CORBIN: As an entrepreneur, I have several.  One mistake was substantially under-estimating the growth of my company.   A requirement to provide our services is a warehouse and processing center.  In 2000, RetroBox signed a 7 year lease and moved into facilities with 14,000 square feet of warehouse/processing capacity and 20,000 square feet of office space.  The company already had another facility with 10,000 square feet of warehouse/processing capacity. Due to the exponential growth of the company, RetroBox outgrew its current warehouse/processing capacity in six months. We were stuck with the 7 year lease.  The impact was significant. RetroBox leased an additional warehouse/processing capacity of 145,000 square feet.  All warehouse and operations were moved to the new facility.  The result:  24,000 of excess capacity in two other facilities with associated lease payments. The additional lease payments before the facilities were sublet negatively impacted the company cash flow.

BRADLEY: Was there anyway you could have anticipated this growth?

CORBIN: Entrepreneurs always believe they will experience exponential growth. But when it comes time to sign on the dotted line, your expectations become a little more conservative. The timing could not have been more perfect for our business.

At the end of 1999, lots of people started replacing equipment to prepare for Y2K. Disposition of used computers is impacted by environmental, privacy and security issues. Our business was at the center of all these trends. Did I believe some of it? Yes. Did I realize it would be this huge? No. We were well positioned in the right place at the right time. Luck has just a little to do with it. The trend was we were growing at a much faster rate than our space would allow. But I was skittish.

BRADLEY: How did you recover from it? 

CORBIN: We bit the bullet.  All warehouse and operations were moved to a new facility.  The result:  24,000 of excess capacity in two other facilities with associated lease payments. The additional lease payments (before the facilities were sublet) negatively impacted the company cash flow. After several months, RetroBox was able to sublet a substantial portion of the 24,000 square feet of excess warehouse/processing capacity.

BRADLEY: Now that you know better, what would you do differently? 

CORBIN: What I didn’t do well, was include a “way out” in my thinking. At first, I thought I found the perfect building that met all my requirements. But in the end, this building was not flexible enough for growth. Looking back, I would have selected a facility that had potential expansion capacity with an associated of first right of refusal for additional space/capacity.

BRADLEY: What advice would you give to others contemplating a similar decision? 

CORBIN: If your business has significant space requirements, flexibility is key.  In this situation, RetroBox underestimated the facility needed to perform services based upon growth.  However, it is just as easy to overestimate growth and end up with an underutilized and expensive facility.  The ability to flex capacity in a business with significant space requirements is essential for cost control, as well as growth planning.

Ben Bradley (see the BRADLEY article) is the managing director of The Bradley Wiltjer Marketing Group (www.bwmginc.com) and GrowingCo, Inc. (www.growingco.com), a research-and-intelligence firm serving manufacturing, technology and security clients. Contact him at ben@growingco.com.