Ridemakerz is off to a fast start, offering kids the chance to build customized model cars, and giving parents a much-needed pit stop 

 

In 2005, Larry Andreini approached two entertainment producers about a possible television show, but their meeting didn't lead to a TV hit. Instead, the pair gave Andreini, an entrepreneur with a track record that includes founding a customer loyalty program and a telecommunications exchange, the concept that would become his next business: Ridemakerz, a do-it-yourself custom model car retailer.
At the time, the pair, Gillian MacKenzie and Jane Startz, had been hammering out an idea for a business, dubbing it Construct-A-Car. And although they thought it was a potential blockbuster, they needed help to execute a business plan, raise money, and recruit a team to translate the concept into a business. "The minute I saw it, I thought what a great idea," recalls Andreini. "My immediate reaction was that I couldn't believe someone hadn't thought of this before."
Actually, someone had. That someone was Maxine Clark, the founder and chief executive of the wildly successful Build-A-Bear Workshop (BBW), the St. Louis-based chain of customized-teddy-bear stores (see BusinessWeek.com, 6/6/05, "This Bear Doesn't Hibernate"). Since launching the first workshop in 1997, the business has expanded to 300 shops across the U.S., Canada, Asia, and Europe, with sales of $437 million. Clark had come up with a similar toy auto concept in 2002, internally called "Build-A-Car" but had put the plans away to focus on running the company, which was experiencing double-digit growth. "We had many requests from parents who wanted something different to do for boys," she says. "Boys love cars and video games."

Filling a Void in the Market

Not long after, Andreini, partner Norm Pozez, and Startz were able to set up a meeting with Clark, thanks to a connection that Pozez' father had with the Build-A-Bear founder. "I said, let's put our best brains together," Clark says. "There was nothing really at retail that was exciting for boys except for skate parks and computer games. Boys do not shop like girls. There was a real void in the market. But I had no time to really work on this until Larry and Norm came to me with their Construct-A-Car."
Following the meeting with Clark, Ridemakerz went from 0 to 60 fairly quickly. Andreini and his investors raised about $5 million in seed money—including $700,000 from Build-A-Bear—and set about figuring out how to manufacture parts for the customizable model cars.
In June, Ridemakerz opened its first store in the entertainment complex Broadway at the Beach in Myrtle Beach, S.C. On July 20 it is set to unveil its second shop at the Mall of America in Bloomington, Minn., and there are plans to open two more—in Indianapolis and Fredericksburg, Va.,—in the fall.

No Two Cars Are Alike

Although the traditional toy market is relatively flat, both the video game and car segments, normally the purview of boys, have been robust. According to a "State of the Industry" study by market researcher NPD Group in conjunction with the Toy Industry Assn., the toy industry hit $22.3 billion in sales in 2006, only a 0.3% increase from the previous year. By contrast, the overall video game segment increased 19%, to $12.5 billion, in 2006 from the previous year. Anita Frazier, a toys and video game analyst at NPD, says that among boys, the vehicle category was up about 6% from 2005 to 2006, to $1.9 billion.
Still, Ridemakerz is trying to merge the near-extinct traditional model car hobby with the interests of 21st century boys.

Success Stories July 19, 2007, 1:12PM EST

Build-A-Bear with Wheels

(page 2 of 3)

  In June, Ridemakerz opened its first store in the entertainment complex Broadway at the Beach in Myrtle Beach, S.C.

  Ridemakerz is trying to merge the near-extinct traditional model car hobby with the interests of 21st century boys.

"Model cars take weeks to build, and they are intricate and detailed, and kids want immediate gratification," says Andreini, who believed there was an untapped appetite for alternative, creative, educational toys for boys. "If we developed a product that they could develop and build quickly, they'd come into the shop."
Andreini already had a leg up, since he says car customizing was already a part of kids' vocabularies (see BusinessWeek.com, 7/13/06, "DIY Dream Cars"). "No two rides leave the shop looking the same. That's one of our biggest differences from model cars, where someone has made the choices for you. At Ridemakerz, you make all of the choices, and we think that is a very constructive thing." On a subtle level, he says, the ability to decal, color, and paint the cars is teaching boys about art. "They see it as customizing, but in a higher sense it gives kids a creative way to express themselves."

Raising the Retail Bar

NPD's Frazier says Ridemakerz is part of a growing trend in "retail entertainment" that has grown from Build-A-Bear to include other categories such as apparel and dining. "It also taps into a much broader consumer trend to add personalization and customization to any product," she writes in an e-mail. "You can see this played out in myriad ways across industries. Not all of them succeed, but it's important to note that the bar continues to be raised, and all these examples are retailers or products that are trying to stand out from the crowd and engage the consumer at a higher level." (See BusinessWeek.com, Spring, 2007, "Breaking the Mold.")
Indeed, at Ridemakerz the store experience is key. It plays up the car culture much in the way Build-A-Bear trades on cheeky references such as calling its accessories "the bear necessities." For instance, the opening doors have handles shaped like large mechanics' wrenches, while the interiors are designed to look like a body shop with kitschy, colorful touches such as floor signs that caution customers to move in a certain direction or risk "severe sneaker damage" and such product claims as "superior handling when cornering around chair legs." The company also has a "No Lemon Guarantee."
Inside, youngsters build customized model cars (which range in base price from $12 to $25) by mixing and matching a body type and style such as stock, custom, hot rod. The 10-to-12-inch cars are assembled in the RZ Pit Challenge zone, where kids build their cars in a race against the clock. After assembly, they move through an additional seven different zones where kids can choose different types of tires, colors, sounds, grille guards, spoilers, and decals.

Clicking with Customers

According to Andreini, there are 649 million possible combinations. However, accessories are extra. For instance, a radio remote control costs $25, a set of monster tires is $10, and a "Street Glow" light kit goes for $15. Many parts are interchangeable and attached through a patented magnet system. "If something breaks," says Andreini, who calls himself the ZEO, "we haven't done our job." A fully "tricked-out" ride can cost about $100.
When they're finished, kids can create a personalized license plate. Then they're given a certificate with a "Ride Identification Number" that allows them to look up their rides, on the Internet, get digitized images, and upgrade or replace parts.
One of the reasons Andreini says Ridemakerz has instantly clicked with customers is its authenticity. For instance, Ridemakerz has licensing agreements with Ford (F) and Dodge (DCX) to use several of their models such as a Ford Mustang or a Dodge Ram pickup "Ford and Dodge both saw this as great way to have kids actually experience building their own licensed car," says Andreini."If a kid is building a Ford Mustang, it creates brand awareness at a young age." Ridemakerz is currently in discussions with two non-American car manufacturers.

Education and Fun

Since its launch, the company has received interest overseas, and Andreini says they are considering opening in Canada, Britain, and Asia, where they are mulling the idea of selling country rights. (They plan to keep U.S. stores company-owned, not franchised.) They have also been approached by various media to extend the brand through video games and television shows, but Andreini says that at the moment they want to stay focused on building the core brand and are plowing revenue back into the company.
Beyond the hoopla, Andreini says Ridemakerz is as educational as it is fun. It offers kids the opportunity to create and build something, and, he says, youngsters can learn about the history of cars and even about alternative fuels on the Ridemakerz Web site. Indeed, one of the model options is a Ford Super Chief, an alternative-fuel concept car. "We are using the vehicles as a 'ride' for education," he says. "When you think of what's out there for boys, it's video games, laser tag. But what's educational and fun? I think we've found a niche."
Build-A-Bear's initial investment is now a 25% stake in Ridemakerz. That's expected to increase to 30% by early next year. (Gillian MacKenzie is now on the company's board.) In addition to a financial arrangement, Ridemakerz has an operational partnership that allows it to use the Build-A-Bear's warehousing, distribution, point-of-sale systems, and back-office systems.
"It's a perfect complement to our business," says Clark. "Build-A-Bear is about 75% girls and 25% boys, and Ridemakerz is just the opposite. It's not that girls don't like cars, but [cars] are not a passion like it is for boys. And this is an opportunity to take on the market and create another phase of playing patterns. Not everything lends itself to experiential retailing. You've got to pick those places and focus on those things, and I think we nailed it with Build-A-Bear and now with Ridemakerz. These are two large categories with no real competitors at retail."

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A New Push to Make Farming Profitable

At the forefront of a revolution in the way small farms operate is celebrity farmer Joel Salatin. His new business model and innovative techniques are catching on with farmers across the country

We have seen new business models emerge over the last decade for dozens of industries including travel, advertising, and publishing—all relying heavily on technology-based improvements in productivity and changes in distribution associated with the Internet.
Now we may be seeing the emergence of a new business model for small farms, which have lagged the transformation of other industries and continued to rely heavily on commodity pricing and middlemen distributors.
At the forefront of this revolution is the 10-employee, $700,000-a-year Polyface Farm, a 550-acre producer of beef, chickens, and pork in Virginia's Shenandoah Valley. A family farm run by its second generation owner, Joel Salatin, Polyface is thriving thanks to a combination of innovative use of technology to encourage livestock mobility, and streamlined distribution to bypass middlemen and instead sell products directly to consumers.

A New Way of Farming

Salatin's unusual techniques for making his small farm financially viable have become so popular that he offers two weekend seminars each year in which he teaches 30 farmers and wannabes all his tricks, "including dressing chickens, grazing management, handling egg layers, composting, and soil management," he says. The sessions, at $550 a person (excluding transportation and lodging), are sold out two months in advance. "You wouldn't believe how many people come here who are desperate to exit their 'Dilbert' cubicles," he says.
What these student-farmers learn is an approach to farming that is much different from what many of the 400,000 to 500,000 family farms still in existence use today (see BusinessWeek.com, 3/19/07, "Choosing the Family Farm").
On the production side, Salatin eschews the commonly used confinement techniques and grain feeding of animals in favor of keeping his cattle, chicken, and pigs grazing outdoors, within small pastures enclosed by light, high-tech, electrified fencing and portable chicken coops that are easily moved daily by one or two people to ensure the animals always have fresh grass. Chickens are fed grains as well, but only those produced by neighboring farms, and without the antibiotics typically mixed in with animal feed.

