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You may think it's nearly impossible to start a business without a lot of money, but think again--some of the biggest success stories have had extremely humble beginnings. Don't believe us? You will after you read the startup stories of the following four businesses. These entrepreneurs built successful ventures with less than $1,000 and are now calling the shots instead of working for someone else. So don't be afraid to cash in all your loose change--it's time to realize that money concerns don't have to hold you back and, yes, you can live your dream!
Startup costs: $970
Amanda Horan Kennedy, 45, was frustrated with the way her bra's back strap looked beneath a tight-fitting cashmere sweater. Even after scouring the finer department stores, she was unable to find a bra that did not accentuate the unsightly appearance of "back fat." On Valentine's Day in 2003, while her husband waited patiently for her to get dressed, inspiration suddenly struck Horan Kennedy: She cut the legs and crotch off of a pair of control-top pantyhose, slipped it over her head and onto her torso, and put on her cashmere sweater. "Hallelujah!" said Horan Kennedy, and the Sassybax prototype was born.
A psychotherapist at the time, Horan Kennedy had already drastically cut back her hours and patients to undergo two surgeries for brain aneurysms. She developed the prototype during her year of recovery, feeling certain she could help women in other ways outside of therapy.
Every step of the way, she cut expenditures to little or nothing. Her husband, Bruce, 54, a former lawyer who had started a business with three partners, drew up a nondisclosure agreement for manufacturers. Meanwhile, Horan Kennedy used frequent-flier miles on airline tickets; stayed with her sister, who lived near the factories under consideration; and got the factory she selected to do R&D for free.
Bruce and his partners decided to close their company, and he became Sassybax's CFO, suggesting they sell their home to cut out the expenses of a mortgage and property taxes. They also auctioned off their 1,500 collectible bottles of wine. "Every dime we cut back, every penny we saved went toward the business, which is still true," says Horan Kennedy. Renting a home in Marina Del Rey, California, near the Los Angeles airport, was beneficial to Horan Kennedy, who travels frequently to different retail locations and her three factories for business. She also sold her car--a courageous move in Los Angeles.
After designing the final prototype--a bra that has no seams or hardware, and provides support through microfiber nylon and spandex--Horan Kennedy attended an apparel trade show. She rented showroom space from a ready-to-wear apparel rep for the LA Mart, a trade show venue, where she rang up $2,800 in orders from specialty boutiques. The business soon took over the couple's lives. "It owns you. You live it, breathe it, eat it, sleep it," says Horan Kennedy. "You wake up in the middle of the night and think about [it]. I couldn't stop. It owned me." The garage became (and still is) their warehouse, and to fulfill that first order from the LA Mart, they enlisted the help of friends, offering free Sassybax bras in return--something they continue to do today.
One lingerie rep was lukewarm about Sassybax until she tried it on and found that the bra really was comfortable, supportive and flattering. With the rep onboard, Sassybax reached additional stores and landed in Neiman Marcus in March 2004, prompting Horan Kennedy to focus on Sassybax full time.
Horan Kennedy, who still works from a home office, estimates 2004 sales at $750,000. She is developing strapless, augmentation, and racerback bras to extend the line beyond the six versions currently available in stores and on the website www.sassybax.com.
Search Engine Marketing
Startup costs: $425
Following a stint for a web development company run into the ground by its founders, Chris Winfield swore he'd never do anything involving the internet again. But he couldn't help himself after being hired by a recording studio to handle business development. He saw their need for a website and soon became well-versed in search engine optimization (SEO). Winfield, 28, was so successful in getting the site to the top of search engines that the company had to remove the studio's phone number from the site to stop the flood of calls.
Winfield, who was ready for a change, had kept in touch with a former co-worker, Danielle Lanzillo, 28, the former head of production for the web development company. In 2002, Lanzillo and Winfield decided to leave their jobs and go into business together, co-founding search engine marketing and web development firm 10e20 LLC in New York City. With just $425, the partners paid someone to handle the LLC filing, and inked an agreement with a hosting company to host their website and their clients' for a low rate.
Working from home, Winfield already had high-speed internet access and unlimited phone minutes on his landline. "We now have clients in every state and six countries around the world, and [we've] only met about five to 10 of our 350 clients face to face," says Winfield. "Because of the nature of the business, there's no need to have a lavish office." Their first client was a referral from the recording studio, but 10e20's specialization in SEO helped their site, www.10e20.com, attract so much business that they never did any cold calling.
The co-founders cut costs by doing as much work as possible themselves. They hired freelancers, communicating with some solely through IM. And by providing their services as bartering chips, Lanzillo and Winfield received a server from a web host company in exchange for a complete redesign of the company's website. They were able to strike up similar deals for accounting and legal services. Rather than hire a secretary for $28,000 a year, they used an answering service instead. Winfield even wrote their script, ensuring 10e20 would sound professional. Even though the partners added two employees five months into business, Winfield's apartment accommodated them with the help of inexpensive dividers purchased on eBay, and a refurbished small-business phone system to help with the busy phone lines.
