(Reuters) - A highly competitive industry, a failed startup on her resume and the worst recession in a generation didn't deter Jane Saidenberg from launching her handbag business. A year later her Jane Marvel (www.janemarvel.com/) line of "lifestyle" bags is going gangbusters, landing on the shelves of more than 300 stores from Alabama to Wyoming and racking up sales of $1 million along the way. The following panel of experts critique Saidenberg's business model and opportunity for growth:
TIM BERRY, FOUNDER & PRESIDENT, PALO ALTO SOFTWARE
Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and a co-founder of Borland International. Tim built Palo Alto Software from zero to 40 employees and 70 percent market share without outside investment. He teaches starting a business at the University of Oregon. Tim is an author of books and software including Business Plan Pro, published by Palo Alto Software, and "The Plan-As-You-Go Business Plan," published by Entrepreneur Press. He has a Stanford MBA degree and degrees with honors from the University of Oregon and the University of Notre Dame. Tim also finds the time to write online, for his own blog, "Planning Startups Stories" (timberry.bplans.com/), Entrepreneur.com's "Up and Running" (upandrunning.entrepreneur.com/), Allbusiness.com's "Planning Demystified" (here), as well as for Small Business Trends (here), the Huffington Post (here) and Business in General (blog.bplans.com/).
“If angel investors spend $500,000 on Jane Marvel, how much of the company do they own? All those things come under I want a decent return on investment. If you want to write cheques to startup companies you want to believe that $500,000 has a fair shot at becoming $5 million in 3-5 years.
“Is there going to be an exit? The investors need you to go liquid with your company. It used to be IPO or acquisition, nowadays it’s just acquisition. She’s got to be committed if she gets investors in. They need her to be able to be acquired in 3-5 years and that sucks sometimes for the founder.
“Her life changes if she gets investors. They don’t just write her a cheque and disappear. Now she has people who are tracking her performance and are unhappy if she misses her milestones and God help her if she wants to go in one direction and they want her to go in another, because then everybody is unhappy. It’s very much like having a second marriage to deal with. You choose an investor for compatibility, as carefully as you would choose a spouse. One of the things that you get to do when you own it yourself is make mistakes. That’s a very comforting reassurance, because sometimes it turns out that they weren’t mistakes and you were right all along, but your investors would never have let you find that out.
“I started my company in 1988 and it was not until 1995 that we made more than $1 million in a year. That’s in rarified air. She has every right to be proud. That gets an investor’s eyes open quickly, because there are so many people who just have future (prospects) and no present. She has validation of the very best kind -people are actually spending money. That’s a high number.”
BRUCE MAXWELL, FOUNDER & CEO, BRUCE MAXWELL CONSULTING
Bruce is a Venture CFO, providing interim CFO services to help startups get organized and funded. He also provides portfolio troubleshooting and due diligence services to venture capitalists. He is a specialist in the construction of business plans and financial projections and has raised over $68 million in venture and angel funds. Bruce has operated his practice since January of 1998, serving corporate clients such as Freescale, Volantis, Unplugged and Arcturus Networks and venture clients such as J&W Seligman and Outlook Ventures. Before starting his own practice, Bruce served as CEO of Positive Communications, a paging services firm. Bruce founded Positive in 1992, grew it to over $40 million in annual sales and 350 employees, and sold over a million pagers. Prior to Positive, Bruce held various positions with Voysys, AT&E and Chemical Bank. Bruce holds a BA from Swarthmore College and an MBA from Stanford University.
“One of your goals is to gain entry into the national chains and department stores. I recommend that you consider hiring manufacturers’ reps to achieve this. Twenty years ago I founded a company to market pagers to mass market retailers. I got very good results by hiring manufacturers’ reps to rep my line. These guys are essentially a rented sales force. They will not have the passion or energy of your own internal sales force, but they do have one thing of inestimable value: they have the ability to get an appointment with the key buyer at the chain’s HQ. They can walk right through a door that might remain closed to you for years. The traditional approach that new manufacturers use is to hire manufacturers reps to crack the major retail chains and win initial distribution. And then, when you have established your brand and your line, and have a personal relationship with these buyers, you replace the manufacturers’ rep firms with a small direct sales force of your own.
“I understand the incredible tension between wanting to standardize on large production runs and the need to be able to provide consumers with a lot of choice. This is devilishly difficult. They key is to keep innovating but ruthlessly prune the losers the minute it’s apparent that they are not selling through. Good information systems that can discern this information in close to real time pay for themselves many times over. Buyers often have the sell through information you need long before you do, so always ask for this on a regular basis.”
JOSH DORFMAN, FOUNDER & CEO, VIVAVI
Josh Dorfman is an environmental author, media personality, and entrepreneur. He is author of “The Lazy Environmentalist: Your Guide To Easy, Stylish, Green Living” (April, 2007) and “The Lazy Environmentalist on a Budget: Save Money. Save Time. Save The Planet.” (April 2009). Josh hosts “The Lazy Environmentalist” television series on Sundance Channel and is a featured commentator on Sundance Channel’s original television series “Big Ideas for a Small Planet.” Josh first created “The Lazy Environmentalist” as a talk radio show which he produced and hosted on Sirius Satellite Radio from 2006 to 2008. His website, Lazyenvironmentalist.com, serves as a green consumer hub, offering advice and reviews of today’s most innovative eco-friendly products and services. In 2004, Josh founded Vivavi, a retailer of contemporary, eco-friendly furniture and home furnishings, to demonstrate the possibilities for merging modern design with environmentally responsible materials and manufacturing. His work as CEO has been recognized widely in the media, and Inc. Magazine has named Vivavi one of the top 50 businesses driving today’s green revolution. Josh holds an MBA from Thunderbird, The School of Global Management, and a BA from the University of Pennsylvania.
“I think Jane is a terrific entrepreneur with a very clear vision. I think Jane is developing her business very intelligently. She’s diversifying her product line and seeking to reach new untapped consumer segments. As a green retailer, I would advise Jane to consider switching to green fabrics to make her bags. As consumers become more savvy, about green living and start asking more questions, they’ll start to wonder why she says her bags are eco-friendly if they are made with fabrics that do not fully consider the environment.
“Being eco-friendly is first and foremost a materials choices. Jane chooses leather-free products, but leather-free is not the same as eco-friendly. Her bags are made of conventional canvas, presumably cotton, which is the most heavily sprayed crop on the planet. I also don’t consider them to be realistic reusable shopping bag alternatives because for that purpose they would be quite expensive. I happen to like her bags a lot, but I don’t consider them to be eco-friendly.
“Jane is well-positioned to jump from boutiques to chain stores because she emphasizes style, quality, and an affordable price. College kids will appreciate that too though college kids will also appreciate a greater commitment to the environment. Beyond that, I think the best way to sell to college kids is for Jane to seed her products amongst college kids who are viewed by their peers as influencers. If the “cool kids” are carrying Jane Marvel bags, odds are others will want to do the same.
“The reality is that we live in a globalized economy, and I believe that is a good thing, so I’m very comfortable with products coming from China and elsewhere around the world, provided that those products are made with environmental responsibility. As a businessperson, I really don’t see any other advantage to manufacturing in China aside from the ability make products at low cost.”
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