Tree Farming

"With this technology, you can feed the world," says Salatin, watching a group of 1,200 Rhode Island Red chickens grazing in a small enclosed area of pasture on a recent morning. The mobile technology, he says, allows the animals' manure systematically to fertilize the pastures, enabling Polyface Farm to have about four times as many cattle grazing its lands as on a conventional farm—and thus save on feed costs.
Salatin combines conventional and innovative approaches to lower the farm's costs, especially energy costs. The pastures, barn, and farmhouse are situated on land below a nearby pond that "feeds the farm" using 15 miles of piping, says Salatin. He also methodically harvests the 450 acres of woodlands, using the lumber to construct farm buildings.
The pasture-based feeding of the animals leads to better tasting meat and eggs than is possible with enclosed, grain-based feedlots, he argues. And the grass helps produce meat that is lower in saturated fats and higher in polyunsaturated fats than conventional meat.

Half a Steer at a Time

He credits the high quality with enabling him to build a loyal following of consumer and restaurant customers (see BusinessWeek.com, 12/20/06, "Whole Foods and the Celebrity Farmer"). His e-mail-based "metropolitan buying clubs" have grown to 900 families within a 100-mile radius, from just 200 families two years ago. Polyface Farm delivers meat eight times a year to specific drop points in the region, where members pick it up.
"The bugaboo in direct-farm-marketing is coming in from the garden and taking care of your customers," he says. "The beauty of this is it is e-mail-based and there is no middleman." In addition, the farm continues to sell to about 400 families that prefer to trek out to Polyface Farm and make their purchases directly, often buying a quarter or half a steer at a time. "These are our most militantly loyal diehards," says Salatin.

If It's Long Distance, Don't Bother Calling

The growing demand from legions of direct customers has led Polyface to lease an additional 700 acres of pasture over the last three years. Salatin says the profits from the weekend-farmer seminars as well as sales from instructional books he's written "are allowing us to make the investment without having to resort to loans," which are another bugaboo of traditional farming.
One thing Salatin won't do as part of its growth kick is to accept orders for shipping to areas outside his Virginia community (see BusinessWeek.com, 7/18/07, "Buy Local—With Town Currency"). "We want [prospective customers] to find farms in their areas and keep the money in their own community," he says. "We think there is strength in decentralization and spreading out rather than in being concentrated and centralized."
(See our slide show for more on Polyface Farm's innovative production methods.)

David Gumpert is a journalist who blogs reports regularly about the business of health and has written a number of books about small business and entrepreneurship, including Burn Your Business Plan! He writes his What Entrepreneurs Need to Know columnevery other week.

 

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Grom Gelato: Creating a Stir in New York

Partners Guido Martinetti and Frederico Grom have managed to preserve Old World flavors and traditions in their Manhattan gelato shop 

Would Americans spend $4.75 for a single scoop of premium, handmade Italian gelato? That was the question that Guido Martinetti and his partner, Frederico Grom, asked themselves a year ago when they decided to bring their popular Italian gelato chain, Grom, to New York City. As it turned out, the answer was a resounding yes.
When the first shop opened on Manhattan's Upper West Side in May, the pair tested the waters by giving out free coupons to lure customers in to try their product. "On the first day," says Martinetti, "there was a line of people 70 meters (about 229 feet) long down Broadway." The second day, paying customers without the benefit of a coupon returned in droves. And ever since Grom opened for business, lines for the artisanal gelato shop have continued to run around the block. Now Grom is planning to open two more Manhattan locations before branching out to Tokyo in the next few years.
Grom began in Turin, Italy, five years ago when the two friends—Martinetti, a former winemaker, and Grom, who had worked in Italy's financial industry—lamented the scarcity of gelato made the old-fashioned way: with premium ingredients and processed by hand. The pair decided that instead of talking about what didn't exist, they would start their own gelato company. They very quickly put together a business plan and borrowed the startup money to do so. In 2003, they opened their first shop in their native Turin. It was an immediate hit.

Ingredients from Far-Flung Places

Inspired by Slow Food, a global association and movement that seeks to preserve regional foods and small producers, Grom's founders decided at the outset to use only the finest organic ingredients and local artisanal purveyors as much as possible. For instance, the pair scoured Italy for hazelnuts that come from Langhe, peaches from Leonforte, and pistachios from Bronte.
Grom's 20 different flavors (containing about 8 to 10 grams of fat) are incredibly inventive, packed with such ingredients as washed Arabic coffee grown on the volcanic slopes of Guatemala's Antigua region, French Valrhonà chocolate, and Sfusato lemons from the Amalfi coast. Only San Bernardo mineral water from the Italian Alps is used to make Grom's sherbets. The firm's signature Crema di Grom is made with biscuits from Piedmont and pieces of dark chocolate. "Behind every ingredient is a story," says Martinetti. "I'm the guy who looks for the ingredients. Fortunately, all of our clients are curious and want to know why we make our ingredient choices."
By 2005, the pair had opened five more shops in Italy (today, there are 14 across the country). Wanting to maintain strict quality control and consistency, they purchased a small workshop in Turin and came up with a system to liquefy the gelato mixture, so that they could distribute the mix to the stores several times a week, then cream the mix into the final product in each shop. When they opened Grom in New York, they decided to maintain the same procedure. The shop receives its liquid gelato mixtures from Italy three times a week. "We ship the liquid gelato, and we make it fresh every day in the New York shop," says Martinetti. "Everything comes from Italy: the cones, the nougat, everything. Because we wanted to offer real Italian gelato."

Riding an Artisanal Wave

When Grom launched in New York this spring, the small chain had already brought with it some transatlantic buzz. During the 2006 Winter Olympics in Turin, the Today Show interviewed the founders and featured their gelato. They are something of a hit on the foodie circuit, having earned plaudits and awards from Slow Food as well as the province of Turin as "Master of Food" in 2005 and 2006. Their New York debut earned the pair much praise and ink, including plaudits from The New York Times. Martinetti considers Grom lucky that it has earned such outsize recognition. Of the $500,000 that he says they invested in opening Grom, none went toward publicity.
Indeed, Grom entered the U.S. at a time when both the organic and artisanal movements are gaining increasing currency (see BusinessWeek.com, 4/19/07, "A Growing Appetite for Specialty Foods"). And they weren't reinventing the wheel, as gelato has been around for a while. At the same time, ice cream and frozen desserts remain a huge market segment. According to the NPD Group, a market research firm based in Port Washington, N.Y., Americans spent $21.6 billion on the ice cream and frozen dessert category in 2005. "Forty percent of the U.S. population will eat ice cream at one time during the next two weeks," says Harry Balzer, a vice-president at NPD. "The thing about the category is that there are already people interested in it when something new happens [that is, there is an existing market]."
At Grom's bustling New York store, it seems like they have reinvented the category. Martinetti says that customers are extremely curious about the ingredients and the process. In fact, he says one of the biggest challenges in starting his business here was educating the store workers on the philosophy behind the gelato. The Manhattan location is spare and clean. The walls have big blown-up images of the ingredients along with information and descriptions about each of them. The kitchen in the back where they prepare the fresh gelato daily is behind large glass windows visible to customers.

Investing in the Future

Martinetti expects Grom will break even in its first year of business and expects to see a return on the initial investment in two or three years. "We've only been open for three months. We have to see how much gelato we sell in the winter," he says. "That will be important data." There is interest in rolling out more stores in the U.S., but one stumbling block is ingredient sourcing. "Our problem is that we only use a few suppliers. We only use top-quality artisanal purveyors, and they can't increase their volume 10 times for us with the same quality. It's not a financial problem for us, it is a problem of [locating] suppliers." He compares the process to cultivating vineyards for wine. "We ask farmers to plant the best varieties for us," says Martinetti.
To that end, Martinetti and Grom recently purchased 20 acres of land in Italy's Piedmont region, where they have an organic farm called Mura Murato and plan to grow six types of fruit—such as peaches, figs, melons, and strawberries—specifically for Grom's ingredients. "We will have the first melons this year," says Martinetti, "and will be at full capacity by 2009."
Now, Grom's lines can only get longer when curious ice cream eaters discover the new flavors and want to taste more.

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Rebirth of a New Orleans Coffee Tradition

Two years after Katrina damaged the franchise's 25 local stores, the brand leader of PJ's Coffee talks about the strength of the people and the brand 

Like nearly every business on the Gulf Coast, PJ's Coffee, a famed New Orleans institution, suffered serious losses following Hurricane Katrina. Founded nearly 30 years ago in the heart of the Big Easy, pre-Katrina PJ's was a chain of 42 coffeehouses located across Alabama, Florida, Louisiana, and Mississippi. As a result of the disaster, all 25 of PJ's New Orleans stores suffered damage.
Two years ago, BusinessWeek's Stacy Perman spoke to Chris Morocco, president of PJ's Coffee, in Atlanta, and Randy Hollingsworth, then PJ's vice-president of operations about the impact of Katrina on their business (see BusinessWeek.com, 9/29/05, "Grounds for Hope in New Orleans"). On the second anniversary of the disaster, Hollingsworth, now PJ's brand leader, discussed the company's road to recovery. Here's what he had to say:

An Indelible Mark

Roughly two years after the Katrina disaster, I can say without hesitation that life is less of a daily grind. In the parishes, towns, and cities that define the Gulf States, it now takes less effort to appreciate things that seem fundamental to most people in America like fresh water, consecutive days of power, or a police presence. Running a business like PJ's Coffee of New Orleans now takes fewer makeshift resources than the months immediately following the disaster.
Less is a relative term in a post-Katrina era, though, as we approach two years since it left an indelible mark on a city with the third-largest coffee port in the U.S.; one of the most recognized streets in the world, Bourbon Street; a city whose architecture is not of this country, but of this world; a city that borders the most famous or infamous river in the U.S. Even fewer families are choosing the forever disaster-related Katrina identity—I noticed it was recently reported that Katrina dropped more than 100 slots in the popularity list for newborn names.
A third of our PJ's Coffee stores (we added "of New Orleans" to the brand in 2006 to feature our proud heritage and commitment) were dramatically affected by Katrina. Damage at our franchisees' locations ranged anywhere from several thousand dollars to in excess of $200,000, just in property and store damage. That does not include loss of operating income—or individual owners whose homes were damaged or lost. Felton Jones, our longtime roaster, lost his entire home as did his roasting associate Brian Beck.

Listening to Mark Twain

In those initial days and weeks following the storm, we were persistent in trying to determine the whereabouts of our franchisees and our corporate employees, and the scope of damage at our stores and our roasting facility that rests just a stone's throw from the mighty Mississippi. Mark Twain wrote, "The Mississippi River will always have its own way; no engineering skill can persuade it to do otherwise." How perceptive he was.
Realizing there was much at stake for us as a company, much at risk for the livelihood of our franchisees both inside and outside the Gulf, and much more in jeopardy close to home, it quickly became apparent to us that the only way to get our arms around the situation was to go against traffic, against the word on the street, against trucks and tanks and armored personnel carriers, and make our way to New Orleans.
We would fly to Jackson, Miss., and make the drive to New Orleans, stopping at every exit to fill gas containers, gaining familiarity with McComb, Miss., the last-chance fueling destination before entering Louisiana. Cash was important, but gas was king back then. Water was king. Without either liquid, you didn't go very far or last very long.

