Marcus Lemonis has a simple, if scary message for Brian Fricano, the founder and CEO of Sustainable Supply: To grow his business, he needs to take on more risk.
The Broomfield, Colo.-based startup, which primarily sells eco-friendly supplies to restrooms, is doing well so far. Sales hover at $9.2 million, with Fricano projecting to do $13 million by the end of 2015. Still, Lemonis -- the entrepreneur, investor, and famed star of CNBC's The Profit -- doesn't like the fact that Fricano is "picky" about who he'll sell to.
Fricano is the featured entrepreneur on Tuesday's episode of Ask Marcus Lemonis. Each week on Inc.com, a business owner gets the opportunity to meet with Lemonis, who will answer one question about a pressing business challenge.
Fricano wants to know exactly when he should start hiring more people. He notes that Sustainable Supply has recently made a $500,000 investment in digital software, and wants to ensure that the transition is seamless for users. "Should I wait to make sure we're out of the woods with the implementation before I hire?" he asks.
Rather than answering this question directly, Lemonis addresses what he sees as the company's bigger issue: Its limited customer base. "I would rather you loosened up your terms for the first year, and let your volume blossom," Lemonis says.
He concedes that growing sales may mean taking on more risk, but there are certainly ways to bake risk into the pricing structure. "There are people that know they have previous credit problems that will pay for that risk, just like in an auto loan," explains Lemonis. Accordingly, he says that Fricano should be prepared to write off about two percent of his sales annually.
To learn how much the company could win over time from a two percent write-off, watch the episode in its entirety above.