So You Wanna Be A Millionaire?
Unlike some Internet entrepreneurs who adopt cautious, "wait-and-see" attitudes, John Shriber didn't think twice about whether Netizens wanted his product when he launched Apartment Source in 1995. Shriber, whose New York City-based company e-mails customers lists of available apartments for a fee, was confident the Big Apple was hungry for his service. So when his online apartment referral business pulled in $3,000 the first day, "I wasn't shocked," remembers Shriber, 26. "I knew it was going to work-just not quite that well."
With three new locations (in San Francisco, Miami and Seattle) and sales of $2.3 million last year, Schriber has a right to be confident. While Internet commerce is an unpredictable industry that changes by the day, all indications suggest it will continue to thrive: According to International Data Corp., a market-research firm, worldwide Internet commerce is expected to grow from $32.6 billion in 1998 to $134.3 billion by 2000.
While books, music and software are still the most popular products on the Web, Shriber's success proves other ideas can work-especially if you target your niche. Shriber got the idea for Apartment Source while working in real estate. Relatively low overhead enabled him to start with just $19,000, borrowed from his father. A niche market, excellent customer service and a keen sense of the online community enabled him to succeed.
By freelance writer Pamela Rohland and staff writers G. David Doran, Heather Page, Debra Phillips, Elaine W. Teague and Laura Tiffany.
2. Record Label
Ani DiFranco, 28-year-old CEO of Righteous Babe Records, wasn't about to wait patiently for a break in the competitive music industry. So in 1990, at age 20, she borrowed several hundred dollars from friends to cover incorporation and studio costs and produced her own self-titled debut album, selling it from her hand-painted car while blazing a path through college campuses and seedy dives.
Today, her 10 releases have sold a combined 799,000 copies at retail music stores, according to Billboard magazine. Sales through women's bookstores, concerts and Righteous Babe's mail order division have pushed the total to 1.2 million.
"Nobody ever said the indie record business was easy," says Chris Morris, a senior writer at Billboard magazine in Los Angeles, who notes that DiFranco is an exception to most rules. "[But] there's always room to succeed, provided [you] don't let love outweigh pragmatism. Money helps, as does good talent. Tenacity is essential."
Today, Righteous Babe Records employs a road crew of 10 and an office staff of 15 in Buffalo, New York, and works with booking agents worldwide. A spokesperson for the company reluctantly admits the business earns more than $1 million annually. That hesitation is because DiFranco, once perceived as a guerrilla warrior in her fight against the traditional music industry, is finding success has given her a seat at the establishment's table. That's what happens when you couple talent with exuberant entrepreneurship.
3. Specialized Staffing
When you graduate from college-student loan bills in hand-temping as a file clerk may not be your career of choice. Rachel Schall and Scott Thomas turned their bad post-grad temping experiences into a niche-oriented staffing company that helps grads get a foot in the door at hot companies.
BrainTrust LLC places college grads in temporary and permanent positions ranging from entry-level to vice president, about half of them in tech firms. By focusing on the "associates' " (never call them "temps") career goals rather than simply filling a position with a warm body, Schall, 27, and Thomas, 29, help everyone win. "We're providing a much better service to our clients," says Schall. "They get [staffers] who are excited about what they do, anxious to prove themselves, and who think the industry is interesting."
Schall and Thomas are plugging into a hot new industry. "The fastest growth [in staffing services] is in the professional sector," says Steve Berchem of the National Association for Temporary and Staffing Services. Berchem cites health, law, marketing, graphic art, high-tech, engineering and science staffing as specific growth areas. Often, former professionals use their industry contacts to start staffing companies of their own.
For some, temping experience alone is enough to know what's lacking in the industry. "We saw a need for sharp, dynamic, short-term employees-project-type folk who can hit the ground running," says Schall. BrainTrust's 1998 sales are estimated at $4 million, and the partners plan to open offices in Silicon Valley and Los Angeles.
4. Niche Greeting Cards
Forget faxes. Move over, e-mail. Niche greetings cards are the hottest way to send a personal message, whether it's condolences on the death of a pet, congratulations on a much-needed divorce or consolation after a bad haircut.
There are about 1,800 greeting card publishers in the United States, and nearly 7 billion cards were purchased in 1998, according to the Greeting Card Association.
Greg Zedlar, 32, is grabbing a piece of that market with Conceptual Thinking Inc., a Burbank, California, company whose business-to-business greeting cards bear messages such as "Let's Do Business In the Near Future" and "Ask What We Can Do For You." Zedlar estimates 1998 sales at $1 million, 40 percent of that pure profit.