Sanctuaries for Locals

While armored personnel vehicles kept us at bay initially, we found friends in the state patrol—frequenters of PJ's Coffee, who eventually helped us navigate around the despair to get us to our roasting facility located in the Faubourg Marigny, which is the next neighborhood down river from New Orleans' French Quarter. It is the backbone of our coffee business and our franchises.
Some stores in outlying areas like Hammond, Covington, and River Ridge recovered in a few days. These stores would soon become sanctuaries for locals. As we were unable to get our roasting facility back up and producing until Nov. 12, 2005, we relied heavily on an Atlanta roaster to supply our franchisees with the coffee—roasted to our PJ's Coffee profiles—that they required to survive.
While we worked to ramp up our roasting facility, we faced the challenge of physically getting coffee to the stores. We could no longer take transportation for granted. Suppliers were reluctant to truck product into the Gulf States or to export it from our roasting facility to our markets in Georgia, Florida, and New Jersey, for example. The supply chain of American invention was breaking down in both directions. We persevered like many companies, giving up efficiencies to simply get the job done. Our people slept in cars, trailers, and on air mattresses in warehouses to fill in the gaps of a supply chain that was broken for several months across the Gulf.

Lessons Learned

Last spring was the first time I was able to fly into New Orleans International Airport instead of making the three-hour, 220-mile commute from Jackson by car. I remember seeing our PJ's Coffee shop on Concourse D dark. It's one of two locations that never bounced back. Concourse D remains today much like the neighborhoods in which local businesses can't sustain themselves. Our franchisee in the Lakeview area continues to hope for the return of their neighborhood. For now, though, they can't justify reopening their store. And as a franchiser with a conscience, we can't insist they open. That's not our way. That's not the New Orleans way.
As it relates to Katrina and the related bureaucracy, what we have learned doesn't help us much. Our franchisees may have learned that business interruption insurance is important, if not vital. Yet such insurance has become either cost-prohibitive for a small business or simply unavailable. As a franchiser, we have come to learn you can't have enough liability insurance along the Gulf. We have also come to learn that liability insurance costs three times what it used to. There's not much we can do about that. It's simply the cost of doing business along the Gulf.

The Home of Good Coffee

As we approach 30 years since Phyllis Jordan founded our great coffee brand, years before specialty coffee found its way to every street corner, we are reminded that New Orleans defined the idea of specialty coffee, leveraging its New Orleans port to bring the best beans in the world to our roasting facility, then to our coffee shops, and to neighbors who wanted to enjoy a great cup of coffee.
We expect to hit 60 stores before the end of 2007, with plans to franchise more stores in 2008 than ever previously. And so for Phyllis, our franchisees, and our customers, we are back, more robust than ever, more full of hope knowing our true place is to be the neighborhood coffeehouse, that sanctuary for friends, family, public servants, students, travelers, neighbors—in the best of times and the worst of times.

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New Orleans: A Startup Laboratory

Entrepreneurs are finding fertile ground for new ventures they think will help bring the devastated city back to life 

In a fifth-floor penthouse office in the central business district, developers craft an online trading system to let companies sell their accounts receivable at a discount for cash. A few blocks away, a programmer builds a tool to send patients' medical data to doctors' smart phones in real time. On the other side of town, workers assemble a sleek modular home from aluminum framing and interlocking panels—no nails or screws required. At the end of the day, they might all head for a hip new nightclub near the waterfront.
This is not New York or Chicago, Seattle or San Francisco. This is New Orleans, two years after Hurricane Katrina, and these ventures represent a cross-section of the entrepreneurial spirit that has quietly blossomed in the city since the flood. New Orleans suffered a net loss of 2,951 employer businesses, or 30%, between the last pre-Katrina quarter and the first quarter of 2006, according to a new report from the Louisiana State University Economic Development Div. (Businesses reporting no employees were filtered out.) Over the last three quarters of 2006, however, New Orleans gained a net 968 employer companies, representing a return to about 80% of the pre-Katrina level.
A small but growing corps of young, ambitious, and passionate entrepreneurs are starting companies that could help the city's economic future. They are business owners who looked beyond New Orleans' traditional tourism, oil, and shipping industries to find fertile ground for their ideas.
"You really want to be able to invest in high-yield entrepreneurs in sectors like technology or film. Those are where you're getting your innovation," says Robin Keegan, director of economic and workforce development for the Louisiana Recovery Authority, the state agency coordinating the rebuilding. "You're also getting a level of company owner and a level of employer that really are committed to both the economic and civic purpose of the city."

Focus the energy

Justin Brownhill, a 36-year-old London native who left a managing director post at Citigroup (C) in New York to co-found the New Orleans Exchange, the online receivables market launching early next year, is one such entrepreneur. "We are trying to focus energy on not just rebuilding the infrastructure and neighborhoods of the city. We are helping to focus the energy on small business and corporate growth and the economy," Brownhill says.
Brownhill and his cohorts' push will not erase the city's problems. New Orleans still has shaky infrastructure, rampant crime, political corruption, and just 60% of its pre-storm population, according to the latest estimates. Vast areas that were flooded remain nearly abandoned. So why would anyone start a business there?
The city's new entrepreneurs see a chance to reinvent the economy, to associate the Crescent City with innovation and technology, with new ideas that will spur growth. "Right now, New Orleans has extremely great long-term potential in the sense that we're crafting a new city," says Chris Brown, who took Plaine Studios, his digital design firm, from a part-time business to a full-time venture after Katrina.

Bargain Office Space

Startups in New Orleans also enjoy lower costs than in many cities—Brownhill says the New Orleans Exchange might pay 10 times as much in New York to rent the kind of loft space his company has. He also hopes to hire local talent out of Tulane, Loyola, and the University of New Orleans—candidates he says are often driven to Atlanta, Houston, or Dallas for jobs.
Blake Killian, who left a small Internet startup to found his own online marketing firm, Killian Interactive, this summer, says Web-based companies have another advantage: Their businesses didn't suffer the same damage during Katrina that traditional companies did. "We just grabbed our laptops and headed to higher ground," Killian says.
There are signs that startup activity is on the rise. Idea Village, a New Orleans nonprofit dedicated to fostering entrepreneurship, has received 1,015 applications for grants, loans, or nonfinancial assistance since the storm. All but 2% or 3% came from existing businesses until this year, according to Tim Williamson, the group's president, but since January, 36% have been for new ventures. "In the first year, it was just people coming back. Now there's people coming in, really coming to us saying: 'We got new ideas,' " Williamson says.

Encouraging Startups

Idea Village is part of an existing infrastructure that supports entrepreneurship in the city. The group plans to launch a series of Business Innovation Centers, the first of which is set to open in the Upper Ninth Ward on Aug. 25, to bring resources to business owners in their neighborhoods. Another group, the Entrepreneurs' Organization Accelerator, was launched after Katrina to help early-stage companies grow.
"Everybody wants everybody to succeed, and I think if anything Katrina has motivated people to open it up more," says Neel Sus, an Accelerator member and Tulane grad behind a pair of startups. Sus quit his job at Northrop Grumman (NOC) last year to focus on SusCo Solutions, his business-process improvement firm. His other venture, eLYMPUS, is developing a way to send patient information to doctors' smart phones, an advance he hopes will improve care in the city's struggling hospitals.
Most of these go-getters root their companies in New Orleans because they believe it is up to entrepreneurs—not the government or Big Business—to rebuild the city. Shawn Burst, who licensed an innovative system of modular building materials from a German businessman, said he placed his firm in his native New Orleans even though his target market is Northern California. Burst, 41, has plunged $2 million into the venture, called Jeriko House, and he's building a prototype on Canal Boulevard. "Everyone's leaving. The climate has been that businesses are leaving," he says. "Maybe this will open people's eyes and make them look at what's happening down in New Orleans."

Post-Katrina Possibilities

It's too early to say what role these young companies will play in shaping the city's uncertain future. But the entrepreneurs say their ventures show that New Orleans is rising. That's what Robert LeBlanc intended when, less than four months after Katrina, he opened Republic New Orleans, a nightclub and creative center that has become a hub for newcomers and repatriates alike.
"Everybody knows that there have been a lot of problems endemic to New Orleans, and a lot of that is because it has been such an insular city for such a long time," LeBlanc says. "We wanted to do things to connect the people who are in New Orleans with the new people who were coming to New Orleans, to create those bonds and those communities."
Williamson, of Idea Village, sees the new energy in the city as the vanguard of a larger movement. "The sense of possibility is more than it was before Katrina," he says. "If you're into innovation and entrepreneurship, New Orleans is a laboratory for that right now."
See our slide show for profiles of more entrepreneurs who started businesses in New Orleans, and hear what attracted them to the city.

