small business @ home start up to success story

Sam & JudyA Small Business @ Home Start Up to Success Story

As Told by Don Osborne in The Profit Puzzle

Sam & Judy’s Start Up to Success Story grew out of my personal experience with many people who failed to succeed with their small business start up idea for lack of knowing and applying business basics. I hope this “true to life” story adds to your knowledge and ability to apply what they learned to your start up idea.

Don Osborne, Author of The Profit Puzzle

The Profit Puzzle Small Business @ Home Start Up to Success WorkbookBy Don Osborne – profitpuzzle.com – (909) 560-1464

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Are You Sam or Judy? Maybe your situation is similar to Sam’s or Judy’s. You’d like to start some sort of small business, probably home based at first.

You’re not a huge risk taker but with the proper knowledge, step by step guidance and support you’d get started on developing a simple business plan to test out your start up idea before taking a full time leap into small business ownership.

Your motivation to start up a small business of your own may be grounded in creating more time and money to spend with family and pursing those things which you value most in your life. In your mind, successful small business ownership offers those rewards.


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Sam had always been interested in starting some kind of small business. During the summer he had given serious thought to the idea. He loved working with his hands and spent hours putting together very intricate jigsaw puzzles.

Judy was more of a people person. Now that both kids were in school, she was interested in working part-time, using her experience as a customer service representative.

Neither of them were risk takers. Their summer conversations centered on starting a business they could do together that could also involve their parents and kids. They were excited about the idea, but worried about their ability to succeed.


1

As a computer programmer for a large corporation, Sam was only responsible for completing his portion of a project. He did not have any management responsibility or experience.

Judy's job in customer service only required quick, short responses; no management. As a Mom with two small kids, she knew how to handle unexpected events and demands.

Their casual discussions about starting and running a small business centered on how much fun it might be and what they could gain from it. So far, the only thing they'd written down was their individual business achievement statement. They were both concerned about their lack of management experience.


2

During their seven years of marriage, Sam and Judy became a good team. They both grew up in active, involved homes. Sam liked to work alone without the help of others. Judy was more outgoing and preferred to be part of a small group.

Both parents lived nearby. They often got together for family activities and also on holidays. Sam's father was about to retire and expressed an interest in doing something to keep busy and add to his retirement income.

Sam and Judy weren't interested in becoming "rich and famous". They did want to do a good job of providing for their family, being in control of their lives and creating some options.


3

Both Sam and Judy were energetic and loved to be busy. Judy was good at scheduling her time and Sam was used to meeting deadlines. However, both of them tended to get wrapped up in a project and lose track of how much time they were spending on it.

They were concerned about how starting and running a small business would impact their family time. They felt it was very important to be "at home" for their kids, who were involved in sports and a lot of elementary school activities.

They knew if they planned ahead and worked together their energy

level would be high enough to make it all fit together.


4

After a lot of discussion about starting a business, Sam and Judy finally wrote down their ideas. Sam's notes were fairly precise. Judy's were more like a "to do" list.

As their discussions moved from casual, unplanned talks to more formal working sessions, conflicts came up. They didn't agree on every objective nor on exactly how to run their new, small business. Many of the conflicts centered on areas they were both interested in controlling.

They tended to skip over areas of the proposed business that neither of them were interested in managing. They talked about the parts of the business they each liked best.


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Since Sam's interest was more focused, he developed a time table for turning their notes into some kind of plan. Thinking in terms of a software programming project, Sam took Judy's "to do“ list and arranged in using different functional areas of their business.

For each area of business, Sam selected the most important objective. Next, he made a list of the steps they needed to take. For each step he selected a completion date.

Although no decision to start a small business had been made, the pre-planning activity had created even more excitement. Along with the excitement came nervousness and cold feet.


6

Moving from casual "what if" discussions to "how about this" had been difficult. Judy's schedule with the kids was very demanding and sometimes unpredictable. Sam wanted to follow a set time and method for discussing their plans.

