The Real Deal
A Note From The Editor
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Admit it--you're curious. Like the irresistible urge to gawk at tabloid TV or read a gossipy celebrity story in People magazine, you can't get enough intimate details of what other people have gone through. As an entrepreneur, you've wondered, What would it be like to expand internationally or surpass your competition? You've dreamed about fighting back against government regulation or seeing your product appear on the Today show. And though you have no desire to experience it, you want to know how an entrepreneur survived an embezzlement scandal that cost him over $250,000. You even want to learn the heartbreaking details of the small-business owner who failed, but then dusted himself off and built another business.
Face it, you want to hear how other entrepreneurs have weathered storms, overcome obstacles or surpassed all expectations to catapult their businesses to the next level. Read on to share some once-in-a-lifetime experiences.
What It's Really Like to... Get a
Product Into Target
"You can't get a better feeling than when you get your first customer," says Joe Heron, 43, CEO of the Minneapolis-based Ardea Beverage Co., which manufactures airforce NutriSoda, a healthy soda pop packed with amino acids and B vitamins and lacking the usual ingredients like sugar, aspartame, sodium and caffeine. In Heron's case, the feeling he had after landing his first customer was pure euphoria-because his first client was Target.
Heron had his eye on Target early on. He found a qualified and well-connected food broker, FMN Moscoe, which started negotiations with Target in May 2003, just months after Heron started his business. In April 2004, Target agreed to a slow roll-out, selling the sodas in 100 stores around the country. Today, they're in 365 stores and counting.
During negotiations, Heron attended meetings, filled out countless forms, found and bought product insurance, and built an infrastructure so that if Target said yes, Ardea could accommodate the retail giant. "To get into that scale of a company, the elation is so high because it means you can conquer anything," says Heron, whose sodas are also sold in specialty stores and 21 airports and are expected to capture over $3 million in sales in 2005. "There's nothing more exciting than watching somebody go to a shelf and buy your product."
So Heron really went into stores and waited around to see a customer pick up his soda? "I still do."--Geoff Williams
... Lose a Business
When a business partner dies, it can be as devastating as losing a family member. It's doubly painful when your partner is a family member.
Kirsten Judd was 33 when her husband, Dr. Richard Irons, died in 2002 at age 52. On Valentine's Day of 2000, they had founded their for-profit professional association, Professional Renewal Center, which offers behavioral health services and consultations for professionals trying to conquer work-related challenges such as career burnout, substance abuse and sexual misconduct. They also created PRC Management Co. LLC, which provided the management and operations to the clinic. Irons worked on all things medical, while Judd took care of management.
When Irons died unexpectedly, Judd had little time to grieve. She had two young sons and 10 employees depending on her. But burying herself in her work was difficult because, as Judd recalls, "There was a definite void in the organization, and in looking back at the stages of what an organization goes through in response to a disaster or a major trauma like a death, it's very similar to the stages of grief that a person goes through."
Still, Judd did lose herself in her work, trying to keep things together and finding a new clinical director, Dr. Scott Stacy, to replace her husband. "I had a job to do, and what that did was prolong my reaction or grief, while I quote-unquote 'crashed,'" says Judd. "It was probably a year after he passed away before I realized I also needed to start taking care of myself."
Judd's company lost revenue for a while, but in 2005 it's projected to bring in $1.25 million, the same level reached the year Irons died. "We're at a stage now of an acceptance of change and a realization that a fusion has taken place," says Judd. "I use the term 'fusion' for a reason. If a fracture heals properly, that point of fusion is even stronger than the rest of the bone."--G.W.
What It's Really Like to
Scott Hildula knew his business was in trouble when his wife suggested, "You might want to rethink what you're doing for a living."
For the previous eight years, Hildula, now 43, had made a living doing what he loved: building homes. He'd started San Francisco-based Rose & Daisy Renovating Co. with just himself and his station wagon, eventually growing to 12 employees. Then in 1999, he bid too low on an old Victorian home in San Francisco and became ensnared in a money pit. Before he knew it, he had to lay off his entire work force and struggled for months afterward to finish renovating the house by himself-knowing that every day he was losing money. That project marked the end of Rose & Daisy Renovating Co.