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From Home Kitchen to Whole Foods

BusinessWeek chats with two young entrepreneurs who aim to 'Feed' the masses quality organic granola 

Models turned business partners Jason Wright (on left) and Jason Osborn turned the granola that they made as a snack in their New York City apartment into a three-flavor organic line they named Feed Granola.
How many times have you come up with an idea that causes your friends to say: "Hey, that could be a business!" How many times have you agreed with them? But how many times have you actually gone out and transformed that idea into a real business? Well, that's exactly what former models turned business partners Jason Osborn and Jason Wright ended up doing. In 2005, the pair turned the granola that they made as a snack in their New York City apartment into a three-flavor organic line they named Feed Granola.
Now sold in eight states at stores including Whole Foods Market (WFMI) and Wegmans Food Markets, Feed Granola earned $110,000 in sales in 2006, and is projected to make $2 million over the next 12 months, according to Osborn and Wright.
Recently, BusinessWeek.com's Stacy Perman spoke with Osborn and Wright about making the leap from a home kitchen hobby to a full-time company. Edited excerpts of the conversation follow.
How did you come to turn a homemade snack into a business?
Osborn: In 2003, our modeling agency put us together and we were living as roommates in the West Village. We started making granola as a healthy snack for ourselves. We would pass it out to friends, and it kind of caught on in the neighborhood. We gave it to a local restaurant to sample, and they ended up putting it on their menu. We realized that we had something special at that point, and we talked about making it into a serious product. So we took the granola to a dietician and gave her the formula. She said we had a really healthy product here and that there was a real need in the marketplace. So we put our heads together to make it a business in 2004.
Wright: And we formed a business corporation in December of 2005.
Did either of you have any prior business experience?
Osborn: After I moved to New York, I worked for an ad agency for three years. And in college I majored in business management and advertising.
Wright: I went to the University of South Carolina and majored in hotel, restaurant, and tourism management, and minored in business. But in college they don't teach you to be an entrepreneur. When I graduated I had no idea that I would have a granola company one day. But I did want to own my own business and to work for myself. I didn't know what I wanted to do, and I got into modeling because it got me to travel. I was managing an Abercrombie & Fitch (ANF) store and that led me to modeling, which led me to New York.
How did you initially finance Feed?
Osborn: In the beginning we financed it ourselves.
Wright: We spent about $10,000 between us from 2004 to January of 2006.
Were you still making the granola in your kitchen?
Osborn: Yes, at first we were making it in our sixth floor walk-up. And we'd go around the neighborhood offering it as samples at gyms to get feedback from people who weren't our friends. That's how we hooked up with a local natural-foods store that put us on their shelves. But at that point we'd gotten too big for our kitchen, so we partnered with a meal delivery service in the city and bartered (BusinessWeek, 7/18/07) to use their kitchen space. We'd bake our granola during the night when they weren't using it and we paid for the usage in granola. That's how we paid rent on our first facility.
Wright: We did that for a year until the end of 2005, and then we outgrew that facility and moved to a cooking company in the Bronx. We trained their staff and worked with them until August of 2006.
Since you were growing, what did you do for capital?
Osborn: We approached the U.S. Small Business Administration and applied for a small-business loan. We were approved for a $75,000 loan, and the money got us to the point where we could launch the product at Natural Products Expo East, a national trade show in Baltimore. We made a plan to spend the next 10 months working on the brand and packaging in order to launch it at the trade show. We came up with the brand name and hired a designer friend of ours to execute the vision we had put down on paper.
Did you have a business plan or did this just evolve? Did you seek advice?
Osborn: In the beginning, we were just flying by the seat of our pants. Early on we sought out SCORE and spoke to them literally via e-mail. They helped us with questions about incorporating and starting a business plan. Then we created the business plan ourselves. It was really just cursory. It laid out how we'd run the business and outlined some of our market and financial milestones. We used that plan to secure our loan from the SBA.
What was the best piece of advice you received?
Osborn: Before we actually launched at the trade show, we attended a few other trade shows and we went to the educational programs and seminars that they had on how to take a product to market. We were able to ask people firsthand how they did it. They helped explain how to go to the next level from where we were. It was very helpful to attend those seminars.
Also, going to the trade shows allowed us to introduce ourselves to markets and distributors and chains. They could see that we were a viable company and became attracted to our brand.
Were there any blunders along the way?
Osborn: Yeah, of course. I think our biggest challenge was finding a facility that fit our needs. If you are constantly growing and changing, you need a manufacturer that allows you to do so. Also, I think our lack of experience allowed us to be more innovative, but I think if we had more experience we could have answered a lot of questions that came up.
Wright: When you are a small, growing company, cash flow is always a problem. Trying to balance receivables vs. payables is always a big challenge.
Many people have an idea but not everybody turns it into a business. What would you say makes that leap possible?
Osborn: In our case, we had a very good partnership. We both bring different things to the table. But I'd also say that you have to go with your instincts and vision and guts and stay true to them. Everyone has their own opinion and advice and it's always different. I say, stay focused.
What's next?
Wright: We'd like to go national by mid-to-late 2008.
Osborn: We also want to expand our product line once we've established it as a quality product. And we want to enter into brand extensions.

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The Paul Newman of Punk Rock

After Hopeless Records started bringing in cash, founder Louis Posen began spinning profits into charity and joined a new trend in "social entrepreneurship" 

Louis Posen's dream of becoming a movie director was coming to an end. The 19-year-old was studying film at California State University at Northridge in 1991 when he was diagnosed with retinitis pigmentosa, a degenerative eye disease that leads to blindness. Looking for another creative endeavor, he bought a book called How to Run an Independent Record Label and launched Hopeless Records from his garage.
Today, Hopeless is profitable, employs nine people, and will gross $5 million this year. Boosting revenues and earnings every year in an industry barraged by digital piracy and slumping sales is an accomplishment. But Posen has another hit on his hands: He figured out a way to spin a sizable chunk of the money his company generates into philanthropy. "Although we didn't really plan it," Posen says. "we're part of this whole movement of social entrepreneurship."
The notes of inspiration came seven years ago, after a compilation of the label's artists called Hopelessly Devoted to You Too sold more than 100,000 copies. Posen realized there was strength in numbers. He created another label called Sub City, a play on the word subsidy and on the punk rock subculture in which the company specializes. Then he offered his artists the option of releasing their records on Hopeless or Sub City.
If they choose Sub City, 5% of the gross goes to charity (BusinessWeek, 5/24/07). On a $14 compact disk that's about 70 cents, but those dimes add up. Posen recently celebrated what he calls a "million-dollar milestone," having given more than $1 million to charity. Half of the money comes from the artists' royalties, the other from Posen's profits.

Creative Philanthropy

Sub City also sponsors tours from which 10% of ticket sales go to various causes. The label works with more than 50 charities, including causes such as fighting blindness and music education in schools. Not every band chooses to participate. Posen figures about 3 of the 10 releases his company puts out each year are on the Sub City label. "Some artists prefer to give on their own," he says. "Some can't afford it."
Posen learned to be creative from a business standpoint early on. Punk rock isn't a huge market. His top selling album—from a band called Avenged Sevenfold—has sold 400,000 copies in the U.S. That's 100,000 shy of what's needed to qualify as a gold record. Posen generates extra revenue for his company by keeping the rights to sell a couple of merchandise designs from each of his bands, such as a T-shirt or a poster. He also takes a fee for licensing their music to television shows and movies. It's a business model many major labels (BusinessWeek, 6/28/06) are now pursuing. "Louis has the spirit of an entrepreneur and a heart of gold," says Mitchell Wolk, an executive at Warner Music Group (WMG), which helps distribute Posen's albums. "He is truly an inspiration to us all."
Marketing punk rock (BusinessWeek, 8/8/07) is difficult. The segment isn't driven by hit singles or radio airplay like most of the music business. Instead, Posen and his team must build awareness for their artists through appearances in record stores, on social networking sites such as MySpace (NWS) and PureVolume, and through relationships with other companies looking to stay in tune with youth culture such as the Hot Topic (HOTT) retail chain.

Hopeless Lifestyle

On Sept. 25, for example, Hopeless is releasing the new album from All Time Low, a pop-punk quartet from suburban Baltimore. The company has a marketing alliance with Hollister, an Abercrombie & Fitch (ANF) spin-off that will sell the CD in its stores and stream All Time Low's music on its Web site. "We call ourselves a record label but we've never looked at ourselves as being in the record business," says Posen, dressed casually in jeans and Vans sneakers. "It's a lifestyle."
Left with only the ability to see light and dark in one eye, Posen takes a cab to work most mornings. His wife picks him up at the end of the day. At the office, he uses a software program called Jaws that reads his e-mails and Excel spreadsheets aloud. With profits from the business, Posen recently bought a 5,500-square-foot warehouse in the Los Angeles suburb of Van Nuys. On a recent September morning, he was bumping into walls and furniture. "We moved in two weeks ago, and I'm still getting used to the place," he says.
Scientific studies have shown that the blind can become suburb musicians, their ears compensating for the loss of sight, à la Stevie Wonder and Ray Charles. "Not me," Posen says. "I've tried to play guitar, drums, everything." Posen has more than made up for his lack of musical ability, finding other ways to make music and give back to others at the same time. "Losing your sight is not something anyone would choose," he says. "But there are worse things that can happen to you."

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Business Courses Give Kids a Leg Up

When she was a 17-year-old student at Mt. Carmel High School in Derby, Kan., Abby Lewis developed a business plan for the Scribbler, a nail polish applicator that looks like a marker. With big expansion plans and a patent pending, Lewis has already been approached by major cosmetic companies interested in her product.
Christian Abrego, 16, came up with the idea for his company, Young Sprouts Event Marketing, while a student at Menlo-Atherton High School in East Palo Alto, Calif. Abrego, who immigrated to the U.S. from Mexico with his family, wrote a business plan that addressed the need for a place where young people could hang out and play soccer or participate in art shows—an alternative to drugs or just killing time on the street.
Extreme Kleen, an auto-detailing business that offers its services to owners of just about any type of motor vehicle, is the brainchild of Marvin Lenzy, 15, a student at Suitland High School in Suitland, Md.

The Business of Graduating

Lewis, Abrego, and Lenzy are all teen entrepreneurs whose interest in starting their own businesses was sparked when they took entrepreneurship courses at their high schools that were sponsored and run by the National Foundation for Teaching Entrepreneurship (NFTE)—a New York nonprofit that teaches business skills to low-income youngsters across the country to help them out of crushing poverty.
On Oct. 3, 32 NFTE alumni finalists from around the country presented their business plans at the Second Annual Smith Barney/NFTE National Youth Entrepreneurship Challenge in New York City in hopes of winning up to $10,000 in seed capital. For a look at a selection of the finalists as well as other alumni who have gone on to start their own businesses, flip through our slide show (BusinessWeek.com, 10/5/07).
According to a survey published last year by the Gates Foundation, almost a third of all public high school students (nearly half of them African American, Hispanic, and Native American) fail to graduate with their class. Furthermore, these dropouts are more likely to live in poverty, be unemployed, and receive public assistance. However, 81% of the Gates survey respondents also said providing real-world learning opportunities increases those at-risk students' chances of graduating.

Taking It to the Schools

NFTE began in 1982 when Steve Mariotti, a high school teacher and dropout specialist working in some of New York's toughest neighborhoods, noticed that his students were just as interested in business as wealthy people were. "When we talked about ownership and the benefits of ownership, I noticed that they came to school more and they were more engaged," says Mariotti, who realized it was possible to convert his students' street smarts into business smarts.
So Mariotti devised a curriculum that incorporated those interests. "I came up with a course for low-income children who were not doing well in school on how to start a small business," he says. "In teaching them to come up with a business plan, we really teach them math and reading skills."
Mariotti fine-tuned his curriculum over the next five years, developing 50 lesson plans—known as the NFTE 50—covering everything from the difference between sales and marketing to how to open a bank account. Having seen the results among his own students in New York, Mariotti believed his course could be replicated on a national scale.

