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Growing a New Business VC-Free

A Minnesota-based alternative medicine company

The Goal

An entrepreneur with a passion for alternative medicine created a research company to produce a unique music-based relaxation system that would be both therapeutic and entertaining. Instead of raising venture capital and building a traditional business model to support the new company, he wanted to bootstrap the business.

His goal was to retain control of his company as it grew, without raising lots of venture capital and building a traditional business model. “I wanted to focus the majority of my time on new alternative healing products, not developing a traditional business infrastructure and standard operating procedures. The goal was to stay independent and grow – regardless of revenues and headcount,” he said

The Challenge

He needed to do extensive research, build a prototype, assemble a sales team and market his product – all without building a large “bricks and mortar” organization and without reserves of investment capital to fund the venture. In essence, he wanted an electronic infrastructure to fuel his company’s growth.

Endurant Solution

Endurant was engaged to design, develop and implement a partner-based virtual business model. This custom virtual business model will enable the owner to acquire and manage a sales force, develop a new product prototype, assemble products and fulfill orders, and manage accounting and other administrative tasks – all without hiring employees, acquiring investors or forcing him to personally manage these aspects of the business. In other words, he was able to focus on the core of the business.

Results

• Positive cash flow. The customized partnering strategy allows the company to share the risk with partners while maintaining a positive cash flow. The company never pays for a product until it’s built and the customer has placed an order.

• Low investment cost. “My total investment has only been about $100,000. There are no investors, no foreseeable need to have any, no desire to go public and no future sale of the business is anticipated,” says the clearly satisfied Endurant client.

• Virtual Recruiting. Endurant spearheaded a collaborative process to define a virtual recruiting model that will be used to recruit the company’s sales force. The web-based system is designed to check the aptitude of applicants early in the process, requiring them to submit a sales plan as part of their application. By using the web to weed out unqualified candidates, the company will save human resources time manually screening applicants.

• Streamlined management. A customized system of web portals allows agents to place orders, report their progress directly to the company, request additional sales tools when necessary, track new leads and the status of current customers, and receive product training. The web gives agents extensive autonomy and control over their daily schedules, something that appeals to most independent-minded sales types.

• Automatic financial transactions. Credit and payment processing also can be handled “automagically” through a virtual accounting model. No need to staff an accounting department, or even contract with an outside accounting firm. With reliable firewalls and processes for secure online transactions now in place, the company can easily invoice customers, receive payments and reimburse partners automatically and accurately.

• Outsourcing. The electronic infrastructure allows the company to use the web to link up with trusted outsourcing partners. These partners can source and procure parts, as well as handle subassembly, manufacturing and shipping, as well as supply service, repair and customer care functions.

• Shared risk/low upfront costs. At the company, a shared risk model means that outside partners provide engineering and other resources. To keep up front costs down, product development and prototyping fees are built into the final product cost.

• Outsourced IT support. The company uses an application service provider (ASP) to handle its IT infrastructure, which was architected and integrated into the overall virtual business model by Endurant.

The Bottom Line

“Endurant has developed a low-risk, highly nimble electronic business model that is remarkable. Their model has built in checks and balances that gives me the peace of mind usually only associated with a professionally managed company. It has the potential to save me millions of dollars. I also appreciate knowing that experienced business managers from Endurant and my other partners are working together in the best interests of my company.” — Company owner