Hildula took his wife's advice and landed a PR gig during the dotcom boom in 1999. He enjoyed the work but hated being employed by somebody else. "I really lost my edge," says Hildula. "I felt like a neutered house cat in the corporate environment."
Three years later, he opened his own PR boutique, Red Umbrella Group. The San Francisco company now has three full-time employees, five subcontractors and projections nearing $800,000 for 2005. Today, Hildula doesn't mind looking back. "I learned a lot," he says. "Once I [finished that house], I was really proud of myself that I sucked it up and pulled through. The experience I gained back then is tremendously helpful now."--G.W.
... Spin Off Your Company
You'd think Tori Swaim would have been thrilled that her success allowed her to spin off a company from her baby products business, New Arrivals Inc. You'd be wrong.
"It was very scary. Just because we were successful with an upscale product line in upscale boutiques, we weren't sure how we were going to do in a mass market," says Swaim, 44. "So there was excitement, but also a lot of caution."
While Atlantic Beach, Florida-based New Arrivals Inc. caters to the high-end market, Swaim's spinoff, My Baby Sam Inc., sells its baby products in Babies "R" Us, J.C. Penney and other mass-market retailers. Swaim's experience with infant products helped her get noticed by the retail giants, but My Baby Sam still had to be aggressive and creative to get buyers to look its way. "The buyers are pummeled with calls from people wanting to get into these stores," says Swaim. The effort paid off: My Baby Sam's 2005 sales are expected to hit $1.5 million.
"It was a huge learning process," says Swaim, who notes that she let one large retailer offer too much input on how several products should be designed. They didn't sell well, so from now on, says Swaim, "We have to love it to go into production with it."--G.W.
... Open a Second Location
Ike Rodriguez and Ingrid deGranier, 31 and 38, respectively, were in for the ride of their lives when they made the spontaneous decision to grace New York City with a second Find Outlet store. Their first boutique opened in 1999 in Chelsea and featured quality outlet merchandise. It had been open a year when a friend closed her store in Nolita and offered them the lease. They jumped at the opportunity.
Little did they know of the growing pains to come. The challenge of operating two locations and having to rely on others hit home when employees would fail to show up to open one of the stores. Technology posed another challenge. Rodriguez and deGranier operated their first store using a computer equipped with basic software. For the second store, they incorporated a multi-unit point-of-sale program and invested in more sophisticated technology and software. "Once we opened the second location, we decided to restructure the company to run as a real business, rather than a mom-and-pop shop," says Rodriguez.
It was by embracing these challenges that Rodriguez and deGranier achieved growth. In March 2005, they celebrated the opening of their third store, and months later opened a fourth, in Culver City, California. This year's sales are expected to be $1.2 million. "The second [store] happened so fast that it was almost like taking a Band-Aid off fast," reflects deGranier. "We didn't even notice the pain."--Sara Wilson
... Expand Internationally
In March 2004, Rich Mak, 33, and his wife boarded a plane to Hong Kong with no return tickets. Mak was setting out to open Crown Marketing Group's first international office. He wasn't certain what the future held, but he was sure of one thing: The time it took his Chattanooga, Tennessee-based design and marketing company to develop a product could be cut by three times if Mak was closer to Chinese manufacturers.
Due to visa restrictions, Hong Kong was the closest Mak could get to China, and while he and his wife adjusted to living abroad, co-founder Phil Sieg, 38, had his own adjustments to make back in Tennessee. Says Sieg, "Without Rich and our natural competitiveness in the office, I found that unless I made prioritized lists, nothing got done."
The partners quickly learned the importance of finding a good accountant and asking lots of questions. By doing so, they have absorbed the ins and outs of establishing an overseas business, and project 2005 sales of $2.5 million. Their most important lesson has been in mastering the art of patience. Says Sieg, "Ultimately, this sort of expansion has to be viewed as a growth of infrastructure to lend long-term stability and value, not short-term profits."--S.W.
What It's Really Like to. . .