The Forbes One

In 1987, Mariotti read the bios of the Forbes 400 and sent letters to 186 of the chief executives asking whether they would be interested in helping low-income children learn how to start their own businesses. He received one reply—from Raymond Chambers, the founder of Wesray Capital in Morristown, N.J. After the two met, Mariotti says Chambers pledged to give him $200,000 to fund one year. "He said, 'Let's see how it goes.'"
Since then, the program has reached more than 150,000 youths in 21 states and trained more than 4,100 certified entrepreneurship teachers. Moreover, NFTE has expanded overseas with programs in 13 countries including Belgium, China, Germany, India, Israel, and South Korea. NFTE now operates on a budget of $15 million and has attracted respected corporate donors such as Microsoft (MSFT) and the Goldman Sachs Foundation.
In NFTE's weekly two-hour classes, fledgling entrepreneurs learn business skills in semester- or year-long courses, after-school programs, and summer camps. Each student comes up with a business plan and participates in organized selling events at his own school. In 1997 a study by Andrew Hahn of the Center for Youth & Communities at Brandeis University found that 33% of the students who completed the NFTE program went on to start their own small businesses and 70% finished secondary school.
Malik Armstead completed the NFTE program in 1988 as a 17-year-old in Philadelphia, at the suggestion of one of his guidance counselors. "The program allowed me use both sides of my brain—the creative and the analytical," says Armstead, who read The Wall Street Journal in class and learned how to read balance sheets and income statements, how stock prices are determined, and how to develop a business plan. "I felt pretty inspired. I felt like a business student."

Giving Kids More Options

Moreover, he caught the entrepreneurial bug. Following the program, Armstead dabbled in a number of small businesses such as selling soda and candy in his high school. While at Morehouse College, he sold hand-painted jeans and T-shirts. After graduating, he got a job at Morgan Stanley (MS) in New York but says, "My dream was to own my own business."
In 1996 he opened a small takeout restaurant in Brooklyn, N.Y., which eventually grew into a successful catering business, restaurant, and bar called the Five Spot, which also offers live entertainment. Armstead says one of the most gratifying parts of owning his own business is his ability to give back to his community. "One of the biggest impacts from a social perspective is that we offer training and jobs to inner-city youth."
Like many participants, Armstead credits NFTE with changing his life. "It is just incredible. I thought you had to know someone to get in a business or have a ton of money. But [I learned] you can start on a micro-level and grow it from there. NFTE gets kids focused on creating their own businesses rather than just getting a job and working for someone. It gives them more options in life."

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Restaurateurs Don't Just Wing It

Ladawn Sheffield

Jordan Busch and Sara Sawicki are the co-owners of Fire on the Mountain Buffalo Wings, a bustling wing joint in Portland, Ore., which has been embraced as a local favorite since virtually the day it opened, on New Year's Day, 2004. Last year, the restaurant rang up more than $1 million in sales, and the business has proven profitable enough to bankroll a second, larger location along one of the city's main drags.
If you ask Busch or Sawicki for their secret to their success, they will tell you the answer is simple: Their food is good, and they serve it in a way that is different and better than the competition. And they are able to do this because they are passionate about buffalo wings: The end.

Mapping Out Failure

Of course, you're likely to get a similar answer from virtually any successful restaurateur who is called upon to dispense such advice. To wit, Wolfgang Puck: "I always believe great food, great service, and wonderful customers put into the right space will make a successful restaurant." Or Daniel Boulud: "In the end, doing what you love is what matters…As time passes, your ambition will carry you from one milestone to another." These are the chestnuts that inspire an uncountable number of angst-ridden lawyers and free-spirited drifters to pursue their version of the American dream, to believe that they can succeed where so many others have failed.
These can-do stories also drive people like John Walker a little crazy. Walker is a professor at the University of South Florida's School of Hotel & Restaurant Management, and the author of thick textbooks like Restaurant: From Concept to Operation (now in its fifth edition). Books like Walker's lay out all the reasons would-be entrepreneurs have to think twice before starting a restaurant. Do you mind sacrificing your evenings, your weekends, and most likely your mornings, too? Do you have a menu, a concept, a business plan? Do you have money to lose? Because, after all, everyone knows that the restaurant business is a fool's game.
Until recently, however, there wasn't much research to confirm or deny any of this advice. Most academic work in the hospitality field focused more on the relative financial performance of existing restaurants rather than basic questions about why restaurants succeed or fail, and how often. H.G. Parsa, now a professor at the University of Central Florida's College of Hospitality Management, set out to investigate exactly those questions. He did so armed with a unique data set—three years' worth of operating license records from the Columbus (Ohio) health department—as well as in-depth interviews with both present and former restaurant owners. What Parsa determined was that a lot of popular assumptions about restaurant failure are incorrect.

Success Is in the Concept

The oft-cited statistic that 9 out of 10 restaurants fail within their first year? Wrong. The actual figure, Parsa found, is closer to 1 in 4 (BusinessWeek.com, 4/16/07). Parsa discovered that conventional wisdom is also unreliable when it comes to explaining why restaurants fail.
Restaurant owners weren't failing because they had ill-defined competitive strategies. They weren't failing because they lacked access to capital, or because they chose poor locations, either. (These are factors, Parsa says, just not typically make-or-break ones.) Rather, the single most critical element of a restaurant's success, Parsa says, is the presence of a distinctive, well-researched concept. This insight is, admittedly, a bit of an anticlimax. The importance of a concept seems like it would be obvious to anyone prepared to invest thousands of dollars in said concept. As it turns out? Not so much.
When asked to describe their concept, failed restaurant owners answered "vegetarian food" or "Alaskan seafood"—when pressed, and they couldn't expand their description beyond food production.
In contrast, the successful restaurant owners could describe, in detail, an entire operating philosophy encompassing everything—the ambiance, the service, the decor—not just the food.

Dining Out is not Field Experience

Parsa's research also shows that the average aspiring restaurateur isn't willfully flying blind when it comes to the established how-tos of restaurant ownership. (Some of the failed restaurateurs in the study had elaborate strategic plans.) He is, however, overly confident in his own skills, knowledge, and level of commitment.
For example, take what John Walker says is rule No. 1 in the restaurant business: Experience is crucial. If you don't have restaurant experience, he says, do not open a restaurant.
Most people wouldn't quibble with this advice. In part, that's because virtually everyone has some "restaurant experience." Nearly half of all adults have worked in a restaurant at some point in their lives, according to National Restaurant Assn. figures. Scott Rockafellow, a business counselor at the North Carolina Small Business & Technology Development Center, says even those who haven't spent a summer slinging hash convince themselves they know all they need to know. "People think, 'I've eaten in restaurants, I like food, I cook at home—I can start a restaurant!"
Rockafellow says a lack of familiarity with restaurant operations is especially problematic for those entrepreneurs without general business experience, either—which is to say, the majority of them. He says while most young outfits are run by entrepreneurs with a background in the type of business they want to start, restaurants, in contrast, attract "a lot of dreamers." People, at first glance, like the co-owners of Fire on the Mountain.

More than a Wing and a Prayer

Neither Busch, a law school graduate, or Sawicki, a self-described "ski bum," had any experience in business or restaurant management. But Dean Vachero, a Portland-based restaurant broker who found them their space, says the partners weren't "going on a wing and a prayer," either, like a lot of the clients he sees; their plan had cautious beginnings.
After first considering a new franchise (BusinessWeek.com, 8/31/07), the pair had started researching the wings concept in 2003 on the advice of a friend of a friend, who had opened several successful restaurants himself. They found some encouraging signs, like a magazine trend story about the growing popularity of new wing restaurants sprouting up across the country. "The more I researched, the more confidence I gained," says Busch, who had been kicking around the wings idea since he was a teenager. He already had the whole concept mapped out in his head: It would be someplace with the ambiance of a local sandwich shop rather than a sports bar—someplace where everybody could feel comfortable. There would be a big chalkboard menu, live music, and a rotating gallery of local artists on the walls. Busch says most of these details were things he just had a gut feeling about. Even so, he and his partner didn't stake their initial $100,000 investment on intuition.
Instead—unlike a lot of restaurateurs—Busch quit his job with a bar-review company to seek hands-on experience in the very field he was contemplating. He made his pitch to the owner of Wingin' It, a wings restaurant in Denver, offering to volunteer his time in exchange for the chance to learn about the business. Luckily, an employee had just quit, and there was a job open—as a fry cook. Busch took it. When he wasn't on the clock, he pored over the restaurant's financials, asking questions about everything he couldn't directly observe. The owner dispensed specific suggestions Busch says he could never have found in his Internet research. For example: Look for a small space of about 1,000 square feet to 1,200 square feet, he advised—it keeps costs down, and takeout and catering is where the real money is, anyway.
Once Busch and Sawicki were convinced their wings concept could work, they plotted the next step of their plan: location. Both liked the idea of Montana—Bozeman, or maybe Missoula—but they were swayed by a friend who had recently moved to Portland, Ore. The city was great, the friend said, and there weren't any good wings places. Busch and Sawicki thought their concept seemed a good match for Portland's laid-back, boho vibe, but the clincher came when they discovered that a wings-enthusiast site, CluckBucket.com, had rated Portland the worst city for wings in the country. Three months later, they packed their bags.
In Portland, the pair quickly set about acclimating themselves to their city—dining out frequently and introducing themselves around to local restaurateurs. Based on this informal market research (BusinessWeek.com, 1/9/08), they made a few tweaks to their concept, like adding soy-based "Portland Wings," to the menu after noticing that a non-meat option was pretty much de rigueur in the vegetarian-friendly city.

Sustaining Success

Scott Roth, the owner of Cluckbucket.com, says wing-loving Portlanders now have half a dozen new places to satisfy their cravings, including national chains (BusinessWeek,BusinessWeek.com, 6/29/06) like Buffalo Wild Wings. A "buffalo wings and pizza" restaurant near Portland State University has come and gone, nevermind the seemingly natural match between college students and greasy food.
Meanwhile, Roth says that despite Fire on the Mountain's shortcomings—getting a table for big groups can be challenging, and it's in an out-of-the-way, semi-industrial neighborhood—the restaurant stays packed. The reason, he says, is simple: "They make really, really good wings."

