From Jibbitz to Geopalz, Entrepreneur Combines Savvy and Luck
| 19 | Nov 2011 |
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Sometimes success really is all about timing. Just ask Rich Schmelzer, whose business ventures largely have been defined not only by strong business plans and strategic planning, but also by the ability to look forward and capitalize on opportunities.
From starting the decorative shoe-charm company Jibbitz to his latest venture, Geopalz -- a fitness tracker where kids earn rewards points based on their daily activity -- Schmelzer and his wife, Sheri, have been able to capitalize on making kid-friendly products that have either literally attached themselves to or taken advantage of current trends.
"My definition of luck is preparing for opportunity," said Schmelzer, who has since sold Jibbitz and is now CEO of Geopalz. He and his wife started both companies together.
"I always keep my blinders open and look for different ideas. I read up on a lot of things and look at opportunities that may be out there a couple years down the road. Hopefully those two things intersect at a point where you can make an impact on them," he said.
With a savvy business sense that balances calculated growth and some good fortune along the way, the Schmelzers have made the most of their entrepreneurial efforts and in five short years have been able to turn a simple art project into two successful businesses.
A $20 million accident
The Schmelzers' entrepreneurial careers started unintentionally in 2005. Sheri and her three children were home working on an arts and crafts project to decorate the family's 10 pairs of Crocs shoes. When Rich returned home from his job that night, he saw more than a simple summer project.
"My wife was decorating the kid's shoes," said Schmelzer. "She wasn’t saying 'I'm going to form a business, let me sit down and figure out how to do this.' When I came home I said 'Can you make a lot more of them?' By accident she stumbled upon the idea and then we decided collectively to make it go big."
The growth of their creation, Jibbitz, the decorative shoe charms that fit into the holes in Crocs shoes, could not be anticipated even by Rich and Sheri. By the end of the summer, the Schmelzers had set up a website to sell their products and had secured the capital they needed to start growing their business .
"We took out a home-equity line of credit, probably under $200,000, to get everything up and running and have cash flowing," said Rich Schmelzer.
With the financing they needed in place, the Schmelzers began to grow their company. With the quick growth and the continued popularity of Crocs, there was a temptation to grow quickly. Despite this temptation, the Schmelzers made sure to take the process slow in order to perfect their product.
"It was calculated growth," said Schmelzer. "We decided to take sales from zero to $20,000 a month, but we didn’t want to launch it to any stores . We wanted to launch it to consumers first and got feedback as to what we were doing wrong and what we were doing right."
With a calculated growth model in place, the Schmelzers were able to increase monthly sales from $20,000 a month to $200,000 a month by launching their product to select stores that had reached out to them about carrying their products. After improving mistakes they found in the initial products, the Schmelzers decided to expand their sales base and were doing $2 million a month in business before they knew it.
"Not only were we taking inbound calls from stores, but we also started to do trade shows," said Schmelzer. "We went from introverted to extroverted when we moved from $200,000 a month to $2 million a month."
In that time Jibbitz also went national, but it was another bit of timing and luck that gave the Schmelzers their big break.
"We set up a table at a trade show in Las Vegas where Crocs also had a booth," said Schmelzer. "People would walk out of the Crocs booth and see our booth and come over to buy Jibbitz for their shoes. We met [representatives from Crocs] at that trade show and kept an open dialogue."
That dialogue continued after the trade show until Crocs made the Schmelzers a $20-million offer -- $10 million upfront and an additional $10-million bonus if earnings projections were met -- to buy their company. One year after starting as an arts and crafts project in the Schmelzers' basement, Jibbitz was sold to Crocs.
Not content to rest on their laurels, the Schmelzers began work on their next venture. One year later they launched Geopalz, as a way to get their children to be more active. The lessons they had learned from Jibbitz were fresh in their mind.
Advice
The allure of quick growth can be tempting for any business owner, but Schmelzer warns those looking to make quick money not to grow quicker than they can handle.
"Make your mistakes small," said Schmelzer. "If I had launched my version one of GeoPalz into 10,000 stores overnight, I would have been backpedaling."
While slow and consistent growth may not be as attractive as quick growth, Schmelzer believes that slow and steady growth will indeed win the race.
"Make small mistakes and fix them," said Schmelzer. "Then make more mistakes and tweak them again to get real confident about what you are going to do. I call that an intricate process as opposed to a three-year business plan where your product can't change that much because it is locked into a business plan. Be willing to listen to the market, be willing to listen to consumers and be willing to make mistakes and learn from them."
Despite the best business planning and strategies, sometimes it is, in fact, better to be lucky than good, according to Schmelzer.
"We happened to be at the right intersection," said Schmelzer. "We prepared for an opportunity, we just didn’t know what it was."