... Surpass Your
When the SARS epidemic hit in early 2003, Jeremy Shepherd, founder of online pearl retailer PearlParadise.com, was suddenly inundated with e-mails, faxes and phone calls from Asian pearl farmers offering great prices on shipped pearls. Shepherd, who traveled to Asia monthly to purchase pearls, suspected--correctly--that the prices were due to the SARS scare and travel-reluctant pearl buyers. SARS did give Shepherd pause, but ultimately, he decided the deep discounts were worth the risk: "It was a chance I couldn't pass up."
Shepherd, 31, speaks Mandarin and knew pearl farmers from his buying trips, so he felt completely comfortable venturing into southern China, where SARS had hit hardest. "There was no competition at that point," Shepherd recounts. "Not only did I get great prices, but I was able to secure future harvests as well." PearlParadise.com could now offer pearls at prices far below its competitors'.
Shepherd returned to southern China on a regular basis and saw no competitors there until the following fall. Because he developed deeper relationships and negotiated well with the farmers during that time, Shepherd maintains he still pays "astronomically different" prices than his competitors. With no advertising, PearlParadise.com experienced a 1,000 percent increase in sales for 2004 and projects 2005 sales of over $7 million.--April Y. Pennington
... Get on the Today
Andy Schamisso, founder of Inko's White Iced Tea, sent cases of tea to various shows and newspapers in the New York City area in the spring of 2003 to attract attention to his product. But he was in for a surprise when, with no prior notification, the Today show aired a segment in August 2003 on white tea. Lo and behold, the Inko's bottle was among the white tea products displayed while their health benefits were touted on-air. Instantly, phone calls from around the country flooded Inko's lines, and e-mails poured in for a week inquiring about the tea, all saying they had seen the Today show segment. Schamisso, 42, was stunned. "We got a tremendous response without our name being mentioned!" he says.
Offering the ready-to-drink white tea since February 2003, when there were few competitors, Schamisso projects 2005 sales of $2.5 million and now faces heavy competition. If he hadn't taken the marketing gamble and sent his product to the Today show, his business might never have taken off. He credits the show with creating a broader awareness of his New York City-based company. "It helped our expansion and paved the way to where we are today."--A.P.
... Get Embezzled
Jay Myers was reading an article about embezzlement in April 2003 when his antennae went up. He wondered, Could an employee do that to my company? He looked into the payroll records of Interactive Solutions Inc., the Memphis-based videoconferencing/audiovisual systems integration company he founded in 1996, to investigate his gut feeling. "I thought about the fact that we might have a weakness," recalls Myers, 48. He was chilled to the bone when he saw what he'd feared: His trusted accounting manager had been paying herself unauthorized commissions, almost since the day she started.
Outraged, Myers called the police and a friend who was a fraud investigator. They discovered the employee had embezzled a total of $255,000. While building a case against her, they learned that she'd stolen over $2 million from other companies in the past. The ordeal lasted nearly a year while she awaited trial, recalls Myers. "It was driving me crazy," he says. "I was able to convince a federal judge after putting all her other thefts together and testifying about how badly she hurt my business." The employee was sentenced to eight years in prison in 2004.
Even with the embezzler incarcerated, Myers admits his ability to trust will never be the same. He now keeps payroll records under lock and key and looks over every paycheck himself. And though he received some restitution from insurance and his bank, it was his forthright attitude with his other employees about the situation that inspired them to double the company's business in 2004-to the tune of over $10 million in sales.--Nichole L. Torres
... Lobby for Small
Sandra Abalos does it all: She runs her accounting services firm, Abalos & Associates, out of Phoenix and lobbies in Washington, DC, as an advocate for small business. Starting as an accountant in 1978, Abalos became a partner in her accounting firm in 1981 and took over in 1988 after her partner retired. Though she loved accounting, she hated the 1986 Tax Reform Act, which she believed unfairly penalized entrepreneurs.
Her other cause has been codifying independent contractor classification so businesses won't incur hefty penalties for misclassifying an employee. "I was so angry, and that's what got me interested in public policy," says Abalos.
She's since sat on numerous committees, most notably a 1995 conference on small business with then-President Clinton-all while building her business to over $1 million in sales. Abalos, 48, says, "If you come forward, not complaining but with a solution, [the government] will listen."--N.L.T.
April Y. Pennington, Nichole L. Torres and Sara Wilson are staff writers for Entrepreneur magazine. Geoff Williams is a writer in Loveland, Ohio.