December 26, 2000, 9:55 AM

Success on a Shoestring

(Page 3 of 4)

Cataudella always has done everything himself. He built his own Web site back in 1995, for example, and even spent several weeks “tearing out my hair,” trying to figure out how to make it secure for credit card transactions.

But his personal dedication is what customers like about shopping at Tronix, Cataudella says. “The relationship with customers is very personalized,” he says. “It’s a one-on-one relationship with each person. They don’t feel like they are in some kind of assembly-line affair.” Cataudella’s efforts are beginning to pay off. He has about 7,000 customers and gets up to 65 orders a day. Last November, Tronix turned a profit for the first time. It’s been a struggle, Cataudella admits. “For the first couple of years, everything sort of paid for itself. Our customer base grew quickly, but our profit margin is very low, so that took a while to build.”

He also has learned a lot about saving money along the way. For example, he has worked with several shipping companies to find the one that best suits his needs and his budget. Another thing that makes his business viable is that he doesn’t have to stock a lot of inventory. Catudella is close to many suppliers in New York, so it’s easy to get the games he needs when he needs them.

Getting online early makes Cataudella, who also is a co-author of Creating Stores on the Web (Peachpit Press, Berkeley, Calif.), something of an Internet veteran. He visits other Web stores daily, instantly recognizing novice mistakes like overpriced shipping. “My experience makes me feel I’m a step ahead,” he says.

Starting small, bulking up


Company: Inc.

Web site:

Headquarters: San Francisco

Founders: Donald Kendall Jr., CEO;
Eric Budin, vice president of business development and strategic planning

Launch date: September 1997;
Web site up May 1998

Start-up funds: $52,000

Current revenues: $1.2 million annualized (based on December sales of more than $100,000)

Employees: 50

Donald Kendall Jr. and Eric Budin probably wouldn’t have had much trouble drumming up funds for their Internet start-up company, a Web-based vitamin store loaded with information and articles on health and wellness. Budin had helped launch two other online companies, and Kendall had co-founded a restaurant company in Poland with annual sales of $26 million. But with, they wanted to do as much as they could with their own money first. “We felt we would have to give away too much of the company if we went to venture capitalists directly,” Budin says.

So the pair put in $52,000 of their own money to get things started in September 1997. With that capital, they hired their first three employees. The small staff began to sign big deals with advisors and marketing partners.

With the site planned and the business moving forward, they took out a loan for $650,000, the bulk of which went to an outside company that designed and built the site. GreenTree also hired several more employees, Budin says.

In May 1998 GreenTree raised $2.5 million in venture capital funding. Revenues grew quickly, reaching about $1,000 a day by last October. At that point, the company raised another $11 million in venture capital.

“It’s important to look at the sequence,” Budin notes. “We have been able to tie our financing to deliverables. First, we had the seed of an idea and we put in our own money. Then we had a real good concept, and we were able to raise the loan money. We built the site, and we were able to get the first round of venture capital money. We started to really get our revenues tracking, and we raised the second round of venture capital.”

GreenTree recently has purchased two other firms, Acumin Corp., a company that offers custom-formulated vitamins, and VitaSave, another competitor. Monthly revenues are beating projections, according to Budin. In December, they topped $100,000.

Budin, who loves being involved in start-up ventures, encourages others who are interested in building a business from scratch. “You should shoestring as long as you can, get the right partners, and then it is all about momentum,” he says. “Figure out what that succession of dominoes is, and start knocking them down.”•

Contributing editor MargaretAnn Cross is a business writer in Allentown, Pa.

How to make it on a budget

Don’t do more than you need to. Complete Book and Media Supply’s clients are businesses that have corporate accounts. For the most part, they don’t use credit cards to shop online. “At first, we went overboard with security on the Web site, even though my clients didn’t care about that,” says President Peter Coomaraswamy. “That was a mistake. We ended it up stripping most of it out.”

Strike a deal. asked lawyers to defer billing in the beginning. Complete Book and Media Supply was able to pay for its Web site over time so it didn’t have to go into debt. Even shipping rates are negotiable, says Tronix Founder Joe Cataudella.

Automate as much as possible. Art Munson is able to run his Web store with just two employees-him and his wife Robin. That’s possible because everything’s automated, Munson says. He uses an invoice software program called Mail-Order Manager. He collects orders from his Web site and his call center’s online bulletin board and imports them directly into the invoicing program. Then he sends the orders to a credit card center for authorization in a batch via modem. Once the orders are authorized, Munson transfers them back into the invoicing program with the authorization codes. From the invoicing program, Munson transfers the data to UPS online software, which creates all of the mailing labels. “I don’t have to retype any information,” Munson says.

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