Archive for April, 2007

Entrepreneurs’ Favorite Mistakes

April 16, 2007

By Stacy Perman, Jeffrey Gangemi, and Douglas MacMillan

Success and failure are two sides of the same coin. Any successful business person, from a multinational mogul to the owner of a corner taco stand, has made a mistake-in most cases several. But those who have come out on top all say the same thing: It wasn’t so much the mistake but what they learned from it that made the difference toward their end goal of success.

BusinessWeek.com recently spoke to small-business owners and entrepreneurs and asked them each to pick their favorite mistakes and explain how they turned their mishaps around.

David Landis

Founder and president, Landis Communications

Public relations firm
San Francisco
www.landispr.com
Founded in 1991
Sales: $1.7 million

“I learned the most important lesson during that last economic downturn (and a new way of doing business that is still in place at our agency today). Namely, that for CEOs and CFOs to understand the value of your product or service, you must quantify the results and demonstrate value that supports their business.

“We developed a new proprietary ROI metrics program-we call it ‘Promised Results.’ At the outset, we sit down with new clients, tangibly define what success will look like-and then individually tailor an ROI metrics program that supports the bottom line.

“‘Promised Results’ is my favorite mistake. Because of it, we had our second-best year last year, with revenues of $1.7 million, and we’re on track to do even better this year. Here’s to more mistakes!”

Jodi Gallaer

Founder, Jodi Gallaer Lingerie

Maker of lingerie for full-busted women
Newport News, Va.
www.jodigallaer.com
Founded in 2004
Sales: NA

“When I first started, I figured the best thing was to get my product into as many stores as possible. Most new lingerie terms will ask for payment right away or COD, but some retailers will ask to pay later. If a store asked for 30 days of credit, I was too willing to provide it. A couple of them had been in business for a long time, so I thought it would be no problem. It took me months and months and months to collect. I never extend credit anymore, at least not for any new clients.”

Patricia Helding

Owner of Fat Witch

Wholesale brownies manufacturer
New York
www.fatwitch.com
Founded in 1991
Sales: NA

“The only thing I could bake was brownies. I think we might have been more successful sooner if we had a broader scope. On the other hand, I think what it did in the long run was help create our brand. [Now] we’re going to branch out with cookies and stuff.”

Peter Tourian

Founder and CEO, Synergy HomeCare

Franchise company offering in-home, nonmedical care to individuals requiring daily living assistance
Gilbert, Ariz.
www.synergyhomecare.com
Founded in 2002
Sales: NA

“I was eager to attract new franchise owners. I spent tens of thousands of dollars on Internet advertising only to find that traditional marketing methods, like referrals, direct marketing, and PR, were more effective for me.

“I have since cut back on Internet advertising and found that the quantity and, more importantly, quality of my leads have increased. To date, franchise sales have increased 35% since decreasing Internet advertising and relying more on these old-school methods. I expect to reach my goal of selling 300 franchises over the next five years with this continued approach.”

Mark Smith

Owner and chef, Tortilla Press

Mexican restaurant
Collingswood, N.J.
www.thetortillapress.com
Founded in July, 2002
Sales: $1.22 million

“The first three and a half years of the business, I kept hiring people who were ineffective, just because they were nice people. We were hiring basically on personality and not on experience and qualifications. We decided that wasn’t working for us, and we ended up developing a profile for the job and a specific list of criteria for the candidates. As a self-made entrepreneur, you have to keep trying things until you find the right combination. Somebody either had to beat us over the head or we had to make the mistake.”

David B. Demyan

Franchisee, Express Personnel Services

Provider of personnel employment and payroll services
Boca Raton, Fla.
www.expresspersonnel.com
Founded in 2006
Sales: NA

“Before becoming an Express Personnel Services franchisee, I had been in the staffing industry for the past 20 years as half-owner of a technical staffing firm in New Jersey. After moving to Boynton Beach, Fla., in 2003 and trying to run my New Jersey staffing firm from afar, I realized I simply could not be in charge of day-to-day operations while living so far away. I would need to either give up that role or give up my ownership in the business.

“Not ready to retire, I decided to sell my interest in the New Jersey business and open an Express Personnel office in Boca Raton. Living just a few miles from my new business, I could make all important decisions regarding daily operations. I wish I had done this sooner. It was difficult and frustrating not being able to grow my previous business. I felt badly that I was not able to give my all to a company that I helped build.

“Had I made the decision earlier, I would have had three extra years to grow my new business. If someone is planning to move to another state, I recommend they give up the daily responsibilities associated with running the business. If they are not ready to do that, then they should start a similar business near their new home.”

