Copyright 2000, Morino Institute. All rights reserved. Edited for length and clarity.

mary macpherson: introductions

Good morning I'm Mary MacPherson, Executive Director of the Morino Institute's Netpreneur.org. On behalf of our team, thank you very much for coming this morning, and welcome to Coffee & DoughNets. We have a terrific program today, created from feedback we've received from you.

Recently, we brought you programs on valuation and acquisitions, but for the record, the vast majority of companies never go public. In fact, slightly over 95% of companies have less than $1 million dollars in revenue, and fewer than 1% reach the top of the pyramid. Today we are going to meet three entrepreneurs who have successful, profitable businesses, and we are going to learn some of what they have learned about growing those companies. All three began as home-based businesses—one actually began in a dorm room. They didn't start out with a plan; rather, they saw a market opportunity and they had the passion and the guts to take the leap. They're doing their own thing on their own terms. They started out to build small businesses, and we will talk to them about how they're doing it.

Each of our panelists will speak for 10 minutes. They will tell you about their businesses, what they do, how they got where they are, and give you a glimpse of where they are going—all without shameless promotions. They'll pass on some of the lessons they have learned along the way about customers, advisors and other issues in building a business. Then, as usual, we will open the floor to questions from the audience.

Let's get started with Lisa Martin, founder and President of LeapFrog Solutions, a digital marketing firm that integrates traditional marketing methods with emerging technology in Web design development, print design and multimedia. She says that she started LeapFrog Solutions in order to spend more time with her husband and daughters, so every day is "Take Your Daughters To Work Day" for Lisa. She also tells me that one of her proudest accomplishments was convincing her French husband to move with her to the US, and that was after he proposed and they survived a major storm in a sailboat on the Mediterranean. You will see that tenacity is one of Lisa's traits.

lisa martin: real benefits of virtual companies

Thank you, Mary. Welcome everyone. I am excited to be able to share some advice that I hope will benefit you. Like Mary said, I started LeapFrog Solutions hoping I'd be able to spend more time with my husband and daughters. Now, what is happening is that they spend more time with me in my office.

LeapFrog Solutions is a women-owned company. We're self-funded and have been in business for about four years. We are a virtual company; most of us work out of our home offices. We have doubled revenue every year and hope to continue to do so.

My background is in marketing and sales. My bachelor's degree is in marketing and my MBA is in marketing and international business. The reason I started LeapFrog Solutions was to offer our clients creative, effective solutions to their marketing needs. I didn't have that flexibility before the way I do now.

Here's how we got started. I had been working with a company where I had a wonderful boss. He was afraid that he was going to lose one of his largest accounts when I left, so we made a deal that I would continue to be the project manager on this account for a year. He was able to keep his client, the client was happy and I got my seed money to start LeapFrog Solutions.

I knew I wanted to start a virtual company, and the first piece of advice I can give you is that image is everything. We knew we were going to be a bigger company, so that's how we came across. We don't view ourselves as a home-based business—I think of that as arts and crafts—we are home offices. When I started LeapFrog Solutions, I invested immediately in marketing materials with top-notch design, top-notch copy and demo reels. I believe that believing is seeing. We believed that we were bigger and we got bigger. Everything else we do, even our phone systems, makes our image very, very professional.

The second piece of advice I would give you, and again it shows an office mentality, rather than a home mentality, is to put together a team that is flexible. I call us a flexible team of experts. I knew the folks I wanted to work with when I started LeapFrog Solutions—top-notch creative designers, top-notch copywriters, top-notch video producers, multimedia people and programmers. The one thing they all had in common was that they were the best of the best. I knew that I could sell these folks, which was a good match because they didn't want to sell or do project management. All of them had been working out of their homes for at least a year, some up to 12 years. They all had agency experience and all knew how to deal with tight deadlines, demanding clients and challenging projects.

That leads me to my third piece of advice, which is that you all need to share the same values. I hope this is not self-promotion, but I want to read our mission statement: "We are committed to assisting corporations and associations in repositioning themselves in the marketplace by integrating traditional marketing methods with emerging technologies. Our clients will always receive creative, effective solutions, a commitment to their deadlines, a consistent follow-up in a timely manner and accurate cost estimates with no unpleasant surprises."

We're always in communication with our clients. Communications and values are key. Even our clients are amazed at how cohesive a team we are.

