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WHAT: Magpie Lovely

WHERE: Nashville, TN

WHEN: 2009

HOW: Holly Craig was a former boutique owner and full-time mom. After her husband was offered a great new career opportunity, the family relocated to Nashville, Craig sold her storefront and its inventory, and planned to start fresh in a new town.  She would have loved to find and open another retail spot, but the 10-hour days they called for weren’t possible with young kids. An online business, however, was another story.

In the spring of 2009 that Craig began developing an idea for an Internet-based eco-friendly boutique – hosting only handmade products.  Hoping to keep her investment low, she pulled $3,500 in savings for the launch.  She corralled a friend who had helped her build a website in the past to design an online retail “store,” and purchased little more than the packaging supplies she’d need to send out orders. Then, she researched. Scouring blogs and handmade market sites like Etsy and 1000 Markets, Craig reached out to nearly 400 designers – sharing her idea, and hoping they’d see her marketplace as an opportunity their growth.

“Only about 45 designers wrote back asking how they could get involved,” says Craig, but that was enough. The designers sent her links to their entire product lines, and Craig chose an edited selection of only hand-crafted products that she thought would sell.  “There is not a factory involved in any of it,” she said, explaining that she courted the sort of shoppers willing to spend more for quality. “People have a preconceived notion that handmade goods are less attractive or second tier,” she explains, “in fact, it’s quite the opposite.”

It took just three months for Craig to reach profitability -– in part due to the small investment she made to get the business off the ground — and she projects to gross $250,000 by this time next year.  Having little to no overhead helps.  Craig continues running the business out of the spare bedroom in her home.   The business model also suits suppliers who make items to order and as a result don’t lose time or money to over production.

Customers seem to like it too — after a year in business, she’s received a total of two quality complaints from customers.  (Perhaps it’s the personal note from Craig that comes with every purchase that wins them over.)  She plans to add a men’s collection, as well as more designers in the years to come.   And five years into her new Nashville life, she describes her work as “fulfilling.”

HER ADVICE: “If you’re passionate about what you’re doing and selling, you’ve taken half of the work away,” Craig says. “And if you get negative feedback from the people around you, look at the source. Have they gone out on a limb like yours before? Often, you need to take what they say with a grain of salt.”

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WHAT: BookRenter.com

WHERE: Santa Clara, CA

WHEN: 2008

HOW: For many students, life after graduation means facing a mountain of student loan debt. When considering all of the costs associated with college – beyond tuition and into the cost of computers and textbooks – that debt can rack up, and amount to a significant setback. Mehdi Maghsoodnia saw this problem, and made it his goal to develop a solution. “In a public community college, you can end up paying more for textbooks than you do for the course credits,” says Maghsoodnia. “Why can’t it be more affordable for students? We have to make it affordable, accessible and effective.”

With a background in working with entrepreneurs at a business ventures firm, Maghsoodnia had been looking into a variety of business options to find where he wanted to take a leap. Realizing his passion for making education accessible, he began to develop a business plan much like that of NetFlix. Investing $20,000 into a large purchase of used textbooks, Maghsoodnia started small – offering rentals locally to students in California. Students visit the website and place a rental order for the textbooks they’ll need throughout the semester. The books, which range in price from about $10 to over $200, are rented at a fraction of their cost – much like airline seats, the rental price is set according to the book’s supply and demand. Once a book is returned, it’s checked for quality, and is either re-shelved or donated to impoverished communities in need of textbooks.

“Within the first year, we reached over a million dollars in revenue,” he says, and after expanding to serving students nationwide, they’ve seen growth of approximately 400% each year. “In a business like this one, it doesn’t take a great deal of money to get started. But as you grow, it requires more capital,” Maghsoodnia explains. With new editions of books being released, it’s important to keep inventory up to date – a process that is helped by a software system that tracks nearly a million titles they have in their inventory, and notifies them when their stock is out of date. Keeping books in stock and cash on hand are issues the company has faced several times since their launch — but Maghsoodnia explains that those points are the ones that keep him excited and aware of his successes.

Today, the company is investing its profit back into the company as they see consistent growth. However, Maghsoodnia hopes to reach profitability within the next few years, and maintain their high levels of customer satisfaction. “People have returned books with notes tucked into them, thanking us for helping them save the money they needed to pay off their car loan or tuition – it’s great to see that impact firsthand.” Recently, they launched a program that allows students to open their own BookRenter.com store. They serve as a BookRenter representative for their sorority or their campus, pointing students to their “store” – and for every dollar of revenue, the student earns eight cents. “This helps students earn money on their own,” says Mahgsoodnia, “and has served well for us in expanding to more campuses across the country.”

