URL: http://www.entrepreneur.com/magazine/businessstartupsmagazine/2000/may/26138.html

Baking up cosmetic formulations is nothing new for Kristin Penta. "I used to work on my own formulations all the time [as a kid]," says the 29-year-old. "I was always sending letters to Estée Lauder telling them about my newest formula." Today, she has creative control over and owns approximately 20 percent of Fun Cosmetics Inc., a $5 million Hillside, New Jersey, cosmetics company that sells mass merchandise cosmetics through a wide variety of retailers.

"I wrote to almost every cosmetic company when I graduated from college," adds Penta. "I wanted to work for a company that manufactured cosmetics and didn't just market them." She found her start in the cosmetics industry with pencil manufacturer Pentech International Inc., which private-labeled low-cost cosmetic pencils to a variety of companies. Penta had lots of new ideas for low-cost cosmetic products for teenage girls and started promoting her concepts within her division. When Pentech wanted to focus on writing instruments, Penta helped get her products bought out by investors in 1997, and together they started Fun Cosmetics Inc.

Penta's success points to two valuable lessons for inventor entrepreneurs: 1) There is more than one way for young, underfinanced inventors to make their fortune, and 2) Working for a small start-up is a world away from working for a big company.

Learning the Ropes

Penta was hired right out of college by Pentech because the company had started to sell
private-label cosmetic pencils and knew little about the industry. Pentech didn't want to invest in an experienced employee, and Penta was the perfect choice, a young woman with an artistic bent, a college degree and an understanding of the process of making cosmetics. Pentech provided Penta with a chemist and a molder (for packages), and she was able to create her own products. Before the line was bought, Penta had put 15 products on the market for Pentech and had sales up to $1.8 million for the four years that the line sold.

And Away We Go

Since being free of the constraints of a big company, Penta has gone to town with new products. She's introduced lip gloss with a mirror on the bottom and a line of temporary tattoos that come off with soap and water. She introduces new pencil products every season that fit the newest colors and trends. She's even introduced a Fortune 2000 product, which is lip gloss and a fortune in a miniature Chinese food container that sells for $2.99. What's really helped Penta in her new company is that she's constantly able to introduce new products into the market, which keeps her one step ahead of the competition. Penta defines her products as "cheap chic, cool but affordable."

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Don Debelak (dondebelak@uswest.net) is a new-business marketing consultant who has been introducing new products for more than 20 years. He is the author of Bringing Your Product to Market (John Wiley & Sons, $19.95, 800-225-5945).

Pentech provided many key benefits to Penta when she started out. One was that the company knew how to package inexpensive products so they would sell easily in the mass market. All Penta's products were sold in display cases that typically sat on store countertops. A second benefit was that Pentech devoted a portion of its trade booth at major mass-merchandising trade shows to Penta's cosmetics line.

Small inventor companies often can't afford the $20,000 to $30,000 total cost (including a display booth) of attending a trade show, nor can they afford to finance new products, build displays and call on enough retailers. Being under the Pentech umbrella offered credibility to Penta's line and helped encourage more buyers to stop by and talk to her. Pentech originally launched the product line with its established sales representatives, a network Penta could never have afforded to set up on her own.

One drawback to big companies is that they are slow to make decisions. As Penta says, "I developed the line because there was nothing for teenage girls that was both trendy and affordable. I wanted to come out quickly with new products for every season and every trend. Pentech's decision-making [process] made it difficult to move fast enough." Big companies can also tend to be too conservative: "I know Pentech never would've approved some of the products I've introduced at Fun Cosmetics because the products were just too radical."

Small companies, on the other hand, are not a panacea either. "The great thing about Pentech was that when you had a big task, such as sending out a mailing or sending samples to buyers, there were a lot of people to help," says Penta. "Once we left Pentech, there were just four of us to do everything."

There are other problems, too: "All promotional products are sold on guaranteed sales," says Penta, meaning Fun Cosmetics has to agree to take back any products that don't sell. "Until we came out with products for two or three seasons, people wouldn't pay us for several months until they knew how much product they'd actually sold."

Most inventors who decide to launch businesses find the initial start-up phase more than a little difficult. They don't always know all the pricing, packaging, and distribution tactics they need to penetrate a market, and they often don't have the funds for introducing a product through trade shows and individual sales calls. Unfortunately, many inventors can't overcome these hurdles and end up failing with their new ventures. Working with a large company hinders an inventor's independence, but it can also help in developing the buyer contacts they need to succeed on their own. Penta's strategy of going with a big company was shrewd for a 22-year-old who was fresh out of college.

She may not own all of her company now, but she has a major share, and she has what she wants most: creative control of a major cosmetic line.

I've been involved with new products for over 20 years, and I've repeatedly met people who believe a product needs to have a patent in order to be considered an invention. I've never agreed with that concept. What matters in the marketplace is whether you have a product that gives customers something they want and can't get elsewhere. That alone doesn't qualify a product for a patent. The U.S. Patent and Trademark Office requires a product to be "sufficiently different from what has been used or described before that it may be said to be nonobvious to a person having ordinary skill in the area of technology related to the invention." (For more information, visit www.uspto.gov.) Kristin Penta's cosmetics provide fun, excitement and a new look that's designed for teen-age girls. She hasn't been able to patent most of her products because they evolved from customer needs, not from the process of making cosmetics. I prefer to follow two of Webster'sdefinitions of the word invent: "to produce (something useful) for the first time through the use of imagination or ingenious thinking and experiment" and "to bring into existence or make known something new." Penta considered what her target customer group wanted and then figured out how to deliver a winning product. She decided that what counts with new products is to have a novel product that meets customer needs rather than a product that's nonobvious to a person skilled in the area of cosmetics. Granted, Penta would have more protection against competitors if she could have also received a patent for her cosmetic-making process. But in my eyes, not having a unique production process doesn't diminish her status as an inventor.

Contact Source

Fun Cosmetics Inc., (908) 289-9250, www.funcosmetics.com