Sam moved forward on some of their ideas without Judy's help. Judy fell behind on doing the things she had agreed to help with.

The gap in equal participation caused frustration and some hurt feelings for Sam. He felt Judy should have been more appreciative of his extra efforts. They decided to set aside a regular time and place for short business meetings.


7

As the business idea moved from conversation to paper, it became obvious which parts of the business Sam and Judy were most interested in running.

They formally decided to start a business based on Sam's interest in putting together jigsaw puzzles. They saw the puzzles as a type of decorator item and a growing hobby.

Sam focused on the best way to produce the puzzles. Judy looked into different ways to market them. They both felt they could work out of their home. They had not agreed on how to finance the business or how Sam's father would be involved. They still ignored issues they weren't personally interested in.


8

Sam and Judy agreed to "officially" start their business as a part-time effort from their home on October 1st. That date was picked because the kids would be back in school. Also, they had applied for a new credit card with a $5,000 credit limit. Since they had a good credit record, they expected to qualify for and receive the card by October 1.

Sam's father, Stan, wanted to help them out so he offered to donate his time until the business got underway. There was no discussion of being a partner in the business.

They knew some type of tax records would be required so they set up a separate checking account.


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Both Sam and Judy knew how to use a computer. They bought some accounting software. It explained the basis financial statements, offered suggestions on income and expense categories, and could record checkbook activity and reconcile their monthly bank statement.

Neither Sam or Judy had ever been involved in the financial side of the companies they'd worked for. They'd heard most banks were not a good source of money for new businesses.

They had a good friend they though might be interested in investing or loaning them some money once they got started. They felt sure a source of money would be available to them.


10

Judy and Sam got married during their last year in college. Making money last and living on a budget was something they usually did very well. However, the excitement of starting a business caused them to be less budget minded.

Nevertheless, they drew up a list of what they thought their initial expenses would be. If they needed it, they had a small savings account. Their budget showed the $5,000 credit limit on the new credit card would be enough to cover expenses.

Projecting sales for the first 90 days was more difficult, but they felt confident they'd make it. Despite their limited research and excitement, they settled on the budget they had created.


11

The credit card arrived in time to start the business on October 1st. The first thing Sam did was pay back some start up expenses.

Over the years Sam had done a lot of puzzles others really liked. When they announced their business intentions several people ordered puzzles to be put together and framed. Sam purchased the puzzles and got to work on them. He didn't ask for a deposit, but he waited until they were done to get paid.

As he worked on puzzle orders, he often needed to buy more supplies. He also purchased some lumber to expand the production area in the garage.


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When the business first started, Sam and Judy did the jobs that came naturally. Fortunately, there wasn't an overlap in what they each liked to do. This prevented conflicts and criticism.

It didn't take long before a more important problem arose. Some of the things that needed to be done to run the business successfully weren't getting done.

In some cases, neither of them knew the job should be done. In other cases, they knew what should be done, but neither of them liked doing the job. Often, the job was done, but it wasn't done very well.


13

As December approached, more orders came in than Sam could handle. Judy continued to build interest in the puzzles and some of their decorative accessories.

Sam had been a great help in preparing the finished puzzles for delivery and getting them to the customers. But, as the holidays neared it was obvious some additional help was needed. Judy's mom offered to help out.

It seemed like a great answer to the immediate problem. She was quick to jump in, even though it wasn't clear where she could be most helpful. Although she made some mistakes, it solved the immediate problem of filling holiday orders on time.


14

Even though Sam's father, Stan, and Judy's mother, Ruth, had volunteered their help, it seemed appropriate to pay them something. It was difficult though to determine how much.

Sam felt an hourly wage would be best. It would be more business like. Judy felt a single amount at the end of the holiday rush would be the right way to handle it.

They were using the computer to keep track of Stan's time. Ruth's sporadic schedule made it hard to tell how much she was getting done. Because Ruth had made some errors, work had to be done over including some cases of incorrect customer billing.