Nina Riley

Founder and CEO, Water Sensations

Maker of clear-liquid flavor enhancers for water
Southport, Conn.
www.watersensations.com
Founded in 2005
Sales: more than $1 million in first year

“I would’ve rethought the pricing strategy more specifically. Instead of going with the 16-count, I should’ve gone with the 12-count package size [of the product]. With a price point at $3.99, instead of $2.99, we were limiting the number of people who would try the product.

“When things go bad-at the first indication-you gotta nip it in the bud, wrestle it to the ground to fix it. You just can’t let it go. If this is your own company, you have to strive to be perfect.”

Nick Lindauer

Owner, Sweat ‘N Spice

Online hot-sauce vendor
New York
www.sweatnspice.com
Founded in 2001
Sales: $130,000

“Making investments in product lines that aren’t marketable was the first learning curve we [dealt with]. We were brand new, didn’t know the industry quite as well, and we bought a bunch of product that didn’t sell very well. We’ve learned to pick out the correct products that are going to sell online. Those that we’re unsure about, we’ll buy a smaller amount and we’ll test-that testing has really let us pick out the right products for the mix.”

Bob Kodner

CEO, The Crack Team

Foundation and crack-repair company
St. Louis
www.thecrackteam.com
Founded in 1985
Sales: about $10 million

“If we had to do it over again, we would’ve incorporated humor into our marketing campaign earlier than 2002. That’s when we rolled out [logo and character] Mr. Happy Crack [and] our leads went up 80%. We were just in the process of starting to franchise and immediately found that we had this powerful brand that separated us-not only from competitors in our industry, but from a slew of franchise opportunities that people had to choose from. Entrepreneurs should go with their instincts and roll the dice now and again.”

J.B. Schneider

Co-founder and marketing & product development manager, P’kolino

Maker of innovative children’s playroom furniture
Dania Beach, Fla.
www.pkolino.com
Founded in 2005
Sales: NA

“If I could call a do-over, I would replay our initial manufacturing strategy of finding a one-stop shop. In theory, having only one source for fine-tuning and producing our premier product would save us time. In reality, it nearly cost us our company.

“We were so determined to follow this strategy that when we could not find willing parties in the U.S. or China (we were too new and too small), we went to Brazil. The distance, communication gap, and unfamiliarity with U.S. regulations [took] so much time-so much of our time. Seemingly simple product changes prove

d difficult. There was just too much that was out of our control and we were often left waiting.

“The one-stop shop can be a tremendous asset. But for a product startup, I would now much rather have the control and flexibility of a small local manufacturing network to get a product to market.”

Peter Marston

Founder, Marston & Langinger

Designer and manufacturer of custom-made residential conservatories, greenhouses, garden rooms, and interior furnishings in Europe and the U.S.
London
www.marston-and-langinger.com
Founded in 1972
Sales: NA

“When we brought Marston & Langinger to New York, I was determined not to make the classic cultural mistakes-New York isn’t California, which definitely isn’t Michigan. I’m sure Americans are as irritated by Europeans talking of the USA as if it were one homogenous market, as Brits are by being lumped in as a stop on a Europe trip or sales campaign.

“We learned from our mistakes when we opened in Germany [and] got everything wrong, such as opening on Saturday, which we learned wasn’t the way things were done.

“This time, coming to New York City, we were much more careful about understanding who we are serving and where to be. We had the help of a brilliant Realtor who steered us into SoHo, which has proven to be ideal for our brand and the lifestyle we sell.”

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The End of a 1,400-Year-Old Business

April 16, 2007

The world’s oldest continuously operating family business ended its impressive run last year. Japanese temple builder Kongo Gumi, in operation under the founders’ descendants since 578, succumbed to excess debt and an unfavorable business climate in 2006.

How do you make a family business last for 14 centuries? Kongo Gumi’s case suggests that it’s a good idea to operate in a stable industry. Few industries could be less flighty than Buddhist temple construction. The belief system has survived for thousands of years and has many millions of adherents. With this firm foundation, Kongo had survived some tumultuous times, notably the 19th century Meiji restoration when it lost government subsidies and began building commercial buildings for the first time. But temple construction had until recently been a reliable mainstay, contributing 80% of Kongo Gumi’s $67.6 million in 2004 revenues.