HIS ADVICE: “You have to know yourself really well,” says Maghsoodnia. “Are you the type of person open to taking risks and enjoying them? You have to be comfortable with risk, change, and moving on a dime. If you’re that kind of person—just go for it.”

WHO:

WHAT: Butch Bakery

WHERE: New York, NY

WHEN: 2009

HOW: David Arrick, like many, found himself – and his source of steady employment – a victim of the recession. After he was laid off, Arrick, who worked in commercial real estate, thought he’d hit it big when he landed a job in Dubai. “But then the global economy took a hit,” says Arrick, and as he packed boxes in his New York City apartment, he again found himself unemployed. “I had cashed out my 401(k) and blown through my savings,” says Arrick, “and I thought to myself, ‘how much worse could it get?’” Fortunately for Arrick, he didn’t have to find out. During a walk around his downtown neighborhood, Arrick’s attention was captured by the around-the-block line outside of a “cupcakery” on Bleecker Street.

“Their business was booming – and I wanted to get a piece of it,” says Arrick, “But all of these Manhattan cupcake bakeries reminded me of my grandma’s kitchen. I couldn’t find the ‘boy bakery.’” Suddenly, Arrick saw the gap in the market he knew he could fill. He went to his apartment, and holed up for a weekend to draft his business plan. “I loved to cook and bake,” says Arrick, and having changed careers multiple times in his life – from acting to personal training to real estate – “I thought, fourth time’s a charm!” Using what he had in cash and putting the rest on credit cards, Arrick launched a website, rented a commercial bakery space in Queens, and got started. Developing flavors like the “Driller” (maple cake topped with crumbled bacon and filled with milk-chocolate ganache) and the “Beer Run” (chocolate beer cake with beer-infused buttercream topped with crushed pretzels), Arrick’s unique flavor combinations and frill-free attitude appeals to the manly man that still wants to satisfy his sweet tooth.

“It took a little less than $25,000 to start,” Arrick explains, “but I was able to keep my costs low because I didn’t have to invest so much money in a storefront.” The low overhead was only one of the plusses, Arrick discovered. By starting slow and getting his brand name out first, he was able to (initially) keep the demand at a pace he could manage, and allowed him to see if there was really a market for the product. “My projections at the beginning were conservative, because I didn’t know if it would take off,” says Arrick, “but within a few weeks of opening, I went from selling 100 to 500 cupcakes a week – and the growth just hasn’t stopped.” His biggest struggle? “No one prepares you for the media attention!” explains Arrick. He’s been featured in several national publications, developed a cookbook, and has begun shooting a reality TV show based on the business. Subsequently, demand has increased – but in only nine months of business, Arrick hasn’t developed the infrastructure to keep up with the demand he has now. “I had to find a way to keep the goodwill of my customers when I have to tell them that I can’t bake and ship their order for another week,” says Arrick, “but still keep them as a potential customer in the future.”

So what can we expect from Arrick? First, now that he knows he has a market, he plans to expand this fall by opening a Manhattan storefront. With the storefront will hopefully come more flavors, and a wider product line that includes cakes, now that he’s received inquiries about groom’s cakes for weddings and more. He recently had the opportunity to fill an order for the military, which was shipped to soldiers in Iraq and Afghanistan – something he says he’ll always remember as a mark of his success. He now has a team of five people working alongside him, which he says has been incredibly rewarding. “It allows me to relax a bit and not worry about managing each aspect of the business myself,” says Arrick. “I don’t have to be or want to be the ‘big cupcake’ all the time.”

HIS ADVICE: “Make sure you know who will catch you if you fall,” says Arrick. “It might be cliché, but it was comforting to be able to remind myself that I had friends and family who wouldn’t let me go hungry or homeless if I were to fail.”

WHO:

WHAT: Rentricity

WHERE: New York, NY

WHEN: 2003

HOW: While we’re still fighting to lower unemployment and stabilize the housing market, at least one business sector is going strong. GreenBiz’s semi-annual “Green and the Economy” survey shows that companies are willing to spend money on products and services that will help them be green and eco-conscious – and Frank Zammataro is taking advantage. After leaving Wall Street in 2000, Zammataro was looking for a new project – and after 9/11, an idea for a business spurred while he looked at New York City water towers.