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Israel's Winemaking Revolution

The Golan Heights Winery vineyards climb from the Sea of Galilee to snow-capped Mount Hermon near Israel's border with Lebanon and Syria. A picturesque region of rolling hills, waterfalls, and gorges, the Golan Heights is perhaps best known as the contentious area Israel captured from Syria during the Six-Day War in 1967—territory still claimed by Syria today.
However, the Golan Heights Winery has added an unexpected business significance to this 460-square-mile rocky plateau. Established in 1983, the winery is credited with remaking the Israeli wine industry and slowly transforming Israel's reputation as a maker of unexciting, syrupy kosher brands to a producer of world-class, award-winning wines that appeal to sophisticated international consumers.
The state-of-the-art winery, located in the village of Katzrin, is owned by four kibbutzim (collective farms) and four moshavim (cooperative farms) that also maintain its vineyards. A professional management board of directors runs the winery. Its three labels, Yarden, Gamla, and Golan, produce some 17 different varieties and are the most widely exported Israeli wines in the world. In 2007 the winery's 1,600 acres of vineyards produced 430,000 cases, up from 420,000 in 2006, and generated sales of $30 million. Today, says the head winemaker, California-born Victor Schoenfeld, "We have wine shortages. Our demand outstrips our supply."
The success of Golan Heights Winery helped open the floodgates for what is known in Israel as the "quality revolution" in Israeli wine, creating a new market and brand identity for the country's vintages. That helped spur the creation of new wineries as well as to push existing ones to improve the quality of their products. Michal Neeman, director of the Israel Export & International Cooperation Institute's food and beverage division, says of the Golan Heights operation: "Their role was crucial. Everyone agrees that they were the first winery to produce excellent wine. Then came the boutique wineries, then the medium-sized, and then the large ones. There were a lot of other factors as well, but when you pinpoint the revolution, it started at Golan Heights."

Rising Exports

According to the 2008 edition of Rogov's Guide to Israel Wines, written by Ha'aretz newspaper wine critic Daniel Rogov, the number of wineries in Israel has grown dramatically, particularly since 2001. In a country about the size of New Jersey, there are now about 130 wineries. Sales of Israeli wines reached about $140 million in 2007. According to the Israel Export Institute, wine exports hit $21 million in 2007, up 42% from 2006.
Winemaking in Israel dates back to biblical times. However, following the rise of Islam in the 7th century, it all but ceased when Muslim leaders banned alcohol. Serious winemaking resumed in 1882, when French philanthropist Baron Edmond de Rothschild began underwriting agricultural settlements in the region with an emphasis on wine growing. In 1906, a collective of grape growers set up what would become the wine cooperative Carmel, for decades the country's dominant player. The reputation of Israeli wine continued to be linked to kosher vintages mostly used for religious observances.
The turning point came in 1972 when Cornelius Ough, a renowned oenologist from the University of California at Davis, visited and surveyed Israel. He concluded that the Golan Heights was an obvious place to produce high-quality wine because of its volcanic soil, cool climate, altitudes, and water available through drip irrigation systems. Four years later, the area's first vineyards were planted near El Rom, the site of one of the largest tank battles between Israel and Syria during the 1973 Yom Kippur War.
In 1983 the Golan Heights Winery was established; it released its first vintages soon after. Almost immediately, Israel proved it was capable of producing world-class labels when the winery's 1983 Yarden Cabernet Sauvignon Blanc received the Winarsky Trophy for Best Cabernet Sauvignon Worldwide at the London International Wine & Spirit Competition in 1987. It was the first major prize for an Israeli wine and earned the winery global recognition. A number of awards followed.

High-Tech Vineyards

When Schoenfeld first arrived in 1992, the winery had been employing a rotating crew of experienced winemakers from California. Schoenfeld, a graduate of the viticulture school at UC Davis and a veteran of the Robert Mondavi Winery in Napa and the Chateau St. Jean in France, was offered a three-year contract. "I figured that I would stay as long as it was interesting," he says. "And it never got boring. It was a great stroke of luck to find myself in a situation … to lead a quality revolution, producing good results in a nonproducing area."
At the time, the winery had only about 300 to 400 acres of vineyards and was producing 150,000 cases of wine a year. Although it had received several awards and the attention of a New York Times wine critic, the reputation of Israeli wines was still less then stellar. Schoenfeld saw the future in producing premium, high-quality wine. It was a radical break from the past.
Says Schoenfeld: "To make low-priced wine you have to be in a country with cheap land and labor costs or have a big size to amortize costs. In Israel we didn't have any of these things and there was no advantage in producing low quality. If Israel wines were to exist and flourish we would have to go to the quality side of the market."
Schoenfeld introduced new techniques to Israeli winemaking, such as using pneumatic membrane pressers and computer-controlled cooling of stainless steel tanks. Today, satellite imagery developed by NASA helps determine optimum planting while a network of meteorological stations placed throughout the vineyards along with a system of microsensors attached to the vines collect temperature and humidity readings on a minute-by-minute basis. The winery spends about $3 million to $4 million annually on research and development.

Slow to Sip

Although it was making top-notch wine, the winery still faced a number of challenges before it could improve its reputation and gain market share. Few Israelis were avid consumers of dry, complex wines like those in Italy or France. Initially, "we were producing a product for a market that didn't yet exist. There was no demand for it," Schoenfeld says. Although domestic wine consumption has recently increased to about 4 liters per year, it still lags well behind large wine-consuming countries like France, at 60 liters annually, or even the U.S., at 11.7 liters.
Like many successful Israeli businesses, a significant portion of the winery's sales comes from exports, with North America and Europe accounting for about 20% of sales. But erasing the longtime stigma of poor quality remains a challenge. Israel Export Institute's Neeman explains that not long ago, "when we would have the discussion with wine sellers, [they] would say they put [Israeli wine] on the shelves on the way to the toilet in their shops."
The Golan Heights business began to change that perception. It had already earned a kind of mystique among a small group of connoisseurs who had tasted the wine on visits to Israel. The winery worked to sell itself as a brand of high-quality Mediterranean wine to buyers and critics. As its vintages earned a number of prestigious global wine awards and recognition, it rose in stature.
A major push for Golan Heights Winery and Israeli wines in general arrived in December, 2007, when the world's most influential wine critic, Robert Parker, reviewed Israeli wines for the first time. Of 100 wines, he gave 14 vintages a score of 90 or higher on his 100 point scale (a score of 90 and above is considered world-class). As it happened, six of the best wines and 11 out of the top 14 also happened to be kosher. Golan Heights Winery earned a 93 for its 2005 Yarden Gewürztraminer Heights Wine and a 91 for its 2003 Yarden Katzrin. Mark Squires, who had participated in the tasting with Parker, wrote about it in the Wine Advocate newsletter, declaring, "Israel has a real wine industry that deserves consumer attention."

Upper Galilee Venture

Of course, there is the possibility that one day the Golan Heights will be returned to Syria in exchange for a peace treaty with Israel. While the winery itself can be relocated, the vineyards cannot. Schoenfeld says his strategy is to keep going and making wine. In the mid-1990s, when it appeared that a peace deal was on the radar, the winery forged ahead with a $4.7 million expansion of its vineyards, the winery's warehouse, as well as construction of a visitors' center and tasting room. "The fact is the owners of our company have no mandate for us to look for alternatives. Who knows, it could happen in 100 years or in five—nobody knows. … We are not politicians and they don't ask us our opinions," says Schoenfeld.
In 2000, however, the winery invested in a joint venture with Kibbutz Yiron in the Upper Galilee to launch Galil Mountain Winery. The move was viewed by some as a potential Plan B should Israel hand over the Golan Heights to Syria. Now Galil Mountain produces nine different varieties and also scored high marks from the Wine Advocate. Last year, the young winery generated $5 million in sales.
Micha Vaadia, Galil Mountain's head winemaker, remembers when the winery found itself on the front lines in the summer of 2006 during the war between Israel and Hezbollah in Lebanon. Just 200 yards from the southern Lebanese border, Katushya rockets rained down on Galil's vineyards. Its Syrah crop took a direct hit. Only 12 vines of the 40 hit survived the attack. The area was sealed off by the Israeli Defense Forces and the winery was shut down during the 30 days of fighting that ended just before harvest time. The winery lost about 10% of its production capabilities for the 2006 harvest.
But Vaadia says he found something sadly optimistic about the surviving vines. "It was like they were saying, you do what you want—you fight, you stay, you leave—but I am going to continue living."
Flip through this slide show for a tour of Golan Heights Winery and Galil Mountain Winery.

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An Entrepreneurial Path to Peace

By providing small businesses with incubators, Israeli industrialist Stef Wertheimer hopes to give Israelis and Arabs economic opportunities that will lead to peace

About five years ago, Stef Wertheimer came across Gamila Hiar, a Druze woman with no formal education who had learned the ancient art of making soap from wild herbs and olive oil as a child. At the time, Hiar was supplementing her family's income, producing about 500 soap bars a week, from a corner in a room underneath her house in Pqi'in, a village in the Galilee region of northern Israel.
When Wertheimer met Hiar, her soaps had a devoted local following and were referred to as "the magic soaps of Gamila" for their restorative properties. Wertheimer was impressed. "We found that she was an entrepreneur," says Wertheimer. "She just needed more space to dry her soaps. I asked her if she wanted to come to one of my industrial parks."

Developing Exports

Hiar, now 68, ended up at Tefen Industrial Park, a bold philanthropic enterprise located about eight miles from the Lebanese border. Wertheimer (BusinessWeek.com, 3/14/08), the founder of Iscar Metalworking, established Tefen in 1985 in order to encourage entrepreneurship in one of Israel's most undeveloped and low-income regions, with a population split largely between Arabs and Jews. According to Wertheimer, 81, "there are no unemployed, only people who are unlucky to find a job."
The Tefen model is based on a business and social incubator concept. In a country with few natural resources and a tiny domestic market, its purpose is to help develop businesses that manufacture for export. Startups are given space to rent and a number of business and administrative services (usually at reduced fees or for free) such as help in business planning, marketing, and entrepreneurship, and access to postal and banking facilities. Although many of the companies are small, the park's structure allows each firm to operate and export on a much larger scale than it could were it operating independently. After a company has established itself, it is expected to leave and become independent. On average, the companies stay between 5 and 10 years. That allows new businesses to take their place.
Currently, Tefen houses 21 companies employing 500 people—many of them Arab and Druze. They include a research and development arm of SanDisk (SNDK), a flash memory device company with worldwide sales of $3.9 billion, a glassmaker, and Kolsint, a maker of lenses for imaging cameras for nuclear medicine that reportedly supplies 50% of the world market. Tefen is also home to Iscar's headquarters and its bright yellow high-tech plant where whistling robots travel the factory floors. In May, 2006, Berkshire Hathaway's (BRK) Warren Buffett acquired an 80% stake in Iscar for $4 billion (BusinessWeek.com, 5/8/06].
Gamila Secret (BusinessWeek.com, 3/14/08) occupies a 12,916-square-foot facility within Tefen's 30-acre campus and produces some 15,000 bars of soap a day. The company employs about 20 workers, all of whom come from Gamila's home village of Pqi'in.
The company, managed by Gamila's two sons, Fuad and Imad, generates roughly $8.4 million in sales in 20 countries including Japan, Germany, and Britain. Fuad expects sales to triple by 2009 and is looking to begin distribution in the U.S. He credits Tefen for the little company's widespread success. "Stef saw that this was a unique and special product," he says. "The location at Tefen gave us huge worldwide exposure. Our big problem now is to double our production each day."