Six months into business, Winfield found an office in New York through Craigslist, an online community. "I worked an unreal deal on rent by dealing directly with the owner of our building--rather than a broker--saving us a lot in fees," he says. Scouring the internet for local deals, Winfield also found a company that was closing its doors and got a bargain on desks, chairs and other office items.
10e20 has found success by targeting small to midsize businesses and extending beyond web development into open-source programming. A second location opened in downtown West Palm Beach, Florida, this past September. The company, with 2005 sales projected to reach $6 million, is also looking to expand to the West Coast.
IP Intelligence Tech & Home Entertainment Installation
Digital Envoy Inc.
Startup costs: $100
Believe it or not, IP intelligence technology provider Digital Envoy Inc. was spawned from two serious sweet-tooths. Sanjay Parekh, 31, started buying candy from Costco and reselling it to his telecom co-workers when he struck up a friendship with Rob Friedman, 38, general counsel at the company and an Atomic Fireball enthusiast. Soon, their friendship moved beyond candy cravings, and they were bouncing around business ideas.
Parekh made an interesting discovery when visiting the FedEx and Ikea websites in 1999: both prompted him to enter what country he was in. "I thought that was kind of stupid," he recalls, and the extra step slowed down his home dial-up session. "So I architected a solution to that problem using IP addresses." Friedman agreed that the technology--which provides general information about an online user, such as the city, local demographics and type of internet connection being used, based only on the IP address--would help businesses. They launched Digital Envoy Inc. in 1999, bringing along senior finance manager and co-worker Dennis Maicon, 40.
Filing fees for corporate documents cost $100, and Friedman drew up all the legal drafts. An article on the Red Herring website about their business led to their very first client, Advertising.com (now owned by AOL). Since they worked from their homes, Friedman quips, "I negotiated that deal in my bedroom." They also hired an intern and Friedman's cousin to do programming work in the beginning.
After moving into an office in 2000, they hired three more employees. Friedman found $10 chairs, and opted for modular desk setups rather than expensive cubicles. In their newest office, they have cubicles, bought inexpensively from the office's previous tenant. When it comes to traveling to trade shows and to see customers, they've also found ways to save their Norcross, Georgia, company money, using slightly out-of-the-way but much cheaper flight options.
Digital Envoy now works with many major ad networks and sites, and projects 2004 sales at less than $10 million. The company's latest product, IP Inspector Fraud Analyst, allows companies to fight identity fraud by verifying user identity in real time. They are also combating fraud with a product that analyzes whether an e-mail is really a phishing attack. Digital Envoy continues to grow, but in many ways remains the same. Says Parekh, "One of the philosophies we've always had is to do more with less people."
Startup costs: $350
Brooks Swift, a self-proclaimed car audiophile in his younger days, parlayed his electronics savvy into a business of his own in 2001 with Home Connections, a Topeka, Kansas, company that services, sells and installs home entertainment equipment.
Recognizing that no professional home audiovideo installers existed in his town, Swift launched his company with just $350--which paid for his home theater installation certification through the Custom Electronic Design & Installation Association, a global trade association. He already possessed the tools needed to hook up the VCR, DVD player, TV and speakers on his first job. Swift worked from home to handle business matters and phone calls, so he had no overhead costs. And since he didn't have to invest in inventory, he was able to use his clients' deposits to buy the products they needed.
As luck would have it, one of Swift's neighbors worked for The Topeka Capital-Journal and pulled some strings to get a front-page article about Home Connections published. The exposure led to new business, which Swift needed to fund his move into the new-construction market. "People were building housing and wanted to have home theaters and the whole-house audio system, with speakers installed all around the house," explains Swift. He bought tools and a vehicle, hired an employee and began approaching builders, winning over many who were dissatisfied with their past installers. Home Connections soon positioned itself as a specialist in the burgeoning field.
There was one competitor, Aaron Koker, with whom Swift had established a friendly business relationship. "It just made sense to combine our forces," says Swift. The businesses merged on New Year's Day in 2003, and the pair put some of their profits, combined with a $70,000 bank loan, toward opening a retail store, Home Audio Connections. Although they still specialize in outfitting new homes, the retail location sells an array of home theater options and gadgetry and provides turnkey installations for any home.
But Swift, 25, is not one to rest on his laurels. In 2004, he started alarm company Security Connection, and continues his lean operational approach by having his wife, Kelli, run the business from their home. Also focusing on new construction, Security Connection pre-wires new homes so security systems can be readily installed at the request of homeowners. With 2004 sales for all three businesses projected at $1 million and plans to expand to another city nearby, Swift continues to keep costs minimal: "You have to stay lean; it's a very competitive industry."