“When you have to bring water from high elevations to low elevations,” Zammataro explains, “you need to slow it down as it comes through the pipeline.” In places like New York City, where water towers often sit on the rooftops of apartment buildings, this is necessary to keep water pressure at a comfortable level – particularly in sinks and showers. “Traditionally, water is squeezed as it goes through a pipeline,” Zammataro says, “but I had an idea that would not only effectively slow the water, but would also generate electricity.” Zammataro’s idea consisted of replacing the existing mechanism inside pipes with a propeller-like “microturbine” – as the water passes through, the propeller slows it down, and as it turns, electricity is generated.

Zammataro knew he was sitting on an idea that would be great for cities across the globe – and while he had found some success in freelancing in IT, his new discovery seemed like the career jump-start he was looking for. “I wanted the opportunity to create not only a good business,” says Zammataro, “but also to do something important for the environment.” He formed a team of friends and colleagues to help him initially fund the project, and was fortunate enough to receive state grant money for the project as well. It took that initial $500,000 (“and a LOT of sweat equity!”) to kick-start the company and land them their first project in Stamford, CT.

In 2007, the Stamford project was successfully completed – and today, they have three more projects underway in Pennsylvania, New Hampshire, and California. Rentricty is also a part of New York City’s new business incubator program – establishing a support network for promising start-ups in the city to help ensure their success. Their exposure as the first “green” incubator in New York City has helped them get investor backing from major water technology businesses throughout the country. While they’re still bootstrapped, Zammataro expects that by the time they complete their third year of business, they’ll be cash-flow positive.

HIS ADVICE: “Don’t underestimate the time, effort, money, and passion required,” says Zammataro. “You have to stick to it and not give up easily, and believe that the time will in fact pay off if you’re able to keep the business growing and going.”

My mom and I own a salon and day spa and like many businesses are having trouble paying off our credit card debt. We have several credit cards that we have made hardship payment arrangements with, but one of our cards was turned over to an attorney and the court awarded a judgment “by default.” What options, if any, do we have to settle this debt ($11,600), and can they garnish our business account to collect this debt? — Anonymous

The very first thing I want you to do is watch the Today Show segment that I did on this subject.  It’s not only happening to you.  It’s happening to many people — and many small business owners.

You should know you’re on the right track. Calling your creditors to notify them of your hardship (which, by the way, is a good word to use when talking to them), and providing them with a clear reason for why you’re behind is a good start, so you can negotiate down your debt and start to rebuild financially.

When it comes to that default judgment, I have some questions: Were you notified of the court date?  Were you, in other words, properly served?  That, unfortunately, is how a lot of these default judgments are coming down these days.  If you were not notified, you have the right to go back to whatever court handed down that judgment and fight back.

You may also want to get some help.  Gerri Detweiler of Credit.com suggests making an appointment – now – with a bankruptcy attorney. “I’m not suggesting you file for bankruptcy,” says Detweiler, since you might not need to at all, “but you do need to find out from the attorney what the creditor can do to collect on the judgment.”

One thing to know about judgment debts is that, like other debts, they can be negotiated. “It can be trickier once there is a judgment since the creditor has additional resources to collect,” says Detweiler, but an attorney can help you do so. Negotiated or not, however, you need to have the cash to settle the debt once and for all – which might be a struggle in your situation. “The fact that you have talked with an attorney and are considering going that route could give you some negotiating leverage with your creditors,” says Detweiler, “who would probably rather get something than nothing.”

So while it may seem a bit frightening, getting legal support is your best option. A lawyer can better explain the settlement options of your judgment debt, and what measures a creditor can take to get the money they’re owed. Depending on the state you’re in, that can include “garnishing wages, seizing bank accounts, and even placing a lein on your property,” warns Detweiler. By meeting with an attorney, you’ll know your specific risks – and they’ll likely have some good suggestions for how to handle the other debts you’re paying off already.

The jobs picture is pretty dismal. The official national unemployment rate is still at a relatively high 9.5% – and the underemployment rate at a more alarming 16.5%. But that’s not all of it. According to the Bureau of Labor Statistics, there are more than five applicants for every job. It now takes 35 weeks on average to get a job. And 45% of people have been out of work more than a half year. At the beginning of the recession it took 17 weeks and only 17% of people were out of work more than a half year.

Are there any bright spots? A few, says Mark Zandi of Moody’s Economy.com. Geographically: Texas – particularly Dallas and Houston because being larger cities, they have more jobs, but also Austin and San Antonio. Some of the country’s “logistical” centers, areas where there are jobs in transportation, distribution, warehousing and wholesaling, are faring well. These include Louisville, Memphis, Salt Lake City, Kansas City. Also, Boston and San Francisco because there are signs of life in technology and education.