Keys to Success

Kongo Gumi also boasted some internal positives that enabled it to survive for centuries. Its last president, Masakazu Kongo, was the 40th member of the family to lead the company. He has cited the company’s flexibility in selecting leaders as a key factor in its longevity. Specifically, rather than always handing reins to the oldest son, Kongo Gumi chose the son who best exhibited the health, responsibility, and talent for the job. Furthermore, it wasn’t always a son. The 38th Kongo to lead the company was Masakazu’s grandmother.

Another factor that contributed to Kongo Gumi’s extended existence was the practice of sons-in-law taking the family name when they joined the family firm. This common Japanese practice allowed the company to continue under the same name, even when there were no sons in a given generation.

So if you want your family business to last a long time, the story of Kongo Gumi says you should mingle elements of conservatism and flexibility—stay in the same business for more than a millennium and vary from the principle of primogeniture as needed to preserve the company. The combination allowed Kongo Gumi to survive some notable hard times, such as when it switched temporarily to crafting coffins during World War II.

Burst Bubble

The circumstances of Kongo Gumi’s demise also offer some lessons. Despite its incredible history, it was a set of ordinary circumstances that brought Kongo Gumi down at last. Two factors were primarily responsible. First, during the 1980s bubble economy in Japan, the company borrowed heavily to invest in real estate. After the bubble burst in the 1992-93 recession, the assets secured by Kongo Gumi’s debt shrank in value. Second, social changes in Japan brought about declining contributions to temples. As a result, demand for Kongo Gumi’s temple-building services dropped sharply beginning in 1998.

By 2004, revenues were down 35%. Masakazu Kongo laid off employees and tightened budgets. But in 2006, the end arrived. The company’s borrowings had ballooned to $343 million and it was no longer possible to service the debt. In January, the company’s assets were acquired by Takamatsu, a large Japanese construction company, and it was absorbed into a subsidiary.

To sum up the lessons of Kongo Gumi’s long tenure and ultimate failure: Pick a stable industry and create flexible succession policies. To avoid a similar demise, evolve as business conditions require, but don’t get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity. These lessons are somewhat contradictory and paradoxical, to be sure. But if sustained success came easy, then all family businesses would have a 1,428-year run.

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Take Two Yields One Speedy Startup

April 16, 2007

Will Anderson, a 2006 Stanford B-school graduate, knows something about making the most out of a business failure. Despite winning the 2005 Business Association of Stanford Engineering Students (BASES) business-plan contest, his company, Adaptive Hearing Solutions (AHS), which aimed to revolutionize the hearing aid industry with its sound filtering technology, proved to be a dud. “We had gotten to the point where we could test the technology, but in the end, the tests didn’t pan out,” says Anderson. “The assumptions didn’t hold, and we had to give up. Otherwise, we could have spent four years trying to make something out of nothing.”

Since shuttering the fledgling business, Anderson, 30, started Start-up Fund, an incubator designed to test potentially VC-worthy business ideas. Anderson was determined not to waste any more time than necessary on ideas without legs. “The purpose of Start-up Fund was to find, test, and launch one company that would have a high probability of success (compared to a typical seed-stage startup). Once this company was formed, Start-up Fund would be folded into the new company. It was not meant to be a perpetual new venture incubator,” says Anderson. His plan was simple: He’d spend about one month assessing each opportunity, identifying the critical assumptions upon which its success would depend, and then spend the next four to six months testing the assumptions, with a target budget of less than $100,000 per idea.

Multiple Pitches

For money, he relied on a handful of investors whom he knew through Stanford and the BASES business plan contest. Unlike traditional investor/startup relationships where investors bet seed capital on a single entrepreneurial venture, Start-up Fund relied on investors willing to throw in between $50,000 and $150,000 each, who would count on Anderson’s experience with the failed AHS to determine each idea’s viability. Since Anderson wasn’t pitching one idea, investors had to be convinced that he would be able to find good ideas, identify and test the critical assumptions, and then execute a business strategy to make the company successful. And Start-up Fund was designed to own equity in the company that resulted from it, so the investors wouldn’t receive a payout until the company achieved a successful exit in either an IPO or acquisition.

The ideas Anderson tested came from a variety of sources. Some of the 10 or so on his list were his own. Others were technologies developed at Stanford or ideas referred through contacts in VC firms, where partners see a lot that are just too early for their funds. “It used to be the case that an engineer could get funded with little more than a patent application,” says Anderson. “But, in the last seven or eight years, VCs are now doing less but bigger deals. This means they have to chase the bigger, later-stage deals and can’t focus so much on the seed deals. This is the market gap that I wanted to exploit,” says Anderson.

