My company, Wine Wear, started with a cute idea: a popup paper greeting card that fits over a wine bottle. When I gave them away as party favors to friends, they were such a big hit that I thought I could sell them to a wider audience. The problem was that I had no startup capital except for the $20,000 I was saving for business school. I thought I'd need hundreds of thousands to cover legal fees, patenting, marketing, manufacturing, and other business expenses.
Turned out, I was wrong. By using D.I.Y tactics and leveraging the power of Google, I could keep operational costs extremely low while my company got off the ground. In fact, I discovered that there were three common business expenses I didn't need to factor in at all:
1. A lawyer on retainer
I knew I would first need to patent my idea. Hiring a lawyer to do the research, write-up, and drawings would cost anywhere between $10,000 and $20,000 in legal fees. I couldn't afford that, but I wasn't going to give up so easily.
I read the book Patents, Copyrights and Trademarks for Dummies, and discovered that the registration process isn't as hard as most people think. By finding a similar existing patent and using it as a template for my own product, I could fill out most of the forms correctly. I paid a lawyer $750 to review my documents and make any necessary corrections, but I saved many thousands over what I would have paid to let him handle the whole process. Finding the right patent to use as a template was as easy as going to Google's free online patent database and searching for similar gift-wrap products.
Now, whenever I think I'll need to outsource a task, I first try and figure out if I can do it myself. When I can't, I'll look for a firm that will give us a break. The firm that built our website is owned by my husband's brother, who agreed to charge us only a few thousand dollars compared to the $6,000 fee that other firms were charging.
2. An agent to deal with manufacturers
I am always looking to cut out the middleman. Most companies hire an agent to find manufacturers for their products, and then to communicate with those manufacturers on an ongoing basis. Most agents charge a 10% to 15% commission. When you're a new company and margins are already thin, that's too much. Again, Google came to the rescue. I found a couple of websites, including TradeKey and AliBaba, which provide manufacturers' listings with reviews and client lists. We were able to obtain samples of their work, and used them to select the three manufacturers we wanted to work with.
It's easy to stay in contact with our manufacturers. Instead of contacting them on the phone, I use online chat and instant message programs like gchat and MSN Instant Messenger. I can log on at the end of the day and touch base with all three of them simultaneously. It's not only cheaper this way, but more efficient than communicating through a third party on the phone.
3. Trade shows
Other entrepreneurs insisted that trade shows were the best place to meet sales reps for companies that might buy our products. I wanted to grow our sales base and connect with sales reps, but a booth at a trade show can cost several thousand dollars, not including travel expenses. I thought there had to be an easier and cheaper way to get the word out. A Google search led me to GreatRep.com, where we could post a 100-word ad for our product for just $75 per month. Within a few months, we had dozens of responses.
We are growing fast
Most of my savings has gone into the company, but it's been less than a year since we put our product on the market, and we've made $6,500 in sales. This year's shipment of products is three times the size of last year's, and we project a 300% jump in revenues to match. We think that the company will be self-sustaining before the year is out.
Because we've kept costs down and have savings to draw from, we've been able to turn away outside investors. My husband works nights at the company, and has kept his day job to help pay for living expenses. We're working with two new designers and have brought on a couple of consultants for our website. We now have sales reps in almost every state across the country and are poised to take the next big step. I probably won't be going back to school anytime soon, but I much prefer running my company anyway.
Jennifer Nielsen co-founded the Kara Foundation, dedicated to supporting young adults with cancer, in honor of her best friend Kara Lalumiere who died at 23 of ovarian cancer.
-- As told to Harper Willis
- Find out when you need a business lawyer for your small business and when you don't.
- Here are some tips on how to find the right manufacturer for your product.