close this bookVolume 3: No. 08
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View the documentEntrepreneurial gambles

The 246-store Babbage's home-software chain has no computers in their stores because they don't want to be mall baby-sitters. Stores sell an average of $883K, turning inventory 4.4 times per year. (Competing Software Inc. stores sell 20% less and turn inventory only 3 times.) Margins are nearly 30%, vs. 17% for Egghead. The founders -- graduates of Harvard Business School -- couldn't find funding for their home-software and video-game channel. Finally Ross Perot loaned them $3M for 1/3 equity, advising them to open one store instead of the 20 they had planned. They did, and learned the business by running it. They lost $560K on $3M in sales the first year, but five years later sold 30% interest for $20M. Last year the chain made $5.6M on $168M in sales.

Compton's NewMedia (Carlsbad, CA) is making 20 CD-ROM games and software titles available to video stores for rental. Rental CDs are an attractive business because most users can't copy them. [softpub, 2/6. Bill Park.]

The Inkpen (Miami) has software that addresses envelopes in calligraphy. The company has chosen franchising as its marketing channel. One franchisee, Shari Ashman, got help from the central company to address 100K invitations to the Presidential Inauguration in just three days. [Software Entrepreneur's Mailing List, 2/6. Bill Park.]

Most start-ups are spurred by dreams of profit, but Give Something Back wins customers with a non-profit pitch. It's an office supply company that donates all profits ($11K so far) to not-for-profit community groups. The books are open to anyone. One of the founders gave up an $80K sales management job, now makes $24K, and hopes to make a $50K salary eventually. The two have drawn like-minded employees and customers, so it's probably a fun business. For other such ideas, see "Companies With a Conscience" by Mary B. Scott. [Barry Witt, SJM, 1/17.]

Robert Blazer has an engineering degree, but dropped out of Wharton business school because it lacked a "human connection." Instead, he went into the discount produce business in Atlanta. Several years later, a freak ice storm collapsed his roof and nearly put him out of business. He asked customers for loans of $50 or $100 -- to be redeemed in produce -- and $40K came in. Robert's refurbished store now sells $50M per year. [Joel Millman, Forbes, 2/15, p. 220.]

Real Goods Trading Corp. (Ukiah, CA), a $7M catalog company selling energy-efficient products, offered customers a chance to lend money at 10%. (CDs were at 8%, bank loans would have cost 12%.) Customers sent in $250K. Owner John Schaeffer then made a formal offer under the Small Corporate Offering Registration program and raised an additional $1M -- again mostly from customers. [Leslie Brokaw; Inc., 1/93, p. 76.]

Be flexible. One lecturer teaching corporate writing skills found that companies were willing pay whatever he asked to write their corporate brochures. He now makes much more money from this than from lecturing. [Mark McCormack, "What They Don't Teach You at Harvard Business School."]

Anyone over 18 can send a typed personal ad to Comptel Net Offer, P.O. Box 2228, Louisville, KY 40201-2228, USA. No abbreviations. Your ad will be batched with others for anonymous publication on a BBS (not yet available) and in at least a dozen singles magazines. Free through 2/28. Respondents pay about $2 to have replies forwarded to you. [Jenny ([email protected]), alt.personals. Bill Park.]

IEEE Spectrum tells of a CMU program using undergraduates to transfer technology to industry. Sponsors discovered that porting the circuit-analysis software to different computer platforms was a major effort. Then it was discovered that few companies had exactly the right need for the package. (Just like starting a business!) Getting six undergraduates out into industry for two weeks was the major success of the project, and sponsoring companies would like to see more such efforts. [Lawrence J. Curran, 2/93, p. 50.]

Bruce Kirchhoff of NJIT studied 812K business of fewer than 100 employees over an 8-year period. Although only 28% survived in their original form, the true rate was 52%. Each year 3% changed ownership or legal structure, thus disappearing and reappearing in the statistics. [Edward O. Welles; Inc., 1/93, p. 54.]

-- Ken