He got the idea while working as a financial advisor for American Express. "[In] marketing to affluent customers, we found the more personal the message, the better the response," he explains. A line of cards he created for American Express financial advisors to send to clients generated
5. Upscale Sandwich Restaurant
Fast food by any other name-in this case, upscale quick service-is just as speedy. But that's where the similarities end, say brothers Jay and Shep Wainwright, founders of Cosi Sandwich Bar in New York City. The centerpiece of their concept is a healthy, European-inspired flatbread, based on a special recipe the pair first feasted on at a Paris restaurant.
According to the National Restaurant Association, more than 65 percent of restaurant customers say menu items at their favorite eateries provide flavors and tastes unlike any they can prepare at home. Catering to those cravings, Cosi's eclectic sandwiches run the gamut, from tandoori chicken to Norwegian smoked salmon. Since Cosi opened in 1996, the restaurant has captivated the affluent lunch crowd in Manhattan's bustling financial district.
"Our [sandwich] bread is out of the oven and onto your plate in 30 seconds," says Jay, 27. But superior sandwiches aren't enough: "We back [them] up with a beautiful restaurant and a pleasant atmosphere," he says. "People tell us '[This is] the nicest place I've ever bought a sandwich.' "
Research firm FIND/SVP reports hectic schedules prevent 34 percent of consumers from cooking meals. That home-meal replacement trend keeps upscale sandwich restaurants like Cosi's busy well into the dinner hour.
Determined not to let their youth hinder their aggressive expansion vision, "We've had to be extra-professional with everything we do," says Shep, 25. Family and friends helped supply start-up cash; now, annual sales of $1 million-plus at each of 11 locations have enticed private investors. Says Jay, "Our goal is to open locations all over the country."
6. Computer Training
You could say John Watson, owner of Columbus Research Inc., fell into the computer training business. His company, started in 1995, was initially created to build customized database applications for businesses. But in 1997, Watson changed his focus to computer training and software development after noticing clients were demanding training software and online learning products.
Now, Columbus Research sells a computer program, On-Demand Testing, that lets schools create standardized tests according to students' language and cultural needs. The company also has a Web site (www.eduseek.com) where teachers and students can find educational materials and courses. Watson plans to expand into online tutoring this year. With 1998 sales estimated at $1.1 million, the change of course seems to be a change for the better. "There's an incredible need for [computer] training products, especially at high school and elementary levels," marvels Watson, 34.
Computer training now encompasses using the Internet or multimedia CD-ROMs to learn about any subject. "Increased bandwidth is allowing more training to occur through the Internet, intranets and teleconferencing," says Sharon Marsh Roberts, chair of the Independent Computer Consultants Association. "The industry is getting more diverse."
According to market-research firm International Data Corp., technology-based training is experiencing exceptional growth, with annual revenues expected to climb from $1.9 billion in 1998 to $7.6 billion in 2002. The fastest-growing market segment? E-learning (Internet/intranet-based training)-which should blossom from $202 million in 1998 to $3.8 billion in 2002.
7. Clothing Design
The worst part of pregnancy isn't the morning sickness. No, for fashion-conscious women, it's those awful maternity clothes.
When they were pregnant, fashion executives Jody Kozlow Gardner, 33, and Cherie Serota, 34, loathed the dearth of chic, affordable maternity garb. "Too bad you can't buy everything you need in one box," Gardner wished. Suddenly, a light bulb went on, and the mothers-to-be turned gripes into profits.
Investing $25,000 each, the pair launched Belly Basics in 1994. Their first product was The Pregnancy Survival Kit, made up of four easy black pieces (leggings, tunic, dress and slim skirt) of cotton and Lycra.
They convinced Bloomingdale's on 59th Street-which had never carried maternity clothes before-to test the kits on Labor Day weekend (pun intended). The kits sold out in three days; Belly Basics now sells through Bloomingdale's, Lord & Taylor, Nordstrom and via mail order.
U.S. retail sales of apparel reached $170 billion in 1997 and remained healthy in 1998, says Jack Morgan of the American Apparel Manufacturers Association. What does it take to succeed? "The public is hungry for new ideas, new designs," he says.
Today, Gardner and Serota each have two children. The business is equally fertile, with 1998 estimated sales of $4 million. Success has spawned imitators, but Belly Basics remains a trendsetter; new lines include fashion-forward diaper bags. Says Gardner, "We see ourselves as the Gap of the maternity world."
