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Diary Of A Start-Up

Chicken wings, bloody lips--plus more pots of coffee than you can count. Here's what it's really like to start a business on the side.

It's 8:30 a.m. on Friday, the day I'm quitting my well-paying job. My wife, Greer, and I make our way to the subway through a torrential downpour. Because my hands are full, when we get to the turnstile, I shut our collapsible umbrella with my chin. The next thing I know, the umbrella flies back at me, almost knocking out a tooth.

My finger was still on the "open" button. Great. I've been planning this morning for weeks--in certain respects, for years--and it isn't supposed to happen this way. Up until the bloody lip, I'm running at 90 percent confidence and 10 percent fear. Afterwards, it's 90 percent fear.

As the subway door shuts, I reflect on the events that have led me, at 30, to this moment.

Friday, March 8, 1996: A new acquaintance, Tom, 27, invited people for drinks. His apartment was full of oddly shaped sponges and pot scrubbers--a sponge turtle with its shell scrubber; a fried egg sponge with its yolk scrubber. I asked if he had a cleaning fetish. He laughed, then explained they were part of a project he'd conceived in design school and planned to market . . . eventually.

My business background and prior attempts at entrepreneurship led me to ask him more questions about the sponges. To everyone else, the only thing odder than an apartment full of sponges was the two of us seriously discussing them.

Monday, March 24, 1996: I've been bumping into Tom frequently on the way to work. We always talk about the sponges. I ask about the economics and logistics.

Sunday, May 5, 1996: Tom and I rode in Bike New York, a 42-mile city tour, with friends. We talked sponges. He's calling them Soakies, which I think is a great name.

After the ride he asked if I wanted to be a 50 percent partner. His offer appealed to me for two reasons. First, by taking a commodity product and changing its shape and color, he's created a new product. Second, manufacturing involves only sponge cutting and package printing, so capital requirements are small.

Tom has a good disposition and a solid work ethic. Our backgrounds--Tom's in product design, mine is in finance and marketing--are complementary.

With modest aspirations, I see this business as a resume-building experience; with aggressive ones, I see it as a multimillion-dollar company. Either way, this is something I want to do. I've passed up two start-up opportunities since college, and don't want this to be the third.

Friday, May 10, 1996: We decided to build a company around our product as opposed to selling a single product line, primarily because of the difficulties of selling a single product to big chains.

I spent the week educating myself about sponges. I never knew they're manufactured in huge blocks the size of a Volkswagen, then cut down. Tom and I created a timetable: If we want the product in stores in nine months, we have to ship everything in eight months, create packaging in seven months, determine pricing and product image in six months, and so on.

Saturday, June 30, 1996: After many late nights over coffee and buffalo wings, we've begun to see structure. We'll contract out manufacturing, warehousing and shipping while we focus on product development, marketing and distribution. We'll distribute through specialty stores such as Crate & Barrel and Williams-Sonoma, and superstores such as HomePlace and Linens `N Things.

Our revenue projections rest on selling one sponge a day--in 450 stores--at a wholesale price of $2, for base annual revenues of $328,500. But since we'll be ramping up sales from a small customer base, our first year's annual sales projections are $150,000. Next year, when accounts are in place, our running rate will be $328,500. If we add new products and customers, second-year sales should hit $500,000. We estimate we need to borrow $20,000, but should be able to grow the company off of its own cash flow.

Friday, July 6, 1996: The first step in implementing our business plan--nailing down pricing--is difficult. Sponge cellulose is made by only three companies in the world. Getting huge companies like 3M to take two "kids" seriously is tough.

Thursday, July 11, 1998: Called the die-cutter 3M recommended, and learned there were huge production quantity requirements. We used the Thomas Register of American Manufacturers--essentially a list of manufacturers organized by state--and began cold-calling.

Friday, July 19, 1996: We found two local factories and took a personal day from work to visit them. We weren't impressed with the first; it was archaic and dirty. The second was huge, clean and professional. We believe they'll do the job well.