The Bottom Line

Anderson believed an entrepreneur with a good idea might only need $100,000 to test a potential blockbuster, but with all the other costs—including manpower, technology, market research, and other resources—the actual cost could approach $500,000 to prove its worth. Start-up Fund’s system was designed to wipe out the extra $400,000 in expenses.

Many times, entrepreneurs need to raise seed capital from a number of different investors, only later going to the VCs if the idea has the promise of scalability and big profits, says Anderson. But he believes it’s important to do the testing before building out a whole company structure. “You wouldn’t want to build a huge sales force before you know your technology,” says Ira Ehrenpreis, general partner at Technology Partners, a Palo Alto (Calif.)-based venture capital firm. “The [venture capitalist’s] discipline is in the initial identification in what the elements of risk are, and ensuring that you’re capitalizing a company to reach discrete risk mitigation milestones,” Ehrenpreis adds.

Start-up Fund embraced that idea. It just sped up the process by removing the inefficiencies of the startup process. It enabled Anderson to test several ideas under one legal entity, without going through a separate fund-raising process for each, while maintaining the ability to kill an idea that didn’t pass validation. “Rather than investing $500,000 to test one idea under the old model, a similar amount of money could test three or four ideas under the Start-up Fund model,” says Anderson. And they would get a bigger stake in the resulting company—providing it is successful.

In the Driver’s Seat

Anderson was in the process of testing various ideas when he hit pay dirt: a Web-based automobile loan origination platform with products aimed at solving problems faced by dealerships, lenders, and borrowers. He quickly set about launching the new business, folding Start-Up Fund into it and maintaining the same pool of investors. His new company, Risk Allocation Systems, closed its Series A funding and officially incorporated on Mar. 21. On July 1, the Redwood City, (Calif.)-based company will launch its first lending products in California, with initial customers consisting of Bay Area automobile dealerships and lenders.

“For me, I just wanted to build and manage a fantastic company. Start-up Fund gave me a better starting point for doing that,” says Anderson. Today he is doing what he originally set out to do—using his experience with failure to increase his chances of success.

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What the Turnaround Ace Knows

April 16, 2007

In his 21 years as a business turnaround expert, George Cloutier, founder and CEO of American Management Services, has seen just about every kind of business failure imaginable. After reviewing 6,000 companies in hot water, Cloutier says, he’s concluded that 90% of failures are due to bad management.

Business owners who are lax, unengaged, fearful, or in denial will never run successful companies, he says. Cloutier spoke recently to Smart Answers columnist Karen E. Klein about how entrepreneurs can avoid startup pitfalls and set their companies up to profit right from the start. Edited excerpts of their conversation follow.

Why do businesses fail?

Because they don’t make a profit. Profits aren’t everything—they are the only thing. With 90% of our clients, we install a cash management system. They don’t have cash flow plans, and they don’t budget.

Let’s say your company’s going to make $100,000 a year, or $1,400 a week after taxes. You put that amount on a spreadsheet, and you work up a budget. It’s not that tough.

Yet most business owners whose companies go under point to lack of funding as the cause.

If you’re out of money, it’s usually because you’re a bad manager. Of course there are exceptions, but in more than 80% of our clients we find they have not managed their resources correctly.

For instance, we did business with a lock and key company. They had $1 million worth of keys in their inventory but no system of keeping track of them. All the keys were different—they couldn’t identify which ones were selling and which were not.

So the company’s assets were all tied up in these keys, and a lot of them were the wrong keys. You can’t finance your way out of problems like that, you have to manage your way out of them.

Does bad management typically begin at business startup?

It may start right at the beginning, or it could be that business owners have some early success, then get carried away and get lazy or become distracted. Even though your business is doing wonderfully, you can’t spend all your time playing golf. You still have to work 60 to 70 hours a week to be a successful entrepreneur. Companies just don’t run themselves.

What are the specific hallmarks of failing to manage successfully?

Not doing financial statements honestly and accurately each month is the real killer. If you’re in school, and you get a bad report card, you know you have got to change those Ds and Fs if you want to graduate. In business, you’ve got to look at the report card and make changes if you want to succeed. But you can’t make those changes if you don’t have financial statements, or the ones you have are not accurate.

So, don’t include receivables that you’re never going to collect, don’t fantasize about sales that are never going to happen. Look at your profit and loss and cash flow statements in the cold, hard light of day.

Don’t make excuses; don’t deny bad news. Face the problems and figure out why you’re losing money. Either your prices are too low or your product costs are too high. Deal with that right away. Don’t implement a plan that will reduce your losses in six months, because you’ll go out of business before then.

