Six Months Later, Start-Ups Find Their Goals Are Elusive

By BRENT BOWERS

IT has not been an easy six months.

This column profiled three new small businesses at the end of last year and the start of this year — Sweet Bites Bakery and Café in West Acton, Mass., started by Caitlin Adler; Tina Ericson’s Mamaisms Gear, in Wilmington, N.C.; and Jeff Takle’s RentingYourHome.com in Somerville, Mass. — with the promise to report on their progress after six months and again after one year.

None met all their goals, but Ms. Adler came the closest. She has built her cafe to $8,000 in revenue a week, up from $7,000 six months ago. But that is still $3,000 shy of her projections. She also expects to begin making a profit this summer, an impressive achievement for a new restaurant.

Ms. Ericson, by contrast, has scaled back her ambitions to create a Web clothing store that doubles as a portal to an Internet center for women. She instead has spent most of her time making cold calls to boutique shops to sell her “Mama says” T-shirts.

And Mr. Takle, just back from a trip to India to recruit low-cost legal talent for his property management software company, says that while he remains hopeful, his venture is foundering. “It’s getting dangerously close to needing investors just to survive, which is a bad place to be,” he said.

Ms. Adler has made improvements, like installing a commercial dishwasher, which saves on labor costs. She expects by August to be able to start paying herself a salary and her parents interest on tens of thousands of dollars in loans. She also said that she might make her father, a senior manager at the Boston Consulting Group who spent Mother’s Day washing dishes in her kitchen, an equal partner in the venture.

But she has not toned down her ambitions. In July, she plans to reintroduce a line of wholesale gourmet brownies (like her trademarked Triple Chocolate Peanut Butter Orgasmatron) that she suspended last year because they were slow sellers at trade fairs. She is negotiating with a distributor to market them throughout the Northeast.

While she is just getting her Web site, sweet-bites.com, up and running this week, she views it as a vehicle to sell her brownies and T-shirts and, sometime in the future, other items like coffee mugs with the Sweet Bites logo. She says she is still optimistic that she can increase sales to $11,000 a week by December.

So far, she does limited catering, potentially a big moneymaker, because Sweet Bites does not yet have a walk-in refrigerator. “It’s crazy, I know,” she said.

The long hours — she has taken only one day off this year — and the stress have taken an emotional toll. “It’s been a crash course for me on running a business,” she said.

Ms. Ericson, whose venture sells T-shirts stamped with “Mama says” slogans like “quit whining” (which she speculates that grateful mothers just point to when their children get on their nerves), says that things are going “very, very well.”

But not necessarily as expected. When she started Mamaisms Gear (mamaismsgear.com) in December, she said she would be selling her T-shirts, other clothing like Hot Mama pajamas and a line of reusable containers on her Web site while creating an Internet community for women.

Instead, she has given up everything but the T-shirts. And after discovering the difficulties of selling them on the Internet, she is marketing them to stores. So far, they are in 10 locations.

Ms. Ericson also dropped a separate plan to start a consulting firm for the financial sector because of bad chemistry among some of the potential partners.

“This has been very much a learning process,” she said. “The lessons are: Keep it simple, and don’t overreach.” She says she has also learned to keep her political and business interests separate, after realizing that links to left-wing blogs on her site might alienate potential customers.

Still, she is undaunted. Sales in the first half of this year are approaching $30,000, and she thinks she can make her $100,000 target for 2008 and become profitable by December. Meantime, she has accepted a full-time job with a six-figure salary, working out of her home as vice president for business development of a publishing company in Florida.

Like Ms. Ericson, Mr. Takle is trying to look on the bright side of his company’s state, while not understating the challenges he faces. Reached in India by e-mail, he gave a frank assessment of RentingYourHome.com, which sells software that helps landlords manage their properties.

“I’d say things have gotten much more difficult in the last six months,” he wrote. “While there are a lot of positive developments, some of the fundamentals are in serious jeopardy. I chose to try double duty and run the company while at the same time go back for an M.B.A. to learn more about fund-raising, financials and how to take the company to the next level.”

He continued: “Unfortunately, cash waits for no one. Sales have lagged behind projections, and retention of current customers, while improving over last year, isn’t where it could be to make the company ‘bankable.’”

Still, he said he had reasons for hope. The company recorded a 17 percent growth in revenue in the first half of this year, enough to cover operational expenses. It expanded its reach to 42 states from 35, it negotiated a partnership with a Web design and marketing company, and it found a source of inexpensive, high-quality legal research in India.

“We’re still on track for building a self-sustaining, profitable company,” Mr. Takle said.

But his setbacks have stung. His slowness in raising investment capital scared away a seasoned executive whom he was trying to recruit. Worse, his co-founder left the business.

So what do the experts think? John Foley, the restaurant adviser for AllBusiness.com, gave Ms. Adler the same passing grade he did six months ago — and sounded the same warning notes. Her plan to sell brownies and open an online store is like starting a second business, with all its attendant headaches, he said. On the other hand, if she threw all her energies into her new wholesale business and used the cafe primarily as a promotional tool for it, “that might work.”

Whatever happens, Mr. Foley added, “she’ll have gained a better business education than she could at the Culinary Institute of America and the Harvard Business School combined.”

Neal Thornberry, an author and associate professor of business management at Babson College in Massachusetts, was dubious about the prospects for Ms. Ericson’s T-shirt enterprise. “She’s a typical start-up entrepreneur — her enthusiasm clouds her judgment,” he said. “She’s gone from a business to customer product company to a business-to-business distribution company, a huge shift.”

He predicted that she would come to a “crisis point” before the end of the year, forcing her to decide whether to continue.

Finally, Janet Portman, a lawyer and an expert in landlord-tenant law at Nolo, a provider of legal information for consumers and small businesses, said her doubts about the viability of Mr. Takle’s business model remain.

“His jaunt to India to look for legal assistance is further evidence of his failure to understand the complexities of the legal world he was wading into,” Ms. Portman said.

Entrepreneurs are used to hearing from skeptics, and like most, Ms. Adler, Ms. Ericson and Mr. Takle all vow to push ahead. Ms. Adler, for one, says she has no choice. “Being boss isn’t always fun,” she said. “But I could never work for somebody else.”