And by Sector: Health care, educational services (although the lack of aid from the states hasn’t helped recently), manufacturing, professional services (accounting, legal aid, management consulting) and Wall Street. Zandi is also expecting to see job creation from the banks. As they start lending, he explains, we’ll see jobs in loan origination and managing credit risk. There will eventually be jobs that come back in retail, leisure and hospitality but not for the next year.

Job creation needs to ramp up, however, to bring down the unemployment rate. Right now, we are creating about 100,000 jobs a month and have added 600,000 this year. Because so many of the folks sitting on the sidelines will eventually start looking for jobs again, we need to create 150,000 a month just to stabilize the unemployment rate. And we need to create more than that to bring the rate down. Both Zandi and employment expert John Challenger, CEO of Challenger, Gray and Christmas, expect that to start happening by Spring 2011.

So what do you do if you’re out of work and see few prospects?

• Look for a temporary job. According to Challenger, temporary help services have added 379,000 jobs since last fall. That was the first sign of the economy recovering. Many businesses are not yet confident enough to hire full time but they are hiring temps. And eventually some of those temps will be given full-time status.
• Take a night class. Going back to school may seem like the right move – and it is true that people with a greater level of education have been less impacted by job loss – but you don’t want to do anything that will get in the way of your search. If you take a night class that can build on your skills, you can continue going even if you get a job.
• Find an edge. It’s unfortunate, but when employers are choosing between people who’ve been out of work a month and those who have been out of work six months to a year, the person out a month often gets the nod because the employer wonders what they don’t know about the person who has been unemployed longer. That’s unfair, particularly in this economy. But you have to find a way to fill those gaps in your resume. Take on a project. Consult. Volunteer. Take that course. Most importantly – get out of the house. Taking on a physical challenge (like running a 10K or marathon) can give you the confidence you need to continue searching. Otherwise, says Challenger, inertia sets in.

WHO:

WHAT: Knock Knock – fun and functional gifts.

WHERE: Venice, California

WHEN: 2002

HOW: It took a belated Christmas card, a blindside of a breakup, and a lack of motivation for Jen Bilik to launch a business. An odd combination, but for a passionate writer who suddenly found herself dabbling in graphic design, having an unexpected inspiration to try something new wasn’t an unfamiliar feeling. After leaving her in-house publishing career to freelance on her own, Bilik tried her hand in a few different projects for about six years (a period she refers to as “the abyss”). One of her projects, a children’s book, was simply not coming together. “I would procrastinate by doing these side projects,” Bilik says – including the “January Card” for those who missed the December holidays, and the “How to Find Love” poster, a tangled flowchart she developed after a bad breakup. “People started to say, ‘you should sell that’ about the things I made, but business didn’t interest me.”

It took a few more months of making little progress on her book – but a lot on her side projects, for Bilik to realize that starting a business had potential. “Despite my best intentions, I wasn’t working on the book, and I was working on Knock Knock,” says Bilik, “so I shelved the book. I created a business plan without a single number — more a manifesto than a business plan — and jumped right in.” She sold her apartment in New York for $700,000, rented an office space and hired a team, and soon after, launched 13 products that were an immediate hit.

With gifts categorized by recipient – everyone from your family and coworkers to “annoying people” – Bilik’s plan to launch “a creative business of interesting, smart, paper (mostly) products united by an irreverent, truthful sensibility” has shown a great deal of promise. Whether it’s the “Enemy Spitball Dartpad” or the “When Pigs Fly” sticky notes, Bilik’s fun, witty collection serves as a reminder that sometimes stepping out on your own can be incredibly rewarding. “Just as there are too many struggles to itemize, so are there too many achievements,” says Bilik. “That’s the thing about entrepreneurship — and, I hear, about parenting — it’s the hardest and most rewarding endeavor.”

Since the launch, one of the business’ struggles has been the ability to maintain profitability. “With a manufacturing business, cash flow can be a challenge when you have to stock up long before you can sell product,” says Bilik, “and our products sell for an average of about $3, so you can imagine how many of them we have to make and sell!” As it was for many small business owners, 2009 was a difficult year, but thanks to new investors, they’re on track to be profitable again in 2010. A recent feature in the New York Times didn’t hurt either. Despite any struggles Bilik is an advocate for positivity. “You need to come back every day, with a new smile on your face, and a new commitment to get through and learn from the challenges.”

HER ADVICE: “Be frugal and resilient,” says Bilik. “The first one I have had to learn the hard way, and the second one… I have had to learn the hard way.”

Want to win one of three prize packages from Knock Knock ($20 value)? Click here – write “KNOCK KNOCK” in the message window – and I’ll let you know if you’ve won!