With Young Firms, Instinct Can Take You Only So Far

Entrepreneurship might very well be an innate skill, but even for those born to run a business, instinct can
carry you only so far.

In order to grow, a small business at some point needs to take stock of its financial needs and opportunities,
as well as to measure and improve productivity and develop a detailed strategy for success. Running on
instinct isn’t going to answer these questions.

By JEFF BAILEY
Staff Reporter of THE WALL STREET JOURNAL

In other words, stop winging it.

It’s that time for Sheryl Woodhouse-Keese, who runs a four-year-old business, Twisted Limb Paperworks,
in Bloomington, Ind., making recycled paper by hand and turning it into elaborate and unusual wedding
invitations.

Ms. Woodhouse-Keese, 33 years old, has done nearly everything on her own, with no formal business
training. She taught herself papermaking "from a library book" as a hobby, she says.

A committed environmentalist, she started out making stationery and personal journals, selling them at art
fairs in the Midwest. Then, in 1999, a local customer asked her to make some wedding invitations. Around
the same time, she built a Web site, http://www.twistedlimbpaper.com. Soon, greenies and others with
environmental leanings searching the Internet for "recycled invitations," were finding her from all over the
country. And today, her business is 90% wedding invitations. "Personally, I’m not into weddings," she says.
"I kind of fell into the business."

Recycling fans are clearly willing to pay premium prices for her very rough, colorful paper, with flowers
pressed into it. The invitations cost $2.60 to $4.35 each. Throw in thank-you notes, a guest book and
wedding programs, and a bride can easily spend $1,000.

Last year, Ms. Woodhouse-Keese took in about $65,000 on about 220 orders. Depending on the season, she
hires between two to five art students from Indiana University in Bloomington to help her make the paper
and turn it into invitations. This year, she expects sales of about $80,000.

After some early ambivalence about running a for-profit business, Ms. Woodhouse-Keese is ready for a
larger and more predictable income. The business is doing well: Of the customers calling or e-mailing about
invitations, and receiving a catalog and a free sample, 60% to 70% end up ordering. That’s a tremendous
conversion rate. But getting the product in front of more brides is what’s needed.

So, how to expand a smaller company initially built on instinct? A closer look at Ms. Woodhouse-Keese’s
situation points up the kinds of issues many entrepreneurs are likely to face when they decide to take a more systematic approach.

Growth: Small ads in bridal magazines could bring more inquiries, and many well-to-do brides who aren’t into recycling might nevertheless
find the paper attractive. Ms. Woodhouse-Keese worries, however, about attracting "high-maintenance" brides. The Utne Reader subscribers
and those who find Twisted Limb on Unitarian Church bulletin boards are blessedly "low-maintenance brides," with few special demands, Ms.
Woodhouse-Keese says.

Separately, she faces a more fundamental decision about her path to growth: Is she a papermaker or an invitation maker? Ms.
Woodhouse-Keese has heard from other printers who want to buy her unusual paper and print up invitations themselves. She hesitates to
supply the competition, but suspects that selling paper would be more profitable than selling invitations. Should she stick to making paper and
market herself aggressively to other printers? Or should she continue to branch out into finished invitations? Either way, Twisted Limb needs
to prepare to be a higher-volume operation.

Productivity: Twisted Limb has two household blenders into which pieces of old junk mail and paper bags, water and some calcium
carbonate are mixed for 10-15 seconds on high speed. Six blendersful make a bucketful, which makes 30 pieces of paper 8½ x 11 inches.
Using her many sinks and drying racks, she can make 250 to 300 pieces a day.

But her business is highly seasonal, at full capacity for much of the first half of the year, ahead of and into peak wedding season, and slowing
the second half. So, to grow she either has to stockpile in the slow season or boost capacity.

A $500 paper cutter was Ms. Woodhouse-Keese’s first investment in productivity. "It’s saving incredible amounts of time," she says, and has
her eyeing a commercial hole puncher and, perhaps, a $6,000 commercial beater that pulps old paper faster and better than blenders.

But first, how many hours of labor does it take to make 300 sheets without such machines, and how much labor would be saved with the
equipment? She hasn’t yet made those calculations.

Financing: Ms. Woodhouse-Keese, like so many start-up entrepreneurs, has financed her business on low-interest-rate credit cards to date,
and kept debt low. And given the unending flood of offers for cheap plastic credit, that may be a good strategy. But it wouldn’t hurt her to
consult a banker who does Small Business Administration lending and other small-company loans about more conventional financing to
support her growth — be it an inventory buildup in the slow season, or a way to handle a flood of orders from bridal-magazine ads.

Pricing: A one-hour visit, arranged through a local SBA office, with a retired greeting-card executive prompted Ms. Woodhouse-Keese to
raise prices earlier this year, though less than was recommended. To understand her ability to raise prices without losing customers, she needs
to study the invitation marketplace and ask customers what they considered before buying her products.

A nonenvironmentally minded bride might be less, or more, price-sensitive than the greenie bride, so tracking where customers learned of
Twisted Limb — and how much of total sales come from each group — would also help her decide prices.

In the end, a successful business runs on good information as much as sweat and tears. By gathering data and putting it to work, Ms.
Woodhouse-Keese has an opportunity to grow and be more successful.

Write to Jeff Bailey at [email protected]