Job Creation and Education

Since Tefen, Wertheimer has established four additional industrial parks in Israel following the same model. To date, they have nurtured 175 companies, employ 5,000 people, and in 2007 produced collective sales of $750 million, 80% from exports. In 2003, Wertheimer established his sixth park, in Gebze, outside of Istanbul, Turkey. Today, Gebze has 70 companies employing 300 people.
In 1994, after eight years in the Israeli Air Force, Guy Cohen joined a group of about 20 former officers at Tefen. Wertheimer offered the group education, provided equipment, a workshop, and a basic salary. Cohen worked there for about two years preparing dies and molds for the plastic injection industry. "We had lectures and daily meetings with Wertheimer," says Cohen. "We were working like a private company that had to make a living. We had to make a product, find customers, and make a profit."
After about three years, Cohen decided to start his own company, Metalicone, a manufacturer of industrial metal precision parts, at the Lavon Industrial Park just south of Tefen. Last year, Cohen says, the 100-employee company, which exports to Germany and Switzerland, had $15 million in sales. "The two most important things I learned from Stef was to take pride in your work," he says. "You don't have to invent yourself. Try to make what is out there but do it even better."
According to Wertheimer, job creation works when it is combined with ongoing educational opportunities. Thus, education makes up a large part of the offerings at his industrial parks. In 1964 he established an industrial school providing technical education for young people (many of whom were dropouts and many of whom today are managers at Iscar and other companies). Wertheimer also initiated an educational system for the entire Galilee region offering computer courses, mentoring, and vocational training.
In 2000, Wertheimer, in conjunction with Tel Aviv University, launched the Arab-Jewish Entrepreneurship Course for fledgling entrepreneurs from across the country. Since its inception, some 230 students have attended the program. The course spawned several successful ventures including a chain of diet workshops launched by a female Arab entrepreneur who plans to expand into Jordan, and a joint Israeli-Palestinian company that makes premium olive oil.

The "Capitalist Kibbutz"

Wertheimer's parks look nothing like industrial zones. They are filled with clipped lawns and open-air sculpture gardens. Tefen includes a handful of art museums, and numerous concerts and festivals take place on the grounds. Several of the parks are located near manicured residential areas that Wertheimer established. It was Wertheimer's intention to showcase the beauty of industry and break the stereotype of manufacturing as something dirty and low-rent. For instance, at Tefen's dining room, waiters serve workers free lunch on cloth-covered tables. "I call this a capitalist kibbutz," says Wertheimer.
In Werteheimer's grand scheme, a host of similar industrial parks would stretch across the Levant, the non-oil producing nations along the spine of the former Ottoman Empire, through Lebanon, Turkey, Jordan, Palestine, and Israel. "There are 90 million to 100 million people quarreling about who's right," he explains. "Israel is more successful than the Arabs, and I believe peace will come if we have similar income levels. This we can have, but we have to change from an agricultural society to an industrial one. It can be done. We've done it here in the Galilee, which is 20% of Israel. It is made up of Arabs and Jews, and unemployment is 4% here compared to 7.5% in Israel."
Wertheimer's vision hasn't always lined up with events on the ground. In 2000, one week before a groundbreaking ceremony was to take place at a joint Israeli-Palestinian industrial park outside of the Gaza Strip, the Intifada erupted, scuttling plans for the park that eight years later have yet to be revived. Similarly, plans to launch a park in Jordan have been shelved.
Still, he hasn't given up. "I'd like to see more neighbors put up more Tefens," he says. In the near future, Wertheimer has plans to create 10 additional parks in both Israel and the Palestinian Territories.
As he takes in the sweeping views of the Galilee and the hills of Lebanon (which were recently the scene of a ferocious war between Israel and Hezbollah), he says that the European Union or the U.S. needs to take an active role in pushing his vision forward. In 2002 he presented his ideas before the U.S. House of Representatives advocating a kind of Middle East Marshall Plan that he says would ultimately replace poverty and terrorism with a better quality of life and jobs. In March he met with German Chancellor Angela Merkel. "I want everyone to have a job and to be busy. There will be no terrorism. I want an anti-oil story where we become rich through industry." After all, he says, "entrepreneurship comes down to opportunity."

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Who Is Stef Wertheimer?

The Israeli industrialist has a unique perspective on how to reduce conflict in the Middle East

Early on, Stef Wertheimer, the founder of Iscar Metalworking, a manufacturer of industrial precision metal-cutting tools, decided that entrepreneurship was an answer to social and economic problems. In 1937, when he was 11, Wertheimer fled Nazi Germany with his family to what was then British-Mandate Palestine. After leaving school at 14, he made weapons for the Jewish underground before Israel's War of Independence in 1948 and served in the special forces unit Palmach during the war. Four years later, living in the northern town of Nahariya, he started making small industrial tools in his kitchen and delivering them by motorcycle. "There were no jobs, this area was agricultural, and I decided that I had to do something on my own," Wertheimer, now 81, recalls.
When France instituted a weapons embargo against Israel in 1967, Wertheimer was asked by the government to make blades for Israeli fighter jets. It was the beginning of what would eventually become Iscar, which now has operations in 65 countries as well as factories in Asia and Europe. While the private, family-owned company does not disclose its financials, estimates put Iscar's sales between $1.4 billion and $2.5 billion—nearly 95% derived from exports.
During the 1980s, Wertheimer spent four years as a member of the Knesset, Israel's Parliament. It was there that he came to the conclusion that he could accomplish more through industry and entrepreneurship than he ever could through government or politics. An early social entrepreneur (see BusinessWeek.com, 12/14/07), he launched his flagship industrial park, Tefen, based on his belief that creating jobs and economic prosperity in the Middle East would diffuse conflicts. Sitting in his office overlooking the Galilee, he says: "What makes peace? The answer is jobs."
In May, 2006, Wertheimer and Iscar made global headlines when Berkshire Hathaway's (BRK) Warren Buffett announced he had acquired an 80% stake in Iscar for $4 billion (see BusinessWeek.com, 05/08/06). When Buffett traveled to the country to visit his new investment (see BusinessWeek.com, 09/18/06) four months later he told the Israeli press: "Iscar and the Tefen Industrial Park should be taken as an example…around the world of what can be done against all odds."

Investing in a Vision

Says David Rubin, the former Israeli Economic Minister to North America and currently a consultant to Israeli high tech companies: "[Stef]'s industrial parks are probably the largest private contribution to Israeli entrepreneurship ever. Without taking anything from the government, he has invested in his vision for a productive and economically independent society."
Today, Wertheimer spends most of his time on his industrial parks and encouraging young entrepreneurs (his son Eitan Wertheimer now serves as Iscar's chairman). He was a recipient of the Israel Prize—the nation's highest honor—in 1991, and last month he was awarded the Buber-Rosenzweig medal in Germany for his work in advancing peace through entrepreneurship.
Wertheimer says the Buffett deal was important because it meant "that Iscar was a global company, not a local one." Perhaps equally important, he says it will allow him to further invest in developing his vision of peace.

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Mom: An Entrepreneur's Secret to Success

Of course a mother's impact extends to business. We asked 10 renowned entrepreneurs, from Richard Branson to Bobbi Brown, to get specific

Richard Branson's parents told him to never criticize anyone. He still tries to apply that rule at Virgin Group. When Bobbi Brown was struggling to decide what to do with her life, her mother suggested a mental exercise that lead to the creation of her eponymous cosmetics business, Bobbi Brown Cosmetics. Napoleon Barragan, founder of 1-800-Mattress, remembers his mother washing his family's clothes by hand in the river, an image that inspired his drive to succeed.
To celebrate Mother's Day, we spoke to a selection of renowned entrepreneurs to learn about their mothers' impact on their professional lives and businesses.
Some say business success is in their DNA. Maternity-wear designer Liz Lange recalled her mother taking her to visit her grandfather's necktie company at the Empire State Building. Lange's father also owned a business, so her parents understood when she abandoned a coveted job at Vogue magazine to pursue her own designs.

A Family Affair

Lessons mothers pass on to children can nurture the entrepreneurial spirit. Zipcar co-founder Robin Chase says her mother showed her how, on a shoestring, one can turn a passion into a business. Chase, the daughter of a diplomat in the Middle East and Africa, grew up abroad, watching her mom create craft businesses in the countries where they lived. "She'd cobble together these things, doing something that she'd love to do with some tenacity, and go out there and make it happen." Chase used the same approach to start the car-sharing company.
Perhaps in the end it is mom who is the invisible, guiding hand that helped create some of world's most innovative and successful companies. Check out the accompanying slide show, to see what famous entrepreneurs have to say about their moms.
We haven't forgotten dad. Look out for another esteemed group of entrepreneurs discussing how their dads inspired and influenced them next month for Father's Day.

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From Junkie to Software Success

Accidental entrepreneur Bob Williamson's personal turnaround led to the creation of his 180-employee, $26 million company

Bob Williamson fled a broken home in Mississippi at age 17 to hitchhike around the country. He landed in Atlanta in 1970 at 24, homeless, broke, and addicted to heroin and methamphetamine. When he got a job there cleaning bricks for $15 a week, no one would have guessed that he would start a $26 million software company someday.
Successful businesses often spring from a combination of hard work and dumb luck, and Williamson credits both. Not long after arriving in Atlanta, he was injured in a car wreck and spent months recovering in the hospital. While there, he read the Bible, converted to Christianity, and decided to straighten up his life. It wasn't easy: He had a criminal record, no college degree, and few job prospects.
"I was either going to commit suicide, which several of my friends had done, or I was going turn my life around," says Williamson, now chairman and chief executive officer of Horizon Software International, a 180-employee maker of software for food service systems used in schools, hospitals, and other institutions.