Is it human nature to want to deny or put off tough decisions?

Tough decisions usually involve confrontations, and most people don’t like those. But my mother used to tell me to eat my vegetables first, and that’s what I tell clients.

We all have things we don’t want to do or we shy away from: Increase prices on our biggest clients, fire an employee who’s not doing the job. It’s easy to delay or procrastinate, but it’s much better to make a checklist of those tough things, do them, and then move on.

Time is money, and procrastinating wastes your money. Every day you let that situation continue or keep that ineffective employee on the payroll, it’s costing you money.

How do employee issues lead to failure?

Many small businesses—and even big businesses—fail to demand top performance from their employees. If someone bills themselves in an interview as the best salesman since sliced bread, hold them to it! They should be as good as they say they are.

The same goes for your suppliers, manufacturers, distributors, and anyone else you work with. You’re paying them to deliver excellent performance, and if they don’t, you have to find someone else who will.

Again, it’s tough because people don’t want to have confrontations. But if you want to be a business owner, you’re going to have to confront people, and if you can’t handle that, you’re going to fail.

The other thing about managing employees is that most business owners don’t have pay-for-performance policies. If a potential employee asks for $35,000 a year, give them $30,000 with the option to earn $40,000 if they do well.

It will be worth your money to pay 25% more if you get the performance level you want out of that employee. If other employees complain, you tell them they can earn just as much if they perform just as well.

What additional management errors do you commonly run into?

There’s way too much emphasis right now on business owners needing to delegate. When you’re a small-business owner you do have to delegate, but you can’t abdicate. Ultimately, you’re responsible for the company and you have to stay on top of things.

Even after you’ve delegated something crucial to an employee, you have to circle back regularly and make sure you’re getting the right performance in that area. Don’t blame others for their shortcomings if you didn’t bother to follow them closely enough.

I tell clients there are no bad employees, just bad owners. If an employee isn’t working out, you have to get rid of him. If you’re too busy to notice something’s going wrong, you’re not managing your time correctly or working hard enough.

If your business is in danger of failing, should you bring in a consultant?

If you bring a consultant in, make sure you’re paying them to get a new system implemented. Don’t just pay for advice—you can get loads of that for free.

Consolidating the advice and implementing it is the hard part. Get someone in who can really help you get your hands on the problems and change them. We spend 80% of our time at clients’ companies working with management and employees, doing training, and hiring and firing.

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From Startup to Success Story

April 16, 2007

By Stacy Perman

First, some good news for entrepreneurs looking to start new ventures: In 2005 some 671,800 new small businesses were launched, according to the Small Business Administration. Now the bad news: About 544,800 of them closed not long after, felled by any number of issues such as capitalization and market forces.

However, there’s no standard method of measuring startups and failures, and a 2005 Monthly Labor Report gives a considerably more optimistic picture: 66% of new businesses survive the first two years, and 44% the first four years.

“During the first two years a company is either on the road to profitability or the road to growing quite rapidly,” says Bruce Phillips, senior economist at the National Federation of Independent Businesses, a small-business lobbyist in Washington. And if not, they are likely on the road to closure.

“I don’t like to say these are failures, but business dissolutions,” he says. And a business can dissolve for any reason at all. For Phillips, “a complete failure is bankruptcy, and that number is 35,000 to 50,000 [a year].

According to Phillips, while any number of reasons can bring a business to “dissolution,” those small businesses that have the best chance of passing the two-year mark are generally helmed by people who have education and background in the type of business they are launching. “Often successful people have experience in industry. It’s not like one day they don’t like their job and, boom, become self employed,” he says.

With the historical data in mind, BusinessWeek.com checked in with a handful of small businesses started in the past five years to gauge how they’ve fared in the crucial early years following their launches and to examine the strategies they’ve employed to keep moving ahead.

The Counter

In 2003, Jeff Weinstein opened The Counter, a build-your-own-burger joint in Santa Monica, Calif., offering 300,000 possible combinations and a hip atmosphere that attracted a steady following. Less then two years later the business earned national kudos when it was ranked No. 15 in GQ magazine’s seminal list of “20 Hamburgers You Must Eat Before You Die.” After Oprah Winfrey mentioned The Counter’s burgers on her show, sales jumped from $44,000 a month to $245,000, and Weinstein soon began plans to expand through franchising.

