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Business Rx: Fresh advice for selling fruits and vegetables

The Entrepreneur

Longtime friends Christos Marafatsos and Kosta Dionisopoulos were in college when they decided they’d rather work for themselves.

With Dionisopoulos’s family in the fresh produce business, he had familiarity with the industry. And with the number of restaurants in Washington, he and Marafatsos knew there was room in the market for another distributor.

After eight months of rigorous market research and careful study of their competitors, Marafatsos and Dionisopoulos bought their first truck and started Delta Produce in September 2009.

The Pitch

Marafatsos

“Delta Produce distributes fresh fruits and vegetables to restaurants, government agencies, country clubs, franchises, hotels and food service establishments throughout the Washington metro area. The perishable commodities sector is valued at more than $2 billion in this region alone.

“We offer more services than our competitors, including a full-time engineer to help customers build Web sites and market on social networks. No one else is offering this kind of service. We also pull together multiple orders to make sure every individual customer gets the best possible prices.

“Even starting up during the recession, we’ve had a lot of early success and we’ve been expanding at a great pace. We’ve nearly doubled our sales in the past year and we currently employ 18 people. We’ve added warehouse space in D.C. And we’ve broken into the government sector, landing contracts to serve cafeterias at the White House and 20 other government agencies. We’ve upped our operations to close to 24-hours, and we’ve expanded our geographic reach into Pennsylvania.

“Kosta and I are concentrating on business development, and we’ve hired someone to run the operations side of Delta Produce. Right now, we’re creating a sales team (up to this point, we’ve been the primary sales force), so we’re interviewing several candidates each week. As we add to the team, we need to make sure we add the right people and that they sell our company the right way.

“As we land larger clients, they want bigger lines of credit. As a startup company, cash flow can be an issue. Our suppliers need to be paid, but our customers may want 30- or 60-day lines of credit before they pay us. We’ll have to figure how to balance that and still stay cash-flow positive.”

The advice

Asher Epstein, managing director, Dingman Center for Entrepreneurship

“As you expand, your scaling issues boil down to systems and people.

“The system you’ve established is the lifeblood of your organization, but you shouldn’t necessarily always do things the same way because that’s the way you started out. Don’t make this a communal responsibility — have one person accountable for systems/operations with a rigorous review process and continual assessment for constant improvement to efficiency.

“Have at least monthly team meetings. As Delta Produce grows, your touch point with each individual employee will diminish so you have to think about how to put your stamp on the culture in a tangible way.

“Money is what runs this business. You’ll be paying your suppliers today, but your customers rely on paying you later through lines of credit. You need ways to fund that gap. There are options — you could raise an equity investment, seek an angel investor or secure a bank loan. Do a rigorous forecast of cash flow. Don’t put yourself in a position where you’re over-leveraged.

“Another option: Let your customers close your cash-flow gap. See if there is a model where you can incentivize customers to pay earlier through discounts or other benefits. Think about aggressive ways that you can get your customers to pay early and often and let them benefit, too.”

Delta Produce is in the running in Bloomberg BusinessWeek as the top promising company started by young entrepreneurs under 25.
(Voting ends Oct. 20.)

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