Promoted Eight Times in Two Years

Williamson eventually landed a job putting labels on paint cans in the basement of the Glidden paint company in Atlanta. He cleaned up the labeling department and helped Glidden move to the company's first computer system. His work ethic, he says, was: "First one there, last to leave." Glidden promoted Williamson eight times in two years.
He went on to work at two other paint companies. By then a paint expert, Williamson started working in his basement to develop a better formula for his hobby: airbrush art. "I borrowed $1,000 on my Visa (V) card and bought a bunch of chemicals and made a bunch of paint," he says. At a trade show, artists flocked to his booth to buy the paint he developed, called Polytranspar. He quit his job and started his own paint company, Master Paint Systems, in 1977.
He spun that into several other businesses: a magazine for artists, how-to books, an art supply manufacturer, and a mail-order business, teaching himself as he went along. As the business grew, so did his need for organizational tools. It was the early 1980s, and he realized he needed systems for his warehouse, inventory control, and supply-chain management. "Back then you couldn't buy software, so I hired a couple of programmers, and we wrote software for all these different companies," Williamson says.

Recovering From Bankruptcy

By 1986, when he was selling 6,000 different art-related items, Williamson prepared to take the company public. But during the audit for his IPO, he discovered an accountant had been embezzling money from the company. "We fought our way through it, and my accountant and my lawyer and everybody told me to just take bankruptcy and forget about it," Williamson says.
But he was convinced he could recover. Williamson urged his creditors not to file lawsuits that would force a liquidation. "Every week I would send them a letter and tell them what was happening, and we rebuilt it up beyond its former stage," he says.

Focused on School Cafeterias

After recovering, he sold off his previous ventures, and in 1992, founded Horizon. The company was built on the back-office software Williamson spent years developing for his own businesses. "We wrote a system for our mail-order business, we wrote software for our manufacturing company, a point-of-sale system for retail," he says. "We weren't selling that to anybody. We had just written in-house for our own use."
The company focused on systems for school cafeterias when Williamson found no one had written back-office software for that market. He was soon selling into other institutions like hospitals, nursing homes, colleges, and military bases. Horizon recently won the contract for the Los Angeles public schools, the nation's second-largest system.
Williamson's son, Michael, who is Horizon's chief operating officer, says his father succeeded by jumping on opportunities that chance presented. "You would never have thought that we would be in food service software when we started Horizon, but the path just kind of led that way and we took advantage of it," he says. "He's always had a great ability to look out into other markets and other products."

The Element of Chance

Williamson, now 61, presides over Horizon's 44,000-square-foot headquarters in Atlanta. The company had $26 million in revenue in 2007, and he's projecting $32 million this year. Still, Williamson says, "I'm the first one there and the last one to leave." And he ascribes his business success to his conversion. "I have always tried to run my business according to the way that God would want me to…I've always tried to be honest and straightforward, and not lie and not cheat, and not try to take an easy way out."
Hard work was certainly part of Williamson's improbable personal turnaround: He recalls years of working 20-hour days and says he still only sleeps four or five hours a night. But chance guided his entrepreneurial success as well: a car accident that jolted him out of a destructive life, a paint recipe that became a hit, and early exposure to the burgeoning software industry.
And in some ways, Williamson's arrival in Atlanta at the nadir of his life set the foundation for his rise. "I'd been through so much in my life, I don't get discouraged," he says. "The trials I've had in business are mild compared to what my life was like."
Flip through this slide show (BusinessWeek.com, 5/12/08) for profiles of more accidental entrepreneurs.

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Centuries-Old Family Businesses Share Their Secrets

Other enterprises can benefit by borrowing strategies from these companies that have prospered generation after generation

In 2000, a few members of the Lyman family moved out of its capacious ancestral home. Though the house, set on a sprawling farm in Middlefield, Conn., had been inhabited by Lymans since its construction in 1785, it was feeling too big for them. Two years later, the 180-member family decided to turn the homestead into an event space for weddings and other occasions. It was the latest in a series of business decisions that have kept the family business thriving for over 200 years.
Today, the event space is one of multiple businesses spun out of Lyman Orchards, including two golf courses, a line of baked goods, and Connecticut's largest indoor farm market. The farm, operated by eight generations of Lymans, sits on 1,100 acres and earned $10 million in revenue in 2007. "I think obviously it's unusual for a family business to last as long as us," says John Lyman, Orchards' executive vice-president.
Indeed, according to the Family Firm Institute, a research group in Boston, only 30% of family-owned businesses make it to the second generation, 10% to the third generation, and 3% to the fourth. While all enterprises are susceptible to failure, regardless of ownership, family businesses contend with some unique issues (BusinessWeek.com, 9/26/07), such as managing succession, going public, bringing in outside board members and other executives, and keeping products or services relevant through the generations.

The Importance of Looking Ahead

While the odds are indeed stacked against family-owned businesses being operated by continuous generations of family members, there are examples of companies that have remained family-controlled and successful through time. Kongo Gumi (BusinessWeek.com, 4/16/07), a Japanese construction company that began in the year 578 lasted for 14 generations until 2006. The Marinelli family of Agnone, Italy, has been making bells in its foundry since around the year 1000. The Loane Bros. started in 1815 as a maker of canvas sails on Baltimore's Bowley's Wharf for the famous Baltimore clipper ships in 1815. When the steamship made sails obsolete, Loane shifted the company's focus to manufacturing awnings. Today's sixth generation continues to produce awnings and also makes event tents.
While the statistics don't favor family ownership over the long haul, those companies that have beaten the odds describe a host of things that have contributed to their success. According to William O'Hara, the executive director of the Institute for Family Enterprise at Bryant University in Rhode Island, the biggest mistake that most family businesses make is not planning for the future. "The companies that have trouble are those that don't look ahead, whether about succession or future products," he says. Regarding the happy few that do make it, O'Hara says, "Those that have been around for centuries deal in products that respond to human needs."
According to John Lyman, the key to his family's 265 years of success has been remaining tied to the land as well as continuously diversifying offerings. The head of the family's third generation, Charles Elihu Lyman, introduced non-agricultural products such as spring lambs and dairy cattle, and began selling hay for local livestock. He is also credited with introducing peaches as a major crop in Connecticut.

Luggage Maker to the Stars

In the 1930s, the family began promoting Lyman Orchards as a recreational family destination, with the launch of the Apple Blossom Festival. "To stay relevant in the market you have to change," says John Lyman. "We are constantly looking for new opportunities. We've tried to be open to new ideas. We are not heavy risk-takers, but we try not to be afraid of taking risks, too."

In 1987, Michael Root, a former executive at Bloomingdale's took over T. Anthony, the maker of handcrafted luxury luggage founded by his grandfather Theodore Anthony in 1946. The company became a favorite with royals and celebrities from the Duke and Duchess of Windsor to Marilyn Monroe and Jacqueline Kennedy Onassis.
While T. Anthony's prices—$1,000 shirt-cases and $15,000 trunks—limit its clientele, Root says the company strives to keep the brand current without abandoning its founding principles. "I would say the biggest challenge is keeping the company true to its original values," says Root. And while it continues to offer the same lines of hard luggage and canvas and Italian leather matched sets that helped establish its reputation, in recent years the outfit has added wheeled suitcases, duffel bags, computer bags, and cases for electronic gadgets. And every six months it offers new handbags and gift items to keep the line current. But, says Root, the company has learned if it keeps to its core values of high quality and luxury items, its customers are happy. "Once they buy our luggage, they don't want us to change it."

A Principle of Stewardship

The Young family of Salt Lake City is at the crucial stage of taking its firm, the Young Electric Sign Co. from the third to fourth generation. Thomas Young started the company in 1920—with a $300 loan from his father in Ogden, Utah—as a maker of coffin plates (plaques bearing the deceased's name affixed to the coffin) and hand-painted signs. Today, it is an $80 million business creating state-of-the-art signs all over the world, including for the Wynn Hotel (WYNN) and the Hard Rock Hotel in Las Vegas. In fact, the company is credited with creating Glitter Gulch on the Las Vegas Strip back in the late 1940s.
"We were brought up, and my father was brought up by his father who founded the company, [to believe] that we work for the company, the company does not work for us," says Michael Young, the president. "Another way to describe it is our principle is one of stewardship rather than ownership and there has been a consistent commitment, starting with my grandfather to the present [generation] of not selling the business or going public."
Young says this philosophy is a core part of the company's culture and the basis for its enduring success. In addition to Young-family members, he says, a number of its 1,600 employees are members of multiple generations of outside families as well. "Like everything, it has its pluses and minuses," says Young. "On the plus side, the loyalty and commitment is fantastic for us over 88 years. The downside is the usual scenario of preferential treatment." According to Young, the company works hard to put the interests of the business above those of individuals and the family. "My father often referred to the company as a child that has to be nurtured and cared for and kept warm."

Family and Outside Management

Facing the difficulty of passing the business on to the next generation, Young says the family begins to groom those members who have expressed interest in entering the family business once they start college. "Not all of them are interested," he says. "We have an orientation that gives them the complete ownership structure." They are also given a set of opportunities and expectations up front. "If they are given the opportunity to work for the company, they have to understand the business comes first—this is not a get-rich program," says Young. "This company has existed long before them and [will exist] long after they leave."
For the German company Villeroy & Boch, originally a manufacturer of tableware, a mixture of family and outside management has helped keep the firm successful and family-owned for 260 years and nine generations. Originally started as an iron foundry and maker of simple earthenware tableware, today the company has grown to include bathroom and kitchen fixtures and tiles, earning some €700 million ($1.08 billion) in revenue a year.
"The continued involvement of the family is one of our major factors for success," says Volker Pruschke, the company's chief strategic officer (and a non-family member). "It gives so much strength to the brand to be backed by the family. There is an authenticity. There is a certain family spirit. Like in any good team, it has become an enormous asset." According to Pruschke, the family through the years has also been able to contribute a spectrum of experience from business to art design to innovation that has also kept Villeroy & Boch strong and flexible over the centuries. "They know the markets and have a long-term view of what is essential," he says.
At the same time, the family has gone outside for professional managers and board members. Last year, the company chose Frank Goring, a 10-year company veteran and non-family member, to succeed family member Wendelin von Boch as CEO. "At the end of the day, they want the kind of management capability and they have a willingness and determination to find the best person for the job," says Pruschke.
See the BusinessWeek.com slide show for a look at how the four long-lasting companies mentioned above adapted their products and services over the centuries.

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