How to Hit It Big (and Why You're Not Ready Yet)

Last Updated Apr 28, 2011 6:20 PM EDT

One of the more pointed examples of how dangerous it can be to grow too big, too fast can be found in Jim Picariello's tale. Picariello launched an organic popsicle company that landed major distribution deals with Wegman's, Whole Foods, and several other major East Coast grocery chains within its first year of business. But by the end of that year, he was bankrupt.

Now I'm going to tell you Justin Gold's tale, which may conclude as abruptly and painfully as Picariello's -- but hasn't yet.

When Gold started Justin's Nut Butter in 2004, the first customer for the Boulder-based natural-foods maker was the local Whole Foods Market. That was fortunate, because the health-food grocer offered the fledgling entrepreneur a rare combination of a low threshold of entry and an expansive upside.

"Whole Foods will allow you to sell to just one store but authorize you for the entire region, which can be 30 stores," Gold explains. "So you can start with one store, tweak your product, make your mistakes, and go into the rest of the stores in that region. Then if you have a hot product, you can go into all of the Whole Food stores."

That's more or less what happened as Gold grew Justin's from an outfit with one employee and a single customer to one that today has 21 employees and, in addition to more than 300 Whole Foods stores, shelf space in the 2,400-plus unit Kroger chain and other major grocers. Whole Foods not only permitted Gold to grow at a controllable pace, the company loaned him $20,000 to help him buy equipment and build inventory.

By the time he got into Kroger a year ago, Gold was about the same size as Picariello's health-food company was when it landed the huge distribution deal that ultimately stressed it to death. If Gold hadn't been better prepared, he might have met the same fate. "Kroger is all-or-nothing," he says. "You can't just get into one store. Whole Foods gives you the opportunity to grow."

Entrepreneurs who are courting the big time can take some good lessons home from the experience of Justin's Nut Butters. To wit:

  • The best customer doesn't just place big orders. Corollary: A customer who orders too much can be the worst of all.
  • Match your customers to your capabilities. Don't take on more business than you can deliver.
  • Grow organically. Don't force it.
Observant readers will notice that Picariello's big break came in 2008 -- perfect timing for him to borrow money to expand just before the economy soured and his backer backed out. Gold, by comparison, expanded into an expansion. So here's the final admonition for those who would step into the bright lights without getting burned: Be lucky.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.

Image courtesy of Flickr user That Other Paper, CC2.0

  • Mark Henricks

    Mark Henricks' reporting on business and other topics has appeared in The Wall Street Journal, The New York Times, The Washington Post, Inc., Entrepreneur, and many other leading publications. He lives in Austin, Texas, where myth looms as large as it does anywhere.