The first year is an extremely trying time for new businesses. We learned that first-hand over the past year, as we followed three distributors in their infancy. From start-up costs and decisions of when to move out of the house to missteps in hiring and client payment issues, we were there as these three distributors allowed us a view into their operations. What resulted was three completely different companies – one that’s finding very fast success, one that’s meeting its modest first-year goals, and one that has succumbed to the current economic realities and is now temporarily out of business. Scott Mollahan, Michaela Raner and Christine Cersosimo are the brave new distributors who let us follow them during the ups and downs of their first year in business. Their stories throughout the past year have given others a roadmap to follow – and we hope have provided a clear look at how to run a new business in the ad specialty industry.

On the following pages, you’ll find recaps of each of their stories – as well as a timeline of exactly what each has gone through in their initial year in business. With one hyper-fast success (Mollahan), one company that’s doing decently in a difficult regional market (Raner) and one operation that has been forced to shut its doors (Cersosimo), at least temporarily, there’s something here for everyone can relate to. It’s a contrast come to life of the varying levels of success that start-up companies can have.


A Sudden Success
Last February when we first met Scott Mollahan, the head of Insight Resource Group (asi/231569) in Orinda, CA, he was busy trying to determine how he could diversify his business. It certainly wasn’t the typical challenge for a start-up business.

While Mollahan was trying to find new clients outside of the wine and spirits industry – his niche market – other start-ups are simply trying to find anybody to say yes. Indeed, most new companies go after any business they can find, and pounce whenever somebody with a pulse is willing to buy.

Not Mollahan. He already had a book of business. The year before, he had left his full-time job as a salesperson for Applied Graphics. He was there for 11 years and had built up a rabidly loyal customer base in the wine industry, many of whom told him that they’d be willing to take their business with him if he started his own operation. So, Mollahan began fulfilling deals on day one – as opposed to hunting deals down.

“I talked to some of my clients to see if they’d stick with me if I started my own company,” Mollahan told us last year. “Many were very supportive. It helped my conscience to know that there was some built-in revenue there when I first started.”

Built-in revenue indeed. Mollahan brought in nearly $2 million in the company’s first year. And in 2008, Insight Resource Group’s first full calendar year in business, Mollahan’s operation racked up approximately $3.7 million in sales – about 60% of which came from the wine market. No, it’s not your typical start-up result.

But Mollahan has had some of the normal start-up obstacles of trying to get clients to pay on time, finding good people to hire for his growing company and deciding when and how to move into a new office space. He’s also operating in an industry that’s going through layoffs and consolidations, and he’s been dealing with rising prices on many of the goods he gets from overseas he’s finally got a Web site up and running after being in business for a year and a half.

So, no, everything hasn’t been perfect for Mollahan’s fast-growing company. But the results in year one can’t be denied. “We’ve done great,” he says. “We had one period in the middle of last year where I was concerned with a little slowdown, but then we ended the year really busy.”

And now, Mollahan is looking forward to expanding his business even further in 2009. He has six people on staff, but is looking for another salesperson now and knows he’ll need even more operational help as Insight grows. Of course, he has his worries – like the layoffs and consolidations hitting the wine market, the rate of unemployment in California and the depressed real estate market, the cost of goods from overseas and running a fast-growing operation with four kids under the age of 10 at home.

But he’s very happy with his first year in business. “It’s a whirlwind, for sure,” he says. “You’re making different decisions every day. But it’s great right now. We’re growing, we have a great staff and we’re always busy. All is good.”


The Nonstop Networker
When we first met Michaela Raner, president of Mack & Jack’s Marketing Solutions (asi/258682) in Tempe, AZ, she regaled us with tales of taking phone calls from clients and prospects while in labor with her second child, Jack. (Raner named the company after both of her children.) Looking back at her first full year in the ad specialty industry, Raner credits much of her success to her ability to constantly network with clients, old colleagues and even child hood friends who might give her referrals.

Raner finished 2008 with revenues of $238,000, $122,000 short of her original goal. But she says she’s pleased with how the year turned out. “Obviously, the economy stinks,” she says.