Sunday, October 20, 1996: Returning from an 18-mile run with Greer, my marathon-training partner, I found two messages on my machine--one from Crate & Barrel, one from Williams-Sonoma! I thought I was dreaming, because even though we'd spent hours putting together a sales kit, we'd FedEx'd it to these retailers just last night. Both wanted more information. Not a sale--yet--but we're on the right track.

Monday, January 6, 1997: Williams-Sonoma decided our products are "too fun" for their stores, and the buyer who liked Soakies has left Crate & Barrel. We're pursuing HomePlace, bloomingdale's, Macy's and Linens `N Things, but haven't heard back. Egos bruised, we decided to target independent stores by exhibiting at the Boston Gift Show.

Saturday, January 18, 1997: The upcoming trade show is forcing us to finally manufacture our products. We need to finance $15,000 in production costs, plus $5,000 in show costs.

We asked friends and family to invest in increments of $2,500 with either a personally guaranteed 15 percent loan for one year, or phantom equity participation, whereby they receive 0.5 percent of every dollar that we sell. If, after two years, we haven't paid back their $2,500 plus an additional $2,500, they are invested for the third and final year. So far, we've raised $15,000 and need $5,000.

Monday, February 6, 1997: Today a conflict between our "real" jobs and our company surfaced: asking for week off to exhibit at the show. I couldn't risk my boss saying "no," so I spun a story about a close friend's wedding.

Every evening we drive an hour to my parents' house, where we're building the booth. My mom is waiting with dinner; my dad is brewing coffee. After five late nights, staying awake at work is a job in itself.

Saturday, March 15, 1997: A bad day. The last two investors backed out. We are $5,000 short and need to pay the bill or the factory won't ship us the sponges.

But there's some good news: One of Tom's best friends, Mike, told his brother what we're doing, and he wants to invest in our business.

Saturday, March 22, 1997: At the trade show, we made our first sale, along with many others! I can't describe the euphoria; everything we've been working on has been validated. Everyone loved Soakies; we wrote orders all day long.

Sunday, April 13, 1997: The show paid for itself and generated solid sales leads. Bath & Body Works has since placed a $20,000 order. Also, I've begun dating Greer--my running partner. Everything seems manageable.

Monday, November 10, 1997: I asked Greer to marry me. The business has been moving forward, but Tom and I have been spending less time on it. Despite that, we've been able to fill the big orders garnered from the trade show.

Wednesday, January 14, 1998: Something has to change. Our business isn't going to hit critical mass until at least one of us is running it full time.

Thursday, July 16, 1998: Today I started thinking about the company. Although we've taken sizable orders, customers and sales reps are frustrated that we're rarely available when they call during business hours. I turned to Greer (now my wife) what she thought about me quitting my job. She was extremely supportive.

Friday, August 14, 1998: To jump-start our company, Tom and I decided to bid for a small producer of kitchen gadgets that's for sale. We can re-brand its products under our name and launch our own kitchen products--while using the cash flow to support ourselves and the company.

Saturday, August 22, 1998: The seller liked our proposal, but has already accepted another offer. Tom and I realized if our offer had been accepted, we would have quit our jobs to run this new business, so why not quit our jobs to run our business?

Sunday, November 22, 1998: Tom is in San Francisco for a job interview. The position would be a step forward for his career, but the end of our partnership.

Monday, November 30, 1998: Tom's interview went well, but he told me, "if I take the job, I'm going to wonder for the rest of my life about what this company could have become." We decided then and there to make the full-time commitment to our business.

Soaking wet with my bloody lip and heart pounding, I call Tom to make sure he hasn't changed his mind. I hang up the phone and walk to my boss's office.

I know it was the right thing to do--our latest products, Grippies hanging sponges, are now stocked in 75 HomePlace stores. Linens `N Things, Bed Bath & Beyond, and Lechters are all rolling out Grippies. Two magazines have even published articles on our products. But despite all this success, my partner and I recently decided to sell the business to a competitor.

It was a wild ride, no doubt, but one I'm sure neither of us will ever forget.


John R. Hendricks co-founded CounterCulture LLC in New York City.

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