Small biz makeover: Flooding the market

A small firm that sells custom-labeled H2O looks to pump online sales.

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By Brian O'Reilly, FSB Magazine

Profile
Company:
Personalized Bottle Water
Location:
Little Rock
2006 revenues:
$350,000
Business:
Sells custom-label bottled water to sports teams, wedding planners, etc.
Challenge:
Sikes outsources all his bottling, but he could fatten his margins by $2 a case if he invested $500,000 in his own bottling gear.
mark_sikes.03.jpg
Take five: Mark Sikes, owner of Personalized Bottle Water, relaxes at his warehouse.
The experts
Brent Birch
an online marketing specialist, runs FLEX360 Web Development, a Web site-design firm in Little Rock. (Flex360.Com)
Margaret McEntire
founded the Candy Bouquet International franchise chain. (candybouquet.com)
Bill Young
launched Unique Business Solutions, a strategy consulting firm based in Little Rock. (byoung204@comcast.net)

(FSB Magazine) -- Mark Sikes was selling $700,000 a year in stick-on labels to manufacturers all over the country. But one day it hit him that he could turn his label-brokering expertise into a whole new business: selling bottled water with a custom label plastered on the front.

Sikes promptly set up Personalized Bottle Water in a warehouse in Little Rock. A friendly and energetic man whose twang comes from living all his 37 years in Arkansas, Sikes kept running his label- brokering business. But he started traveling around the state to hustle up business for his custom-label bottled water.

Soon high schools across Arkansas were buying cases of water with their team mascots on the labels to sell at football games. Funeral homes and hotels found that private-label water was a discreet and effective way to market their services. Brides and grooms discovered it was fun to have their photos beaming out from every water bottle at their wedding receptions. "And used-car dealers love handing you a bottle of water," Sikes says with a laugh. "It makes you feel obligated to them."

By 2005 - his fifth year running Personalized Bottle Water - Sikes was selling about $350,000 worth of water a year and making a tidy profit. Though the label business generates twice as much revenue, he's more gung-ho about the water business, figuring it will grow faster.

Sikes is a self-confessed worrier, and an ambitious one too. "I want to take the business to the next level, but I'm not sure I can see far enough down the road to put it all together," he says. He's concerned that competitors with cheaper water will enter his markets and squeeze his margins.

Should he bottle his own water instead of buying it from suppliers? He wants to tackle markets in a couple of big Southern cities but worries that freight costs will kill him. Can he sell water on the Internet, or streamline the design and ordering process? Can he create a network of franchises or distributorships in a dozen cities?

Two local consultants and a successful franchisor sat down with Sikes over the course of a week to help him grow his business. For e-commerce advice we turned to Brent Birch, 36, director of FLEX360, a Little Rock-based Web-design firm. For franchising wisdom we recruited Margaret McEntire, 54, founder of Candy Bouquet International in Little Rock. As of mid-January 2007, McEntire's 815 franchisees sold bouquets made of candy in 40 countries worldwide. Strategic-marketing advice came from Bill Young, 56, who has run three medium-sized companies and helped turn around a half-dozen more since he got his MBA from Harvard 30 years ago.

Distribution

McEntire beckons Sikes into her quirkily decorated offices in an old garment factory in downtown Little Rock. She's a friendly woman with frosted blond hair, wearing a huge green scarf draped over her shoulders. Her stuffed animals, potted plants, posters and trademark candy bouquets contrast sharply with Sikes's bare white walls.

Sikes wants to create a network of distributors rather than franchisees, fearing that the franchise model requires too much micromanagement. "I don't want to be telling them how to run things every day," he explains. McEntire advises him to draft a brief, clear business plan that lays out his vision and his timetable. He will use the plan to keep himself on track and to woo potential distributors.

McEntire urges him to treat the distributors generously. "When I started my business, there were two other companies like mine," she adds. "They failed after creating 15 franchises because they were greedy. Make sure each distributor earns more money than you do."

What if the distributors start negotiating their own deals with Sikes's customers? "Contracts," McEntire replies crisply. "Get good lawyers in early before there's a problem and have them create the protection you'll need." But the Candy Bouquet queen urges our hero to view his distributors as creative partners rather than potential competitors. "A few years ago some of my franchisees started selling Beanie Babies in their shops, and were making $300,000 a year from them," she recalls. "If I'd spotted that sooner, I would have jumped on it."

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