How to Ride a Big Retailer’s Rocking-Horse Order to a Successful Finish?

Q: I started making rocking horses from my home and now have an order from a large retailer for 200 to 600 rocking horses. I don’t have the funds to pay for the manufacturing and fulfillment of this order. How can I leverage the order and manage to pay my subcontractors?

--Douglas Dick, Venice

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A: Your first and easiest solution would be to attempt to persuade the retailer to put a deposit on the order to cover all or part of your immediate costs. This is a legitimate request, although it may be that the retailer will refuse to provide you with any money upfront. If you can’t persuade the retailer to give you a deposit, you could try to find a supplier and/or manufacturer that would provide the materials and labor on a 30-day-plus order to finance the purchase. This might cost you 10% to 15% more, but it will limit your business’ cash outlay.

Here are two more ideas: You can factor the purchase order through a factoring company, which will “buy” the order from you and give you a percentage of the money upfront, charging you a fee. Try a company such as AeroFund (https://www.aerofund.com) of San Jose. Or you could contact our Los Angeles Business Development Corp. (https://www.microloan.org) and apply to participate in the microloan program, which grants loans of less than $25,000 to small businesses. If your business has a fair credit rating, we could finance the purchase order for you at a fixed rate of 12%.

--Roberto Barragan, interim

president, Valley Economic

Development Center

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Q: I have an Internet guide site where I host home pages or link sites that are “lost” in cyberspace. My site is simple, low-cost and easy to use. How can I get the word out about my site and persuade people to advertise with me? I charge $20 per month per link.

--Phil Bishop, Torrance

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A: The first question I’d ask is: What kind of effort have you made so far to get the word out about your site? More important, is your message getting to the right audience? Sales of banner ads are declining on the Web, mainly because the ROI (return on investment) tends to be very low. If you want to sell banners, you’re going to have to offer your advertisers a narrow, vertically targeted medium, so that the people who view your site are exactly the people your advertisers want to reach.

There are hundreds of thousands of potential venues for an advertiser to choose from on the Web. Rather than go for high-traffic (your advertisers can buy banners on Yahoo if they want that), you’ll have to stress that every visitor to your site is someone who has a predisposition to click on your advertisers’ link. If you can prove you have a relevant number of visitors per month, you can sell ads, and it won’t matter if you get even only 20 page-views a day.

In order to drum up site traffic, I often suggest that my clients get onto Usenet and spread the word to people who participate in the newsgroups that would be relevant to their sites. For instance, if your site appeals to amateur chefs, you can find groups of people conversing about cooking, restaurants, recipes, etc. The trick here is to let people in these groups know about your site without “spamming”--because if you do, you’ll turn a whole host of people off to your message. “Lurk”--a Net term for reading the messages without posting one yourself--for a while to get a feel for the group and what is (and isn’t) permissible. Then join in the discussion with a meaningful comment and include a link to your site in a non-aggressive, non-threatening manner. Make sure your home page includes a prominent link to your advertising rates and a place where people can send you e-mail comments.

--Jonathan Hirshon,

chief executive, Horizon

Communications, Santa Clara

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Q: My partners and I have a small company that develops and manufactures infection-control products for use in dentists’ offices. We just ended an exclusive two-year distributorship agreement with an East Coast company that wants us to renew. It has made orders sparingly, and we wonder if we should try to go out on our own or market the company for sale to a larger firm. Any help would be appreciated.

--Jim Samp, owner,

IC Products Inc., Palmdale

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A: Here are the questions I suggest your company try to answer or address during this distributorship decision process:

* Are your products truly workable and, if so, at what price and in what quantities?

* What actions (regardless of who takes such action) would most dramatically affect sales? Product redesign? Packaging? Pricing? Advertising and/or marketing? Sales organization?

* What kind of feedback, if any, have you received on the products from the dentists who have purchased them during the past year?

* How do dentists prefer to purchase products such as yours, and from whom? If you don’t know, ask dentists who have and have not purchased your products about their preferences. Ask if they are happy with your current distributor? If they would prefer you use a similar distributor (one who may be better suited to this product), or if they would rather purchase directly from IC Products through direct mail, a Web site, etc.

In summary, I suggest that you spend some of your limited time and resources researching the market and its response to your products. Trade shows are a great way to do this, as is directly contacting your existing and potential customers. Based on the feedback you receive, you should know enough to either set up a direct-selling program, re-sign with your existing distributor--but possibly under different terms, such as with a requirement that they spend more money on marketing--sign a deal with another distributor, or offer to sell the company.

In general, distribution decisions can be key to a product’s success, and the more information that a company can gather about the market and its product response, the better the decision will be.

--Ben Tenn, Tenn Consulting,

Northridge

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If you have a question about how to start or operate a small business, mail it to Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.