IncQuery: How to Renegotiate Your Lease

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"Getting those terms may be a little more difficult if your company is new, but it's still not impossible. Most of these suppliers are small companies themselves. If you do a good job of explaining your situation to them, and if you come across as a solid, reliable individual, they're likely to give you the benefit of the doubt. Of course, it would help if you could show them a contract with a customer who's committed to paying for the material in question.

"You may also be able to get some assistance from your customers. In residential landscaping, it's not unusual for customers to pay one-third of the bill on signing, one-third on delivery, and one-third on completion. So you might be able to raise some cash that way. Those terms aren't typical in commercial landscaping, but everything is subject to negotiation. Besides, your commercial customers probably chose your company because they want to work with you. If you explain your situation to them, they may very well be willing to pay for the material on delivery. In fact, they may even be willing to pay your suppliers directly. If so, you'll have something else to offer the nurseries when you go in to negotiate terms with them.

"Beyond that, I'd just make sure that you have really learned the lesson of this experience. I don't think it's ever a good idea to rely on a bank to cover your normal cash-flow needs -- not if you want to stay in control of your destiny. There's nothing wrong with going to a bank when you need money for a big investment, like buying a truck, but you should be able to finance your growth internally. If that means starting small, so be it."

Stock It to Me
I have a one-year-old business that sells a women's fashion accessory through the Internet and through major retailers. Several national magazines have recently told me that they plan to feature my product in upcoming issues. My problem is that I have no idea what the response will be, so I can't come up with even a ballpark estimate of the amount of inventory I'll need. I'll ask the magazines for their advice, but I'm not sure how much they'll be able to help me. Meanwhile, I'm short of cash, so I'm not in a position to stock up on inventory unless I know for sure it will sell. Do you have any suggestions? By the way, my product costs about $50 retail and is going to be associated with an industry expert. --Kathleen

"Asking the magazines for advice is a good starting point, but you're still the one who has to pay for the inventory, so you have to make the call," says Jack Derby, founder and president of Derby Management, in Boston. Derby was formerly president of CB Sports, a leading skiwear retailer, and has coached several fast-growing consumer-products companies. "I have two pieces of advice. First, you should make a deal with your suppliers to purchase the component pieces of your product, assuming that it requires some assembly. Yes, you'll have to pay for the pieces, but you'll improve the delivery time of the finished product, and you'll reduce the up-front financial commitment that you'll have to make.

"Second, you shouldn't worry too much about the possibility of selling out your stock of finished goods. In my experience, selling out a consumer product -- and going to back orders -- is not such a bad thing. Unless your product is seasonal, consumers are generally willing to wait a couple of months to get it. They understand and accept the fact that they can't have the product right away because they didn't order it in time. I'm not suggesting that you deliberately create a shortage, but you have to err on one side or the other, and you're the one whose capital is at risk. If I were you, I'd keep your up-front commitment fairly small and say to the latecomers, 'I'm afraid we're sold out of that item right now, but would you like to back-order it?' My guess is that almost all of them will say yes."

Having Trouble Sleeping Lately?

Could you use some advice from an experienced entrepreneur who's been where you are and figured out what works and what doesn't? Send your questions to IncQuery@inc.com. Editor-at-large Bo Burlingham, aided and abetted by Street Smarts columnist Norm Brodsky, will find the best people around to answer them. And if you don't like their answers -- well, you can tell us that, too.

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