Lessons in financing a business startup

Lessons in financing a business startup

Friday, September 28, 2007

Honorees for Remarkable Women Award relied on personal funds to launch their enterprises.

By JAN NORMAN / The Orange County Register

2007 honorees: From left, Coralee Newman,
principal, Government Solutions Inc., Irvine; Sue Parks, principal,
WalkStyles Inc., Laguna Hills; and Gloria Robbins, principal, SMS Inc.,
Irvine

Gloria Robbins quit her job at Disney in 1987 and used $3,500 in savings to start a small direct marketing firm.

Coralee Newman was laid off from the Irvine Company in 1992 and used her severance to launch a media relations business.

Sue
Parks quit her executive position with Kinko’s in 2002 and put several
hundred thousand dollars of her own and investors’ money into a fitness
company for walkers.

These three Orange County women are
typical of the vast majority of U.S. businesses whose startup depends
on the founder’s personal financial commitment in addition to time,
labor and ideas.

These three women also share something less
common: They will be the top honorees at the 12th annual Remarkable
Women Awards Luncheon Oct. 19 at the Hyatt Regency Hotel Irvine. The
event, put on by the National Association of Women Business
Owners-Orange County, attracts a sellout crowd each year as outstanding
members of about 30 local women’s organizations are honored.

DIFFERENT STARTUPS

"I had no idea how to start a business," said Robbins, chief executive of Specialized Marketing Services Inc.in
Irvine. "Direct response was all direct mail back then; there was no
Internet. I thought I’d buy a Cheshire (brand) labeler and a scale."

She
cleaned out an extra bedroom in her house, put in two folding chairs
and a folding table and started marketing herself as a full-service
database marketing company.

"We started on a shoestring, and we
didn’t make any money when we started," she said. "We put every penny
back into the company, and little by little we sold jobs."

Newman ran Government Solutionsin her home for three years. The media relations company now has 10 employees in a Newport Center office in Newport Beach.

"I
grew it slowly because I had to learn how to run a company, to serve
clients, to make sure the cash flow was there," Newman said. "I had to
make sure I could do it before I had the confidence to grow."

Parks planned a large company from the start when she and husband, Dennis, launched WalkStyles Inc., in Laguna Hills.

Although
the company started with a high-tech pedometer, the DashTrak, and a
line of stylish, yet comfortable, walking clothes, Parks envisioned an
online community for fitness walkers, which required a robust Web site
that couldn’t be built on a shoestring.

"We put in our own
money… did convertible loans with family and friends and then a series
A preferred stock offering in 2006," she said. The capital "made
significant difference because we were investing in infrastructure and
capabilities to build a large company."

GROWTH STRATEGIES

Parks’
strategy of having products as well as offering services has required
more capital than many startups. About half the Inc. 500
fastest-growing private companies start with less than $20,000.

However,
the clothing line, carried by Nordstrom, has helped build the brand
name, so it might be considered part of the marketing budget.

"As
I went around the country promoting the clothes, it became apparent
that people wanted to be part of a community," Parks said. "It was an
‘aha’ moment to build a free community site for the walking lifestyle."

In
April, Parks started another phase of brand building, staging five-mile
walks in all 50 states in 50 days. That campaign, which has brought
press coverage, is another reason WalkStyles needed more capital than
many startups.

Newman, on the other hand, ran her company for
10 years before bringing in Carol McDermott as a partner as part of a
growth strategy.

Government Solutions specializes in
complicated, often controversial, projects in which a client must
communicate with government officials and residents to gain approval
and acceptance for large projects. Clients include Lennar Homes,
Marriott Hotels and her former employer, the Irvine Co.

"Carol
likes to do the business development part and I like running the
company," Newman said. "I now have the confidence to grow."

Government Solutions revenues have been growing 25 percent a year and now Newman plans to pick up the pace.

"We
want to more than double next year," she said. "We think we have the
infrastructure to grow and we have just scratched the surface" of work
the company can do.

SURVIVING TROUBLE

Six years ago, Robbins of Specialized Marketing Services learned that past success doesn’t guarantee future growth.

"A
lot of our clients were in high tech, travel and leisure," she said.
"After 9/11 we lost two-thirds of our business. It was devastating."

It was also immediate. One client was an airline that put everything on hold on Sept. 12.

She sat down with her two sons who were president and director of operations for SMS. Did they want to close or rebuild?

They decided to rebuild. The staff was cut from 65 to 26. They managed to pay the rent on two large facilities.

"For
us it isn’t about making money; it’s what we owe to our clients and to
our employees," she said. "We had two rounds of layoffs. It was
painful."

By persistence and guts she and her sons have rebuilt SMS to 47 full-time staffers.

"I
hear (business owners) say ‘I’m going to try to do this.’ That means
they are thinking about it, not working," Robbins said. "You survive by
doing, not trying."

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