In 2005 he told BusinessWeek.com that he planned to roll out a new restaurant in Palo Alto, Calif., to be followed by 12 spots in 2007 and 60 by the end of 2008, with an eye toward 400 to 600 nationwide locations in Florida, New York, Arizona, and Nevada.

Last year the first franchise did indeed open in Palo Alto, and Weinstein says sales are on track to reach $2.1 million, up from the original target of $1.7 million. However, Weinstein has had to slightly scale back some of his early projections and goals. For starters, this year the company will likely open 10 stores rather than 12. “I was hoping for more to be open at the beginning of 2006, but real estate takes time, and the business climate changes,” he says.

As well, in attempting not to dilute the cool neighborhoody feel of The Counter, Weinstein has found he’s had to be prudent in hiring staff, partnering with franchisers, and developing new locations. “We are continuing to seek out the best people that fit in with our ‘Counter-culture,'” he says. “It’s difficult to find the right partner and people that will make us a success. So we’ve been over-conservative with who we hire.”

And that of course has affected the speed of his expansion plans. “The problem from the start is that we didn’t want to become too cookie-cutter. My goal is to have 500 stores, but I want them to be 500 great stores. We don’t want to end up in the graveyard [with] Krispy Kreme and other concepts that dove for the goal too fast and forgot what made them special.”

That said, Weinstein says the company has hit most of its goals. He estimates the two stores will bring in about $5 million in sales this year.

Rick’s Picks

Rick Field, a former producer for newsman Bill Moyers, turned his passion for creating artisanal pickles in his Brooklyn kitchen into a bona fide business, Rick’s Picks, in 2004. During his first year in business, Field says, his sales increased 200%, and by 2005 he was selling 10 different varieties, online and in specialty stores in nine states, including Whole Foods and Dean & Deluca.

Now, Field says, Rick’s Picks is a national business, and his Phat Beets and Windy City Wasabi are sold in more than 300 stores in 35 states. Sales have grown sharply, with a 120% jump in 2006 from 2005. “In 2004 we were only in business three months,” he says, “so this is a more significant sign than the 200%.”

While sales and retail distribution are strong, Field says he is trying to “recognize the power of the Internet for our small business. We are in the middle of [turning] a new Web site into more of a selling machine and enhancing the consumer experience.”

One of the important lessons that Field says he has learned is the importance of understanding what made his brand—which first garnered notice when sold at New York area green markets—unique in the first place, and being able to communicate that message as the company continues to grow.

“I think that being able to work with distributors was a key step in spreading the message to the widest possible audience,” he says. However, as far as missteps go, “ours is a brand that needs to be managed. When you go into a new region, you are starting a new relationship, and you need to be attentive to that new partner. As a small business, we are challenged in terms of human resources. I spend a lot of time on the road. I found we are less successful in places where we have not shown up physically and put the pickles in the mouths of customers.”

Camp Bow Wow

Five years ago, Heidi Flammang launched Camp Bow Wow, a Denver doggie day care center, and a year later sold her first franchise. By 2005 she had 11 different locations and planned by the end of that year to expand to 75, each bringing in between $750,000 and $2 million in revenue annually, depending on size and location.

Like The Counter’s Weinstein, Flammang has had to recalibrate some of her targets. “The company is doing very well, and everyone is very happy. But personally, I wanted to be farther ahead as far as the number of camps opened and as far sales go.”

Flammang says she has sold 180 franchises, but only 35 are operating, well under her initial target of 75 in operation by the end of 2005. However, she says that by the end of this year she will have sold 225 franchises and there will be 75 Camp Bow Wows up and running.

“We are selling more [franchises] than we thought, but they are taking longer to open,” she says. The biggest obstacles, she says, are zoning and construction issues. “It takes so much time, and we can’t speed this up [because getting permits depends] on local municipalities.”

Flammang has also readjusted her sales goals to $600,000 to $700,000 per store, in large part because she has also scaled down the size of each camp. “Our original model has not proven that bigger camps are better,” she says. “We wanted to [keep the] intimate, boutique-camp feel… And having more than 150 dogs in a facility is too crazy.”

She’s learned a few lessons about franchising along the way. “One thing I’ve noticed is how important cash flow management is for us and the franchisees,” she says. “It’s important to have working capital and to invest wisely and to advertise. A lot of franchisers did not want to advertise. Now we have strict rules on that. We didn’t have [those rules] a few years ago.”

All in all, however, Bow Wow’s future looks good. Flammang says the company brought in $10 million in revenue last year. Based on her new goals, she expects to hit $100 million by 2010. There are Camp Bow Wows in 28 states and Canada—more than double the number in 2005.

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