When Michael Dell built computers in his dorm room in the 1980s, his customers paid him in advance. When apparel retailer Banana Republic first opened, it charged $1 a copy for its catalog and used the proceeds to build its inventory. Both companies exemplify what management professor John Mullins calls “the customer-funded business,” a commonsense approach to financing a company that avoids needed venture capital and bank loans. Instead, savvy entrepreneurs use their customers’ money to fund their growth. Mullins makes a compelling case for his model and its variants, and he illustrates the strategy with real-world examples. getAbstract recommends his guidebook to entrepreneurs curious about this alternative way to finance new ventures.
In this summary, you will learn
- What a “customer-funded” strategy involves;
- Why some entrepreneurs may prefer it to raising money from venture capitalists or bank loans; and
- How Dell, Banana Republic and other companies benefited from customer-funded strategies.
About the Author
John Mullins, PhD, is an associate professor of management practice at the London Business School. He is the author of The New Business Road Test and co-author of Getting to Plan B.