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Bear Naked's growth: Stew Leonard to $65M

Landing a major deal was just the beginning of the co-founders' retail education.

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He seemed impressed by our youth and enthusiasm and asked us into his office. He said he was used to brokers pitching 55 products at a time and that it was refreshing to meet young kids so eager to sell a bag of granola. After talking with us for two hours, he said he wanted to help us out. He decided to place our granola in his stores.

Many food companies fail because once their product makes it into stores, they figure the hard part is done. For us, it was the beginning - we used Stew Leonard's as our classroom. We spent hours on the loading dock, helping unload boxes and talking with department managers. We learned the vocabulary of the industry (we didn't know that the terms "pallet" and "skid" are interchangeable), which helped us pitch our products to stores. We learned to recognize shopping patterns. (Sunday was the busiest day of the week). I'd stand in the aisles at Stew Leonard's, flagging shoppers down and asking, "Do you want to get Bear Naked?"

We didn't take a salary for the first two years. We had no responsibility except to ourselves - no car payments, mortgages, or kids to take care of. We mooched from our parents. In early 2003, I was able to secure a $200,000 line of credit from a local bank - an amount that was proportionate to our accounts receivable and inventory. I used Intuit's (INTU) QuickBooks to keep track of finances - the checking account column consistently computed negative $110,000. I wasn't balancing things properly, and occasionally our bank accounts were overdrawn. I'd call our banker and say, "I promise we're doing okay, but can you let this check clear?" Those types of relationships - people who believed in us - allowed us to get by.

We flirted with raising venture capital from a firm that focused on health- and wellness-minded companies. By the end of 2004 sales hit $2.2 million, up from $600,000 in 2003.

I visited the offices of a firm where I sat surrounded by six potential investors. They talked about convertible debt and used other terms I didn't understand. We sat in my mom's living room deciding whether to accept the deal. Kelly asked if we were ready to give up control. We decided the money wasn't worth it. After we said no, the venture capitalists came back two months later offering us twice the money. Kelly's father told us that our ability to hold on to the company was equivalent to our tolerance for pain. Ultimately, we raised money from friends and family.

Regional press brought us a lot of business after we landed at Stew Leonard's. We hit a turning point when a senior manager at A&P - a large East Coast grocery chain owned by the Great Atlantic & Pacific Tea Company (GAP) - called us after reading a front-page piece in the Stamford Advocate. He wanted our granola on his shelves.

FLATLEY: In late 2006, Kellogg called us, unsolicited. Its executives were impressed by Bear Naked's market penetration and thought our brand was complementary to its Kashi products, which appeal to an older demographic.

We debated selling and looked at alternative options. After five years of growing this company, we feel like proud parents - last year we turned out 30,000 12-ounce bags of granola a day and watched sales hit $65 million. We've come a long way, but we decided that the largest cereal maker in the world could put Bear Naked in places we could never reach.  To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.