Mass.

Pizza Man

Meanwhile, we continue to be deluged with letters in response to Steve Tanner of Bolero Pizza, Subs & Salads, who had written about the problems he was having with his blue-collar clientele (Educating the Public, August). Most readers chided Tanner for looking down his nose at his customers, but he also got some advice.

There are some problems that all managers, whatever their business, share. Our crane-service business has also tried to develop an identity that sets us apart from our competitors. Word of mouth helps, but it can be slow.

If you're trying to educate the public, think like an educator -- show them and tell them. For example, Mr. Tanner might develop a slogan that always appears with his store's name, something like, "We use only the ingredients you'd use at home." He should put it on his packaging, place mats, and napkins.

It's wise to stay one jump ahead of customers' questions. Use easy-to-read signs and a simplified menu, and display platters and soft-drink cups for easy comparison. Tanner should also tell the public what they are experiencing and why they like his food -- you can't assume they know. If he's on the right track, they'll come in, and they'll come back, too.

Roger D. Lenack

General Manager

Contractors Crane Service

Northridge, Calif.

If Mr. Tanner wants new customers, he should look for a new kind of customer. If his place serves only takeout, he's limiting his market. To expand, he'll need to deliver his pizza to new customers. Here are some suggestions:

* Are there retirement homes nearby? Maybe he could talk the nutritionist into a Pizza Night once a month.

* Are there clubs, civic organizations, or Little League teams he could cater to regularly? A lot of people don't like the sushi and imported cheeses that upscale caterers specialize in.

* Perhaps nearby businesses habitually hold after-hours meetings. He could arrange with the company to deliver dinner to them.

* Are there student dormitories within five miles of your kiosk? It might be worthwhile to pay someone an hourly wage to sell subs there, if the college will let you.

* If you have leftover food, donate it to local programs that help the homeless. You might meet people who organize events and need catering.

Robert P. Sprague

Berkeley, Calif.

Mr. Tanner says he takes pride in his healthy food, but that people seem uninterested. The problem may be that he's trying to impress his tastes on his customers. My restaurant sells pizzas and subs, and my customer base, like Mr. Tanner's, is sharply defined -- although my customers are college students, not blue-collar workers. As my business has matured, I've learned that what I like may not be what my customers like, so I've surveyed both customers and potential customers, in and out of the restaurant, to find out what they want. I'm not partial to some items on the menu myself, but they sell well. The customer is the bottom line. Whether or not you like it, they dictate your menu.

Jim Paradiso

Owner

Ratsie's Terrapin Eatery

College Park, Md.

Contracting Out
Bob Winter of Bob Winter Designs Inc. asked whether an inventor like himself could contract out such functions as parts ordering and order taking (Help for Inventors, August). Several contractors responded, offering their services. Other readers offered the following suggestions:

We are a small distributor of medical supplies with five employees and $1.5 million in sales. We stock inventory; we receive, process, and ship merchandise; and we manage our bookkeeping and marketing in-house. We manufacture through local cottage-industry vendors. If a small company in our area needed these services, we would certainly be willing to work out an arrangement. Maybe Mr. Winter can find someone in his area who would be willing to do the same.

Timothy S. Cooke

Vice-President and CEO

The Electrode Store

Yucca Valley, Calif.

Mr. Winter should investigate a process called contract management. His corporation would act as an administrative core, outsourcing production, marketing, and financial functions. Before I joined the university, I started a medical-products company along these lines, and it's quite successful. The process is very popular right now in the medical-products industry and in segments of the electronics industry. There's literature available on the subject, if Mr. Winter is interested.

Jeffrey Bracker

Professor of Management

George Mason University

Fairfax, Va.

Last updated: Nov 1, 1989




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