The Potbound Start-up – Brand Endangerment

I keep running across interesting examples of America’s favorite cottage industry, the startup company. The latest examples involve two startups that are so potbound that their brand images may suffer.

Most of my posts on startup companies have been about the difficulties in launching one and getting it to grow. I have rarely run into a startup which grew so rapidly that it choked on its own success. That, as we used to say, was the kind of problem we could live with.

Well, the business climate in south central Virginia must have something going for it, because I know of not one, but two small companies that have become so successful that they are in trouble.

The owners of these companies have been so efficient with their use of time and space that they have managed to produce great quantities of high quality food products in very little space with very little infrastructure and an absolute minimum of support systems.

Both companies are being run by extremely capable people who developed winning products that are eagerly sought after by small retailers and now by large chains. So, what is there not to like about this situation? It sounds like an opportunity, not a problem.

Well, these people may have been too efficient for their own good. They have not hired people who can carry on the business while they deal with the problems of growth. They have been single-handing instead of building a team. Single-handing works well on a small boat or a small company, but there is no relief when the wind or business picks up to gale force.

One of these small companies has temporarily shut down operations in order to reorganize the business. The owner of the other company is going into overwhelm from the pressure to meet orders. It may also have to suspend operations if something isn’t done quickly.

In both cases, these companies are operating in facilities that cannot be expanded and the owners do at least 90 percent of the work. They now have to deal with the problem of finding a larger facility, or a corporation they can license to produce their product. Either solution takes time and resources that these companies do not have.

Unlike Paul Newman, they do not have A.E. Hotchner to seek out and negotiate with food processors while they go on with their businesses. This is truly unfortunate, because both of these companies have superior products which are above and beyond what is commercially available.

These business owners might well read Shameless Exploitation in Pursuit of the Common Good, the inspirational account of Newman and Hotchner’s creation of a multimillion dollar enterprise which brought all-natural foods to supermarkets and donated more than 125 million dollars to charity.

As an interested customer of both companies, I can only hope that the owners of each will find the help they need to find and evaluate suppliers who can produce products for them.

The biggest danger I see is that any hiatus in the production of product can damage the excellent brand image each has built up. I would hope that they might figure out a way to continue limited production while building up alternate production facilities.

Readers with experience with this type of situation are invited to chime in. Are there other solutions which don’t involve shutting down? How can a brand image be preserved when product is not available?