The fourth piece of advice I could give you is to get involved. Being in sales and marketing, I am a born networker. I got involved immediately with the Fairfax County Chamber of Commerce, the Northern Virginia Technology Council (NVTC), the New Media Society, the Volunteer Center of Fairfax, the Leadership Fairfax Programs and Netpreneur.org. We all got involved in some type of networking, some of us more than others. Because of that, I was selected last year to sit on the boards of the Fairfax County Chamber of Commerce, the NVTC and Volunteer Fairfax, and my creative director is on the advisory board of the New Media Society. This helped our business immensely, and 70% of our business comes from this region now.

Another piece of advice I'll give you is to be able to offer clients effective, creative solutions. I refer to this as "Hollywood-style management." We have a core team of people at LeapFrog Solutions, but we analyze the projects to see how we can best offer them the solution by putting other teams together. There is a good book called Teaming Up by Paul and Sarah Edwards that I recommend. It gives some different strategies for how to team or partner with other groups, especially as a small business. This has enabled us to get larger accounts, one of them being Mobil Corporation, where we needed a group of people who could make our projects EDI compliant. We did this also with Dewberry & Davis for some specific database needs they had. It is also crucial that your partners share your values in order to make it work.

In terms of lessons learned I'd say three things: flexibility, persistence and resilience. They are key to continuing a successful business.

An example of flexibility is that when we first started LeapFrog Solutions we were about 80% print design. Within a two-month period, we became 80% Web design. We were able to do that because our designers were also multimedia designers, and they were chomping at the bit in 1996 to get more involved with the Web. Having Mobil as a client also pushed us in that direction because they kept wanting more of our work.

The thing about persistence is, never say never. At one point, after I had hired two employees who were working out of my house, after I bought new equipment, added cubicles, phone lines, a DSL line, you name it, we lost two of our largest accounts. This was about six months ago. These were clients up in Boston, and we lost them because they were going through major reorganizations in their companies. Stuff like that happens, and it was a very long two months for me, but we were networking, we were getting ready to launch a Web direct mail campaign and we had been getting a fair amount of local media coverage which helped us. We were able to recover and gain new business. All of the replacement business has come from this region, so the networking and the persistence were crucial for us.

Interestingly, one of the clients we lost also lost their largest account. They shared this with me later. They had been in business for 30 years, had 50 employees, were in formal office space and were supposedly very solid. They hadn't been getting new business, so they decided to close their doors. After 30 years, they decided to just shut down, so it made me realize how nimble we were and that we could survive.

The last thing is resilience. Hopefully I will laugh about this some day. I had a neighbor who also owns a business get a little upset about all the media coverage we were getting. He called Fairfax County on me because you are only allowed to have two people in a home office and we had three. It was probably one of the worst days of my life when the Fairfax County inspector came to our office and told me I had 30 days to move. We filed for an extension immediately, and we are moving into office space next month. We are going to continue to have virtual companies, but now we are going to have a combination of an office team and a virtual team to continue our growth. This was inevitable. I had been looking for office space already since we are hiring and won't have room to put anybody.

The thing I would like to leave you with is something Gene Riechers of FBR Technology Venture Partners told me. He said, "Lisa, be careful what you wish for." Everything we are wishing for is coming true, but you have to earn it. I think this office space situation is just a way of telling us that it was what we needed to do.

Ms. MacPherson: Thanks, Lisa. Now we will move on to Layla Masri, founder and Senior Creative Director of Bean Creative, a full-service Web design firm. Her family is from Jordan, and last year she had an opportunity to meet the new King of Jordan on his first visit to America. While everyone else asked him about foreign policy, Layla knew he was a sci-fi buff who had appeared once on Star Trek, so she invited him to attend the Star Wars movie premier. She got his attention, but apparently he was already on his way to a private showing at the White House. You will see that ingenuity is one of the ways that Layla gets Bean Creative noticed.

layla masri: downsized into an upside

Thank you. Yes, the main thing about meeting the King of Jordan and asking him, "Hey, do you want to come see Star Wars with me?" summarizes how Bean Creative has gone from where we started to where we are now.

We started as myself and my partner. I always call Keith my partner. He is also my husband, although it's not something that we necessarily broadcast when we meet clients. Our partnership started because we were working together in advertising. Keith is a graphic designer, and I'm a copywriter by trade. Journalism was my degree from the University of Maryland. We had a very good rapport—obviously, since we are married—and, hopefully, that will continue.