8. Webzines/Online Communities
They're not quite Webzines. Not exactly online communities, either. So what do you call Web sites that seamlessly blend original content and interactivity? If you're talking about "Girls On Network" or Bolt.com, try mass-targeted media properties.
"We launched the company to develop media properties that would focus on youths, using the Internet as a primary vehicle for reaching them," says Dan Pelson, 32, founder of Concrete Media Inc. in New York City, the new media company that owns "Girls On," an entertainment site targeting women aged 18 to 24, and Bolt, a community for teens in college. "Girls On" boasts about 2.7 million page hits a month, and Bolt has more than 200,000 registered users, with about 2,000 more registering every day.
Pelson attributes his success to both sites' extensive use of the online community. Concrete Media, which estimates 1998 sales at $5 million plus, plans to release a line of Bolt brand products, and "Girls On" has book and cable television deals.
What's behind the success of Webzines/online communities? Steve Silberman, senior culture writer at Wired News (Wired magazine's online news service) says it's the mass-targeting. "What keeps these publications successful is a practical mind-set about matching up advertisers and readers," says Silberman. "One of the great things about the Web is that you can market directly." Which means successful sites set up programs with online book or music retailers when they do a review or sponsor online events, extending advertising dollars beyond the ubiquitous banner.
9. Juice Bars
Eric Strauss didn't just run a lemonade stand as a kid-he actually sold stock in it. "I always enjoyed business," says the now 27-year-old founder of St. Paul, Minnesota-based Crazy Carrot Juice Bar Inc. "Growing up, I did everything from lawn mowing to delivering newspapers."
That busy beginning has ripened into a thriving juice-bar company. What prompted Strauss to set his sights on the $500 million-plus U.S. smoothie market? "To me," says the avowed vegetarian, "juice seemed to be-and still is-the next major food trend."
Strauss' optimism is well-founded. Health-conscious consumers have an ever-increasing appetite for vitamin-enriched juices. "Let's face it: Baby boomers are aging and they want the fountain of youth," observes Dan Titus of Juice Gallery, a Chino Hills, California, publishing and consulting firm specializing in juice bars. "There's going to be steady [industry] growth."
That's good news for Strauss, who launched Crazy Carrot in December 1996. Projecting sales in excess of $1 million this year, Strauss now counts friends Liem Nguyen, 25, and Tony Barranco, 24, as partners. Coincidentally, Crazy Carrot has also grown to three locations-all in Minnesota. Adds Strauss, "We're very interested in expanding."
Crazy Carrot isn't content just to expand geographically, though. As if juices, healthy snacks and smoothies created from freshly squeezed orange juice weren't enough of a draw, Strauss notes the newest Crazy Carrot offers free Internet access. "To my knowledge," he says, "this is the first juice bar [to do so]." Fresh ideas-and ingredients-are what this industry is all about.
10. Web Site Development
When Tom Feegel, 31, and Richard Mintz, 33, began targeting clients for their Arlington, Virginia, Web site design and Internet consulting business, NetResponse, in 1994, they aimed high. They started with a wish list of their top 10-America Online, MCI and Microsoft among them-and didn't quit until they got the business. "We drove out to [America Online] and basically camped out until someone there listened to what we had to say," remembers Mintz.
Since then, NetResponse has garnered lots of big-name clients. The company, which develops targeted, end-to-end Web marketing solutions, has opened offices in New York and San Francisco, with $7 million in sales last year.
According to research firm Gartner Group, sales for the Web design industry as a whole exceeded $700 million last year. But it's no longer enough to simply design Web sites or provide clients with graphics and content. Like NetResponse, successful companies offer value-added services such as assistance with advertising, e-commerce or direct marketing.
Feegel and Mintz formerly worked for a large direct-mail marketing agency, where they became convinced the Web could be used to build effective, immediate direct-marketing programs. "We saw the Net as a way of leveraging our technical and direct marketing expertise," says Feegel. "Businesses have recognized that value."
11. Restaurant Delivery
Since opening their business in 1993, the owners of Restaurants on the Run have turned an initial $10,000 investment into a $6 million business. How have brothers Anthony and Michael Caito, ages 27 and 30, and friend and partner Matthew Martha, 27, done it?
Location is important, but so are the eating habits of Americans, who have less time than ever to prepare meals or go to restaurants. Fifty-one percent of all food prepared in restaurants today is eaten off-premises, according to the National Restaurant Association, contributing to the need for restaurant delivery services.
