On The Money

Proceed With Caution

Nick Yonano, 31, spent his money carefully when he launched Tea Body's Inc., a Turlock, California-based gourmet iced tea company, in 1995.

The former attorney financed his company through his savings and modest borrowing from friends and family. His vision? To develop iced teas and market them to specialty food stores throughout the United States. To achieve that end, he watched his pennies, meticulously planning each step.

The tough part, he says, was determining how much money he'd need. "The idea was to eliminate nonessential expenditures," Yonano says.

When he reviewed his estimated costs, he figured $60,000 should allow him a modest start. So he sold his Porsche 911 for $18,000 and tapped into his savings. Soon, he was in business.

Yonano's most significant costs were in product development. "About half the start-up money was apportioned to buying quality teas," he says. The rest of his costs were allocated to marketing, promoting and packaging.

It didn't take Yonano long to realize that his business would cost more than he imagined. Originally, he thought he could finance his company's art, graphics and logos for around $5,000. But once he began getting estimates starting at $25,000, he increased his own estimate to between $10,000 and $15,000. Fortunately, Yonano was able to find an artist who worked from home to create the graphics for his fledgling company. The job's final cost: $12,000.

And when it came time for market research, rather than paying rates of up to $10,000 for the help of an expert, Yonano did it himself for only $1,200.

Rent? That was easy: Yonano converted his garage into a blending facility. Later, he moved to a small, rent-free office in his parents' company until he could afford the $600 monthly rent payment for his first official office.

Even with such meticulous planning, $60,000 in start-up fees barely covered it. To keep the company afloat, he borrowed $20,000 from his parents.

Today, Yonano's cautious financial strategy is paying off. Last year, sales jumped 250 percent, from $50,000 to $175,000. This year, he's confident sales will reach the $300,000 mark.

Even though things are looking better, Yonano is still a cautious pragmatist when it comes to projecting his finances. To save the business money, he didn't take a salary until last year. "My salary ranges between 2 percent and 5 percent of sales," he says. "I plan on keeping it that way until we're well on our way."

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