This was a big meeting, and Jill found herself very anxious. If she were to get a yes, her brand would be available in over 2,000 stores nationwide. Three years ago, when she first launched, she dreamed of this day. Now, she was just one yes away from it being realized.
The meeting was awesome. The buyer loved the presentation, and she received the yes she so desperately wanted. The product would be in the stores in 90-days. She called her partner to share the news as she jumped into an Uber to head to the airport.
A few days later, she was at her desk, brow furrowed, running her fingers through her hair. “This is maddening”, she thought, as she stared at the spreadsheet listing all 2,000 stores and the different distribution centers that would have to be delivered. She was having to respond to questions about freight modes, minimum orders, swell allowances and more. Up until now, most of her customers had picked up at her co-packer's facility. What few customers she did deliver to were all handled by a local carrier.
She had a meeting later in the day with her co-packer, and she was hopeful they would be able to help her respond to some of these questions. Jill had sent off an Excel sheet with her volume projections, and they were coming to her office to review and discuss those numbers.
Hours later, she sat at her desk, a sense of panic as her companion. “How could this be happening?”, she wondered. The co-packer had shared with Jill they were concerned that they would not be able to meet or keep up with her rapidly growing demand. Further, they informed her, that they wouldn’t be able to warehouse and manage the shipping for that much product. They suggested she find a second co-packer on the east coast to lessen the burden and create some manufacturing redundancy. Also, they encouraged her to find a third-party logistics provider to manage her warehousing and shipping needs.
Just then, her partner called. He too was feeling nervous. He had been working to identify how they’d manage the retail execution at store level. Stores would need to be checked and their directors and district managers routinely called. He had also done some analysis on their cash needs. They would have a lot more finished goods inventory, carry significantly more receivables, have dramatically increased freight costs, and their aggressive promotional plan would create significant deductions from the retailers.
Jill hung up the phone and just sat in stillness. She thought, “What have we done? This could ruin us.” They had worked so hard, and 2,000 stores were everything they hoped for and more.
Sadly, this happens far too often. Companies work hard to develop their brands, great products, cool stories, and a strong following. They’ve proven their concept and are ready to scale. But, they only think they are ready. Yes, they’ve got the packaging, the pricing, and have generated a buzz. However, the backbone of their organization can’t support the weight of their growth.
Growth is alluring, exciting, even intoxicating. It’s what every company wants for their brand. Yet, it can also be devastating if you’re not prepared to scale. Before you start looking for that explosive growth, you need to ask an existential question. Will our order-to-cash infrastructure support that growth? This infrastructure includes the entire supply chain from manufacturing, warehousing, shipping, transportation to IT. Order-to-cash also encompasses the sales structure, order processing, and customer service. Additionally, it impacts receivables. Not only does it grow the total A/R, it also increases the average days outstanding. Growth can have a significant impact on cash flow.
Please, don’t make the same mistake as Jill and her partner. Before you find yourself sitting across from the buyer who can help make your dreams come true, take the time to make sure your organization’s backbone can support that dream becoming a reality.