We were starting to get bored with the print media work we were doing. The Web was becoming a big thing when we first started talking about doing something back in 1995. I thought about it, and I guess that a lot of things that happen in life pushed us towards this. First, we started doing work out of our house. It is still out of our house, but at the time, we did it on our spare time. We had regular day jobs, so a cell phone was a great thing to have. When it rings, you know that is the Bean Creative line and you kind of duck under your desk and answer, "Bean Creative." None of my past employers should ever hear this, but that is how we got started—with a cell phone answering calls on lunch hour.

Work picked up and we started making supplemental income. It was nice. You would get some good-sized checks. It wasn't something that would let us quit our jobs, but it started off pretty well. We started saving that money, hoping that some day we would be using it as capital to start our business. That someday came about two-and-a-half years ago when I was abruptly downsized from my job. I walked in and they said, "Sorry, we are letting all of these people go, and you, unfortunately, are one of them."

I did a lot of soul searching. I was terrified. Keith was terrified. We had just landed two new clients, however, and we thought, "All right, this is a sign that someone has given me this opportunity and I am going to run with it." That is what we did, and I became Bean Creative's first employee.

We worked on those jobs, and, when they were over, we realized that we didn't have anything else lined up. As promotional people, we realized that we needed to market ourselves some more. We were getting clients through networking, but we were not really doing the job effectively, so we started sending out mailings. We made up a list of all the companies we thought it would be really cool to work for, and we put together a mailing. We sent it out, and, of course, direct mail being what it is, we got very, very minimal response. Well, hadn't sent it out to very many people. We just created this cool list and sent it out and said to ourselves, "I bet all of them are going to come back to us." We knew in our heart of hearts, of course, that really wasn't the way to go. We started hooking up with a lot of the online networking through Netpreneur.org, through DC Web Women and by placing ourselves strategically in online directories, search engines and things like that.

Our business started picking up when we got another interesting downsizing. This time it was Keith. At this point, we realized that we were really not meant for the corporate world, since we both had been kind of shoved out the door. Unfortunately, we were not ready to do it full-time, so Keith ended up getting another job. In the process, Keith learned a lot of skills that have helped us become the company we are today. Eventually, we saved enough capital that we were able to have Keith quit his job. I was still working for the company full-time, and now we came to the point where we had another full-time employee and a couple of part-time employees. Much like LeapFrog Solutions, we also had groups of people we worked with, so we could expand and contract our business.

We've tripled our income consistently every year since we've been in business, and we've already met our goals for this year. When we set these goals, I couldn't believe they were going to be something we would attain. This year we will probably do about $1 million in sales, which, for us, is mind-blowing considering how we started. We also said we were going to hire another employee, and we have done that. We also want to get office space. I really like doing the home business thing, but I can see that we need to get out of the house at this point. We have had people show up on our front porch, not realizing that we were a home-based business. There were two dogs barking and they didn't really know what was going on. We got creative and started saying, "Why don't I come out to your office? I am going to be in Germantown tomorrow at noon, anyway. I'll be right by." Our meal expenses have gone through the roof because we take everybody out to lunch. Now, we're at a point where we need to have office space. We are going to hire more people than we feel we can fit into our house, which is already taken over by office equipment, phone lines and computers. The temperature upstairs in our house is probably 10 degrees hotter from all the computers.

So, we are meeting and exceeding our goals, which is very exciting for us given where we started. At first, we had people sending emails saying, "I am interested in a Web site." What kind of Web site are you interested in? "Well, I really like Star Trek and I wanted to do a fan page for Captain Picard." Right. That was kind of a blow to the ego because here we were trying to put forth this image of a professional company. When we started out, it was important to make ourselves look bigger than we were—like a corporation as opposed to a bunch of people working out of our house with dogs sitting at our feet. We have done a lot in the ensuing years to combat that. We have very nice office equipment, great computers, DSL and all the things that Lisa mentioned. They make you feel like a company, and, if you feel like a company, you will be.

As a side note, at one point we met with a client we had just finished doing some work for. They had brought in a lot of different companies to bid on the project, and one of those companies had actually bowed out of the bidding. They asked them, "Why did you bow out? We really liked you." They responded, "We thought we were too small for you." The client had ended up hiring us, and, apparently, we are much smaller than the company that dropped out. It was a powerful message to me that if you feel that you can do it, you can. It doesn't matter that you have five people and the company you are bidding against has 50. Certainly, you are not going to say you can do the job if you know you can't, but if you have the skills, the people and the resources, and if you really feel that this is something you can do, that makes the difference. It's why we won the account.

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