15

With good planning, not by chance, Sam and Judy' new business made it through the holiday season. The new year looked promising. They thought things might be less hectic.

Stan liked being busy. He began to feel he should play a more significant role in the business. Ruth was happy to continue to help out, but only on a very limited basis.

Sam was very excited about the progress they'd made. Judy was concerned about spending some of their savings on the business. The business was still part time, but had good potential. Pleasing everyone was difficult, especially since everyone involved was a family member.


16

At first Sam and Judy's only product was a completed jigsaw puzzle. It was glued, framed and delivered to the customer. In some cases, it had been chosen by the client. Other times, it was selected by Sam or Judy to match the decor of the place where it was to be displayed.

To a casual observer, the product seemed sort of silly. But, when

you researched how clients displayed them or why they chose to

decorate with them, the business idea looked pretty solid. Some

of the puzzles were actually favorite photographs. The display

methods called for a variety of accessories. The accessories

often became as important as the puzzles themselves.


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Originally, many of the puzzles were ordered for kid's rooms or reflected hobbies. Judy used her contacts at school and through the PTA to generate business. After the holiday season, many clients were referred by other clients.

Ruth, Judy's mother, complied a list as she prepared the puzzles for delivery. She wrote down the client's name, the size and subject of each puzzle. She also tried to find out where it would be displayed. Whenever possible, she asked if it was a gift for someone.

Judy figured out how to track orders and generate sales reports using the accounting software.


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Initially, everybody involved in Puzzle Decor thought it was very unique. Puzzles? It seemed no one else did what they did. But eventually they learned from their suppliers that others offered the same services. Some even offered their services on the Internet.

Judy's first thought was , "but ours are better". As she looked at similar services and other ways people could decorate their homes, she began to wonder. Was their initial fall season success going to last?

She listed the things which really made their puzzles stand out. Judy found more similarities than differences.


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A lot of enthusiasm and a long list of friends got Sam and Judy's new business started. The fact that many people admired Sam's puzzles before the business started, coupled with the holidays, made the first 90 days of business a success.

The pace of business slowed down during the first quarter of the new year. The list Ruth complied was good research material, but neither Sam or Judy was good at talking to strangers about their puzzles.

It was clear they had a good idea. They both wanted to find an effective and enjoyable way to get the word out and expand their business. Judy wanted to stress quality and personal service.


20

Normally, Judy and Sam kept things neat and orderly. During the holiday rush things really piled up. As the first quarter of the new year ended they still had a number of unfiled stacks of paper.

Most of their financial transactions were recorded in the computer, but a lot of the documentation had not been filed. While getting ready for an appointment with a tax preparer they discovered a lot of information they needed was still buried under stacks of unfiled papers.

Also, they couldn't find some of the marketing lists Ruth had complied. It made it hard to develop accurate profit plans.


21

Sam, along with his father Stan, had done a pretty good job of turning the garage into a production facility. With the expansion of products and supplies, pace was getting tight.

Although most client only picked up or dropped off puzzles, there was a growing demand for a small showroom. Judy wanted to broaden their product line to include additional craft type items.

The only office space had been the kitchen table. The computer was tucked into a corner of the spare bedroom. Expanding into a small retail type space would require new capital and full-time hours.


22

From the outset, Sam made do with things he could build himself or buy second hand. In planning for a possible move, he figured out what would be efficient. He wanted to avoid hiring people by making good use of equipment.

Using his programmer's mind, Sam put together a flow chart of everything they did and how they did it. Next, he compared the time it would take a person to do each step vs. how long it would take a piece of equipment to do it.

Judy appreciated his efforts but worried about paying for the proposed equipment and having enough business to make the equipment investment worthwhile.


23

The idea of moving raised the question of lease, licenses and insurance. The business had picked up at the start of the fourth quarter. Sam was getting ready to quit his job.

