CEO's Notebook

CEOs give advice on: fueling growth through purchase-order financing; boosting sales through affinity marketing; and using cash incentives to collect customer contacts.

Hot Tips

Answering customer-service phones all day can get boring. To keep employees on their toes, National Tele-Communications, a reseller of telecom services in Cedar Grove, N.J., began making daily "phantom" calls to its operators. The "dummy callers" (read: managers) pose as ignorant--and irate--customers. The reps who keep their cool are eligible for a $25 daily prize and entry into a monthly drawing. The prize? Two tickets and a limo ride to the Broadway production of Phantom of the Opera. --Ilan Mochari

Want to hire good salespeople? During the interview, ask the job candidate to try to sell you your own product--or something like it. Steve Oehlerking, founder and president of Tampa-based Apartment Hunters, a $2-million rental-locator service, asks potential sales hires to "pitch" him their current homes. "If they can't tell me all about a place where they've lived for a while," Oehlerking reasons, "how will they be able to talk to customers about places where they don't live?" --Marc Ballon

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Don't meet a banker's standards for credit?

Here's one way to find cash to fuel your growth

By Jill Andresky Fraser

It's the classic entrepreneurial plight. You're desperate for capital to fund production or expansion. But you're still too young, too small, or too financially precarious to meet a banker's high credit standards.

So where do you get the cash--and get your company ready to qualify for bank credit? Bob Carroll, the chief financial officer of Ex Officio, a Seattle-based importer of travel wear for men and women, has a simple recommendation: purchase-order financing. Think of it as an earlier phase of factoring your company's receivables. With purchase-order financing, companies can obtain letters of credit to help finance production costs--as soon as a customer places an order.

"We were in a real bind," Carroll says of his system's origin. Founded in 1986, Ex Officio relied on family-and-friends financing for years. But the company just got too big, broadening its customer base to about a thousand stores across the country: "By 1994 we realized we couldn't keep relying on personal sources of funds. But we didn't have many other options."

By networking with other companies in the industry, Carroll got leads on purchase-order financiers. "And so began a lucrative business relationship," he says. In the past four years, he explains, banks have issued 50 letters of credit to the company for amounts ranging from $50,000 to $500,000. Typically, the letters of credit expire after three or four months, but they have enabled Ex Officio to meet the security demands of its Asian manufacturers while bridging the financial gap between getting a sales order and receiving a payment.

The strategy has helped Ex Officio stay on a fast-growth course, with sales last year of $12 million and 1998 sales projected at $16 million. But it's an expensive financing option. Carroll warns that interest charges typically run from 1.75% to 2% per month, more than credit-card borrowings. That's why purchase-order financing should be a purely interim strategy. "We're always looking for ways to ratchet down our financing costs by diversifying into other nonbank lenders," says Carroll. "As we've grown, that has become more of an option for us."

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Hot Tips

In the wake of the Monica Lewinsky scandal, the National Retail Federation (NRF), which is based in Washington, D.C., and is the largest U.S. trade group for retailers, wants to publicize new voluntary privacy guidelines. Special prosecutor Kenneth Starr, you may recall, subpoenaed the sales records of three D.C. bookstores from which Lewinsky allegedly bought books, including Nicholson Baker's steamy tome Vox: A Novel, for her White House pal. The bookstores were ultimately spared having to decide whether or not to turn over the records when Lewinsky herself supplied Starr with the information. But the query raised red flags for retailers. Would the bookstores have set a precedent for violating the privacy of their customers if they had revealed the purchases? The NRF now counsels retailers to avoid sticky situations by informing shoppers up front about the kinds of data a store collects and how they might be used. --Mike Hofman

Looking to reduce employee stress--and encourage honesty? At Text 100, an $18-million international public relations agency, employees get two "duvet days" in addition to vacation and sick time. What does that mean? If employees don't feel like getting out of bed, they simply call in, take a "duvet day"--and then sink back under the covers, no questions asked. --Stephanie Gruner

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Maximizing your marketing

How to target groups likely to be receptive to your message

The average age of Spice Girls fans is maybe 12, but Debbie Newman is counting on them to help boost her business into the big leagues. Newman, vice-president of marketing for New York City-based N2K Inc., is using affinity marketing to reach Spice Girls fans--and others. N2K's Music Boulevard Network sells CDs, videos, T-shirts, and other merchandise on the Web at musicblvd.com.

Through an "affiliate" program, N2K, a public company with $11 million in revenues last year, lets more than 11,000 small music Web sites link to musicblvd.com. "The experience of the affiliate is generally, 'Hi, I'm a Spice Girls fan and I have a Spice Girls fan page and I'd like to sell Spice Girls records on that page," says Newman. For that fan, N2K would set up a Web link so that anyone who visits that Spice Girls fan page can, with one click of the mouse, go to musicblvd.com and buy Spice Girls records.

Affinity marketing began largely with credit-card companies, but recently a variety of industries have noticed the revenue potential and are investigating the concept. Nowhere is the trend more prevalent than on the Internet, where companies believe that savvy affinity marketing will steer more consumers toward E-commerce. A Web site devoted to affinity programs-- refer-it.com--lists more than 300 businesses that are testing this model.

Newman and her colleagues believe that having thousands of small affinity-marketing relationships is as effective as partnering with a few huge entities. "We have several big, strategic business-development deals," says Newman, referring to N2K's partnerships with the likes of Netscape and Excite. "But in aggregate, these little fan sites in the affiliate program are the number two source of referral in terms of revenue."