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No Money? No Problem

Despite a lack of funding, this herb farm is flourishing.
April 26, 2001
URL: http://www.entrepreneur.com/article/39998

"If we weren't growing, it probably wouldn't be so hard," says Bill Varney, co-founder of the Fredericksburg Herb Farm, located deep in the Texas hill country. "We see a big future with herbs and herbal products, but for growth you need to have capital."

The Varneys have built an impressive and prosperous business with 30 employees and annual sales approaching $1 million. Despite their success, they've been turned down repeatedly for a $500,000 loan they need to expand their herbal farm and spa business. They've been trying for a more than a year to secure the money to expand, without success.

"I don't understand how the dotcoms raised the money," says Varney, with a grimace. "We have furniture, fixtures, equipment and inventory, and we're still having a very difficult time finding financing. It's been very discouraging. We have about three times the collateral needed for the loan."

Despite these difficulties, Varney is hopeful a lender will recognize the value of lending to a booming brick-and-mortar business in this picturesque town. The area where Fredericksburg is located is a verdant land of rolling hills and lush vegetation fed by slow-flowing creeks and rivers. The hill country has a strong German heritage; shops in downtown Fredericksburg have names like Friedlhelm's Bavarian Inn, the Antique Haus and the Dog Haus.

If you listen closely, you can hear German being spoken around the town, which is located within a two-hour drive of both Austin and San Antonio. Many couples dream of moving to the country and starting a business, but few do. Bill and Sylvia Varney met and married in Houston. Sylvia was a financial analyst for an oil and gas company, and Bill was a nurseryman. Shortly after they got married, they decided to relocate to Fredericksburg. Bill found work in a local nursery, but Sylvia was not so lucky.

"We put our heads together and thought about what Sylvia could do that the town didn't have, so we opened this little herb shop on Main Street," recalls Varney.

The Varneys started their business in 1985 with a $5,000 loan from Sylvia's grandmother. They named their shop Varney's Chemist Laden (Laden is German for shop) and began selling aromatic apothecary items from manufacturers like Crabtree & Evelyn and Caswell-Massey. The apothecary shop had a small courtyard behind it, where the Varneys began growing herbs to create their own herbal food and beauty products.

"We found people were mostly interested in the herbs, and more interested in anything we made from our own herbs," says Varney. "We found the products we made ourselves sold ten times better than other companies' products."

After about six months in business, Bill quit his job at the local nursery and devoted himself full time to the growing business. For the first five years, the Varneys reinvested all their profits back into the business. Neither one of them took a salary. Then in 1991, after six years of growing their business, the Varneys found they needed more space to manufacture their expanding line of herbal food and beauty products and to grow and harvest their herbs. They sold their home, obtained a SBA loan, and bought a fourteen-acre farm a few blocks from Main Street for about $125,000.

"It was like starting over again," says Varney of the move. "The money paid for the land and building the warehouse. But it didn't pay for the gardens, the other buildings, or any of the rest of it."

After 15 years, the Fredericksburg Herb Farm now includes the small manufacturing facility that supplies herbal products for the Varneys' shops, wholesale clients and mail order business; the herb gardens; a greenhouse and nursery; a day spa; a guest house; a restaurant and two shops-one that sells plants, books and candles, and another that sells gourmet foods and bath and body products.

The farm is a sweet-scented oasis of gardens between restored rustic farm buildings. It's a local landmark, with a brass plaque on the old limestone farmhouse and a brown historical marker sign in town, pointing the way to the herb farm.

In addition to being home to the Varneys' shops and businesses, the farm supports a family of rabbits and a flock of guinea hens. The family dog keeps visitors from wandering into their home.

It's easy to see how much Bill Varney loves his work as he moves around the farm, picking leaves from prized plants for a visitor to smell, answering questions about plants, checking in on the bottling station and the candle-making counter, and answering phone calls on his cell phone. Despite its remote location, the Fredericksburg Herb Farm has attracted attention in the press. Victoria magazine first wrote about their products in 1991, and since then, the farm has been featured in magazines like Country Living, Texas Monthly and on local TV shows.

It helps that the herb gardens, charming buildings and sumptuous grounds make a fabulous backdrop for photographs. Tourists arrive by the busload to stroll the gardens, eat lunch in the restaurant, relax in the day spa, and shop for herbal products.

If the effect on visitors is tranquil, the effect on the owners is anything but. Since they moved to the farm, Bill and Sylvia have been living in their business. Their home is in the same building as their manufacturing facility, steps away from the shops, spa and restaurant, which makes for a quick commute, but very little privacy.

Their commitment is constant and, at times, exhausting. Sylvia is currently taking an extended vacation away from the business. At the moment, it's up to Bill to oversee the business, house and the care of their 12 year-old son, Roy.

"It's so much fun to see people getting excited about herbs," says Varney. "It's really fulfilling, to feel like you're spreading some knowledge, getting people excited and bringing some peace into people's lives," he says, as he looks over one of his gardens. "We all need some peace."

The Fredericksburg Herb Farm is located at 402 Whitney Road, Fredericksburg, Texas 78624 and online at http://www.fredericksburgherbfarm.com. You can call them toll-free at (800) 259-HERB.

Reporting by Sarah Prior.


Jane Applegate is a syndicated columnist, author and founder of Small Business TV, global network for entrepreneurs.