Sam and Judy were concerned about meeting their expenses on time. Some monthly expenses on insurance and other payments could be made quarterly. Surely, business would continue to expand to allow for larger quarterly payments.

Although they hadn't paid pack their savings account yet, Sam and Judy had kept up with their business credit care payments. They could apply for a higher credit line. It would help with the moving expenses and new monthly expenses.


24

As the business grew, so did the number of products and services. With each new product Sam became more aware of just how many different parts and steps were involved in getting the finished product to the customer.

Sam quickly learned that quantity controlled price. He also discovered that he needed a quick turnaround on delivery. He found that many suppliers did not always meet their promised terms or delivery schedules.

Sam and Judy discussed ways to keep the cost of goods down while providing the level of quality and turnaround their clients expected.


25

As part of his equipment and facilities review Sam put together a production step flow chart. He used the chart to assess the cost of each step.

Through the first six months of business many different people

helped out with production. Everybody's work pace and ability to

use materials and equipment was different. Sam didn't have any

records to go by.

Now that he was going to be depending on the business for his full time income, Sam wanted to make sure he covered all his costs. He knew that income had exceeded expenses, but wasn't sure what the proper profit margin should be.


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Judy wanted to make sure the puzzles were delivered in the best possible condition. She often added extra little touches to them. She hadn't kept track of who got what.

As business expanded so did the delivery charges for out-of-state orders. Sam and Judy charged only the actual amount of the delivery cost plus a flat handling charge.

Sam suggested they needed to evaluate the things they did to prepare each order for delivery. If something extra was done, it should be part of the cost of the product. Handling charges should reflect the amount of time an order takes to prepare. Judy saw it as a customer service, not a cost.


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Sam's way of determining time and materials and assessing a cost factor made sense to Judy. She wanted to make sure that the customer had a clear understanding of what they were paying for and what they were receiving.

The biggest concern for both Sam and Judy was balancing the need to cover all costs while remaining competitive. The relationship between what the market would bear and making a profit was hard for them to agree on.

Sam and Judy did agree on one thing. If a product's production cost exceeded what people would pay for a quality product, they would drop the product instead of take a loss.


28

Puzzle Decor completed its first year in business. The second holiday season was coming up. Sam and Judy were excited about how far they'd come. But, they were equally concerned about the future. There was so much more to do and learn.

Sam's father, Stan, was now the production manager. Judy's mother, Ruth, decided to provide Sam and Judy with childcare.

They had hired several part-time people to help out with the store

hours and the Internet catalog business.

There was now a small staff, a lot of information stored in the computer, and a year's worth of experience.


29

One thing both Sam and Judy realized was the potential of their business. During the first year, a number of people approached them with various consulting services. They decided not to use any outside services because of the cost involved.

Now more was at stake. One person had repeatedly proposed some marketing advice. Judy was tempted to hire the person. Sam felt it would be too expensive and wasn’t sure exactly what they’d get for their money.

Judy had a similar problem with Sam’s interest in having someone help them with their computer system.


30

When Sam left his job to begin working full time in the business, he attended a chamber of commerce networking event. He also attended a small business forum. Both were helpful.

Sam and Judy decided to join the chamber. Since his initial activity in the chamber, Sam hadn't attended many events. It was time to renew their chamber dues. Because they didn't get much out of their membership, they decided not to renew.

Sam also subscribed to a number of trade publications and business magazines. Due to his hectic schedule, the magazines just kept stacking up without being read.


31

Every day Sam and Judy met people who were either in business, had been in business, or were thinking about starting a business.

At first, Sam and Judy only listened politely to the ideas being offered by these people. They felt their business was unique and had their own ideas to follow through on.

Now, Sama and Judy were not so quick to discard what they heard. Some ideas got them thinking about what they could do to improve their business. Other ideas could be applied with little or no change. They listened now because they realized how much their success mattered to them.


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