Experience isn't necessary, but potential restaurant-delivery entrepreneurs must understand two points: First, locate in an area with at least 250,000 people within a 20-minute drive, says Bruce Brown of the Restaurant Delivery Services Association.
Second, the industry is less about delivery than marketing. "Keeping food hot, getting the order complete and delivering on time are still our [top] priorities," Michael says. "But we [also] work with the restaurant to market that restaurant to customers."
Restaurants reach more people, and the delivery service savors 30 percent commission per sale. "Because this is a relatively new industry, restaurant owners [don't always] understand it," Michael explains. "But as more delivery services [start], they understand it better."
Bonus: Personal Concierge Service
As students at Stanford Business School, Kathy Sherbrooke, 30, and Janet Kraus, 32, experienced the concept of "time starvation" firsthand. "There are never enough hours in the day," their friends would gripe, adding that they were so busy with school, work and family, they'd gladly pay someone to do their errands for them.
Intrigued, the duo conducted market research and found a real opportunity. "We talked to a lot of our target markets from an end-user standpoint and tried to figure out what would make their lives easier," says Sherbrooke, who worked as a marketer of business books before opening Circles, a corporate convenience and concierge company in Boston, with Kraus in 1997. "What we kept hearing was 'I wish someone could take care of my to-do list for me.' "
So Kraus and Sherbrooke investigated their idea-a service business that offers corporate customers not only on-site convenience services such as dry cleaning and grocery shopping, but also a hotline that assists in finding service providers, such as day care.
After an initial three-month trial period to test the concept of the hotline, which also serves the general public, Circles won its first corporate customer in late 1997. Today, the business oversees seven accounts, including a division of GTE, and the partners plan to expand their concierge services to corporate customers nationwide later this year.
While no one is quite sure how many concierge services operate in the United States, a study released last year by the Families and Work Institute revealed that American workers are more pressed for time than ever before, with the average worker spending 44 hours per week on the job. Some 78 percent of married employees have spouses who are also employed, leaving no other shoulders to bear the myriad responsibilities of everyday life. For service-minded entrepreneurs, the time crunch may offer some interesting opportunities.
Bonus: Herbal Pharmacy
After several years working as a pharmacist in traditional settings, Ron Stock, 33, wanted to go in another direction. In an effort to tap into the huge and growing public interest in natural remedies, in 1997 he opened The Herbal Path, a pharmacy that sells natural healing products-vitamins, herbs, minerals and homeopathic treatments. Stock expects sales of $400,000 for the first full year his Dover, New Hampshire, business has been in operation.
What differentiates Stock's business from traditional health-food stores is that he's a trained pharmacist who helps customers understand alternative healing methods. "Pharmacists have always been counselors, helping people choose over-the-counter medications," Stock says. "Now there's a whole world of nutritional supplements people need advice about."
Stock used $10,000 of his own money, borrowed $40,000 from his family, and got a $60,000 bank loan after submitting a business plan created using a Jian software template. ("My banker said it was the best plan he'd seen in years," Stock notes.) The capital paid for retail space, inventory, equipment and advertising. (One of his most successful strategies? Buying radio time to air a minute-long advice segment.)
Lewis Harrison, director of the Academy of Natural Healing in New York City, says interest in the $30 billion natural healing industry won't wane anytime soon: More than 75 percent of Americans have used alternative therapies and would do so again.
Ultimately, Stock wants his business to become an integrated health center, with a medical doctor, natural healer and massage therapist available to customers on-site.
Academy of Natural Healing, (212) 724-8782, email@example.com
American Apparel Manufacturers Association, 2500 Wilson Blvd., #301, Arlington, VA 22201, jmorgan@americanapparel
Apartment Source, (212) 343-8155, www.apartmentsource.com
Belly Basics, www.nystyle.com/bellyb
BrainTrust LLC, 123 Townsend St., #620, San Francisco, CA 94107, firstname.lastname@example.org
Columbus Research Inc., (619) 454-0171
Conceptual Thinking Inc., (800) 501-0116
Concrete Media Inc., (888) 466-4973
Crazy Carrot Juice Bar Inc., (651) 695-0080, email@example.com
The Herbal Path, (603) 740-8400, www.herbalpath.com
Juice Gallery, 2042 Big Oak Ave., Chino Hills, CA 91709, www.juicegallery.com
NetResponse, (703) 276-3300, www.netresponse.com
Restaurants on the Run, 22642 Lambert, #404, Lake Forest, CA 92630, (949) 951-2500