With sales of $20,000 in 1981 increasing a hundredfold to more than $2 million this year, Renex Corp. had a real cash-flow problem.
It was more than the young company and its two co-owners could handle. Day-to-day managing took all their time, leaving little time for strategy or financial planning. Valuable capital was being wasted.
And the experts at MIT Enterprise Forum told Renex's leaders so.
MIT Enterprise Forum of Washington and Baltimore is a project of the local MIT Alumni Association, copied from a similar MIT alumni forum in Boston. Now in its second year here, the forum offers a chance for operators of small businesses to tap the expertise of others in finance and industries related to their own, says Don Christensen, chairman of the forum's executive committee.
Once a month, a technology-oriented small business seeking the counsel of the Enterprise Forum presents its case to a panel of four or five specialists in the fields of banking, securities and organization and to other small-business owners or someone in the field in which the case company does business. Typically, the company head describes the firm's history, problems and plans to the panel, which responds with questions and its critique.
Then the audience gets to ask questions and offer advice. Anyone interested is welcome as an audience participant, Christensen says. Together, the panelists and audience represent a potential network of investment, service and market contacts for each other and for the case company, and business cards get traded all around the room.
By giving established and budding entrepreneurs a chance to exchange ideas and experience, the forum "can counter the loneliness and isolation often associated with operating a small business," Christensen says.
Renex almost didn't make its presentation. A week before he was scheduled to appear, co-owner and general manager Mike McCall called Jerry Feigen of the forum executive committee to beg off. Renex had begged off before.
McCall said he wasn't ready, and in truth, he didn't think he'd gain much from appearing at the forum. But Feigen "forced me," McCall said.
With his partner, Renex President Ray Gwinn, at his side, McCall told an Enterprise Forum late last year that his company was in the computer hardware business, making controllers, which link terminals with huge mainframe computers.
"By doing things for other companies, we realized we had an essential role, but were getting a small take compared with hardware vendors," McCall said. So Gwinn spun off Renex from a software consulting firm he'd founded.
Seeking a more lucrative market, Renex began making its controller in 1980.
Sales at Renex moved from $20,000 in 1981 to $572,000 in 1982. McCall said 1983 sales are on target: $2.2 million.
"I want to congratulate you. You've accomplished much in a short time," observed panelist Valerie Yeager, assistant vice president of American Security Bank and an expert on financing and business plans for small companies.
She pointed out Renex's cash-flow "problem" and the potential for misspending.
Donald Schwartz, a Williams & Connolly attorney with expertise in corporate finance and securities law, agreed that Renex was growing faster than its owners could manage effectively.
McCall conceded as much, admitting that he devoted most of his time to daily management and little to advance planning.
As McCall took notes, Yeager emphasized the importance of long-term personal and business plans: "You have to stop now and do them, or it can get away from you."
Now visibly impressed rather than reluctant as before, McCall said he "realized the need for professional and financial help."
Sometimes the Enterprise Forum and the case company's chief have different views about the hurdles to be faced, Christensen says. One consistent problem with small, high-tech firms is that "the entrepreneur tends to be so focused on his technology he forgets that the technology is only as good as the economic application of it."
Such seemed to be the case with GEOView Inc. of Arlington, which had been the subject of an earlier Enterprise Forum. GEOView is a new, privately owned corporation marketing electronic information storage systems.
President James McCain told the forum audience that his product was based on a concept developed at MIT with funding from the Defense Advance Research Project Agency to provide "vicarious travel" over "movie maps."
The equipment, McCain said, consists of a computer terminal, two color TV monitors, a videodisc player, custom software and a joy-stick type control unit. The system allows the user to "travel" through the display on one monitor while information related to the picture is shown on the second monitor. For instance, one could use satellite photos to "fly" over terrain while reviewing data pertaining to each location shown in the photos.
GEOView previously had sold its product only to the federal government for defense and security purposes. McCain said GEOView wanted to move into commercial sales, and had produced 30 units.
McCain and Steve Levin, who developed and copyrighted the software package, invested $250,000 of their own funds and had sought about $2 million in outside financing.
McCain focused his presentation on what the product would do, but his panelists--presidents of two local high-tech companies, the head of corporate finance at an investment bank, and a consultant experienced in GEOView's market--criticized him for insufficient sales data. Potential investors would demand more information on product marketability, the panelists maintained. As a result of that advice, McCain said he has "plans to add a sales supplement."
Within a week of their presentations, McCain of GEOView and McCall of Renex said they were seeing results. Beyond the advice he needed most, McCall said he received a number of resumes. McCain who was looking for financing and customers, said he got two dozen phone calls, some from potential investors and clients.
"One of the difficulties a small company has is to get good advice from people who have experience in the entrepreneurial process," Christensen says. He sees the Enterprise Forum fulfilling this and similar vital needs of small companies for what he calls a reasonable price, $200 per presentation. The company pays the fee, which covers costs for conducting the meeting, printing, mailing and other administrative expenses of the forum. For the audience, the evening is free.
The next meeting of the MIT Enterprise Forum is today at 6:30 p.m. at the National Science Foundation, 1800 G St. NW, room 540. The company making its presentation is Management Information Services Inc. For information, call Don Christensen at 656-0634.