And the greater Phoenix area was particularly hard hit when the housing bubble burst, putting a severe damper on the local economy. Over the summer, she lamented that retail clients she had been relying on for business were reducing their marketing spend. But instead of continuing to tap into the local economy, Raner expanded her horizons and worked old business contacts in Park City, UT, to gain a number of accounts in the popular resort area. Now, she’s regularly flying to Utah to service a new client, a fractional ownership company, and provide promotional products to a group of ski resorts. Plus, she just inked a deal to provide marketing services to a Park City firm that is about to launch a new cosmetic product that will be touted as a non-surgical alternative to a tummy tuck.

At the same time, Raner is feeling more bullish about her prospects with local businesses in Tempe, ironically, because the economy is so bad there. “Because so many companies are laying off their marketing teams, they’re starting to outsource their services,” she says. “It’s a win for me because they still need marketing services, even if they don’t have people to do the job.”

After changing her payment policy (she now requires clients to pay 50% upfront), Raner also now has more cash flow and plans to spend more on marketing her company. She also recently discovered that many suppliers are willing to provide her with discounted products for self-promotions. She’s taken some of the suppliers up on their offer and is planning to purchase towels and water bottles to do a promotion at her local gym, a 24 Hour Fitness franchise, which lets members hawk their services on select evenings.

She and her independent rep, Christina, a recent college graduate, are also putting together a marketing kit they can use on cold calls that includes sticky notes and other small promotional items that feature the Mack & Jack’s logo. Both Christina and a second employee, a graphic designer also just out of college, have proven to be great finds for Raner. But finding such talent hasn’t been easy: Raner first went through a series of bad hires, all of whom were friends or friends of friends. “One lesson I’ve learned is that hiring friends is a good way to ruin a friendship,” she says. She also has found that hiring entry-level workers is a better way to build her business, at least for now. “When I hired people who were my age or older, they had this mentality that they knew better than I did how to build my business,” she says.

With a full year under her belt and a continued focus on growing her pipeline of contacts, Raner has set a goal of $600,000 in sales for 2009. And in five years, her dream is to be listed among the top 25 local advertising agencies in the Phoenix Business Journal. “That’s when I’ll know that I’ve finally made it,” she says.

Trouble in Steel Town
For some businesses, 2008 was like a Mac truck careening toward them. Before they could blink – bam. For Christine Cersosimo, that truck didn’t flatten her business until the fall.

At the outset of 2008, things were promising. Her company, Flow Business Solutions (asi/195711) based near Pittsburgh, PA, was up and running. She had a business plan in hand that she had crafted in detail and she was writing some small sales. But, then things got dicey as she tried to expand her business past her first couple of clients. When the economy faltered throughout the summer, her sales quickly dried up.

In addition, with the credit markets freezing in the second and third quarters, Cersosimo found financing to be nonexistent. She couldn’t get loans and banks were tightening their standards for any sort of line of credit. Operating a business, fronting orders and marketing the company was becoming impossible for Cersosimo. She maxed out her credit cards, but without revenue coming in, she found herself at a crossroads in the second half of ’08.

Cersosimo also struggled with finding people to work with her. She originally wanted to hire a rep besides herself. While she had an eager candidate for the sales role, that person turned Cersosimo off after she gave an unenthusiastic response to the job offer. Cersosimo quickly rescinded the offer.

Then she explored the possibility of merging her business with a partner, but it ended up not working out as the prospect requested too high of a commission rate on sales he made for Cersosimo. So, the two businesspeople went their separate ways. Ultimately, Cersosimo was left to handle the prospecting, cold calling and all the administrative aspects of her business by herself.

With no sales coming in and the inability to secure financing, Cersosimo had no choice but to shutter the business in the fall. Flow Business Solutions now lays dormant, temporarily closed while Cersosimo has been forced to find income. She has taken a job at a local Costco since July. That, though, hasn’t been without its issues – she injured her back while carrying a case of Gatorade on the job and has had to work in the back-office since. No, 2008 has not been an easy year for Cersosimo.

But, as she looks toward 2009, she’s trying to get her personal finances in order so she can jump-start her business one more time. “I hope to reopen after I graduate with my MBA at the end of the year, on a part-time basis at first, it’s time to financially rebuild,” she says.

It’s been a tough road, for sure, but Cersosimo is intent on getting her company going again. Cersosimo acknowledges that she perhaps bit off more than she could chew. Starting a business, applying for Women Owned Business certification, and going to night school to complete an MBA is quite
the challenge when you’re an operation
of one.

“Being a business owner has many advantages and some disadvantages,” she says. “I will regroup and consider options at a later time.”