My husband David and I founded Alliance Memory in 2006 to provide legacy IC memory products for the communications, computing, industrial, and consumer markets around the world.
Like most small business owners, we knew at the outset that it was going to be a lot of work and long hours with little reward in the short term. We understood that it takes time to establish a product, build a customer base, and begin to see profits.
For us, that was part of the excitement of starting our own company -- the challenge. And there was certainly no shortage of those. From getting Alliance Memory off the ground to the day-to-day operations of a small startup with limited staff, there was a lot we needed to figure out along the way; but figure it out we did. In this three-part article, I explore our startup experience and provide some practical advice to those considering taking up the challenge themselves.
Birds make it look easy, but while a startup can be an exhilarating
flight, the take-off isn't as easy our winged friends make it seem.
Itís important to understand that when you start your own business, nobody knows you and anybody you want to do business with is instinctively wary. Our bank was skeptical, vendors required short payment terms and low credit lines, and potential customers wanted to see our financials to determine if they should trust us and place an order. Selling your company again and again on the merits of your good ideas and intentions is tedious, and it takes precious time away from the goal of growing your business. The key to easing the process is simply planning.
Typically, your bank will want three years of business financials before it will loan you money. Until then, you will be borrowing against personal assets, so you have to be prepared for that financially. When approaching customers, work on anticipating what their questions might be and have your answers ready. Prepare financials for the customer up front in case you are asked. Do this quarterly, outsourcing the task to your accountant. In addition, prepare product roadmaps so itís clear that the future of your company is being planned for. At Alliance Memory, we also initiated an ISO certification program to instill faith in our customers that we not only took quality seriously, but we intended to maintain this quality program well into the future.
Strength of the chain
Of course, without a supply chain you have nothing to sell your customers, so building one is a vital process. Itís an undertaking that can vary depending on your type of business, and one that should be carried out around a definitive strategy. As a legacy memory provider, our initial inventory came from a company called Alliance Semiconductor, which was being broken into several pieces and sold off. We acquired the memory division and received an inventory of 2 million pieces.
Part one of our strategy was to spend one year selling this inventory to recoup our investment, while David travelled to Asia to meet with the vendors who had originally produced the devices for Alliance Semiconductor. His goal was convince them to continue doing business with Alliance Memory, which would allow us to provide our customers with a continued source for their memory ICs beyond our original inventory. The vendors were fully supportive of our business plan and worked with us closely to avoid any concerns about our initial ability to meet payments.
Once we began buying wafers and producing inventory, part two of our strategy was to put a backup plan in place. There was always the possibility that a vendor would decide our initial volumes were too small to bother with or that a bigger customer of theirs would use their full capacity and push us out of the way, leaving our customers high and dry. To avoid this, David established backup vendors in Asia, relying on his industry reputation, connections, and negotiation skills.
In my next post, we discuss how I ran lean and mean, running the day-to-day operations with limited staff.