Right now, Mary and Michael Martin are about to make one of the biggest decisions in their young careers as entrepreneurs.
How many new copies of their new product, the HOMEFILE home filing system, should they order from the printer -- and when?
As recently as the end of October, they had only sold 1,500, because they missed the peak selling period of January through tax day, April 15. So while they proceeded with test marketing through the summer, they sat on most of the 10,000 original copies of the product -- a comprehensive home filing system.
Today, with that crucial lesson in timing under their belts, they are on a roll. Money magazine and Kiplinger's Personal Finance both mention the company in their December issues, just in time for Christmas. A California sales rep has been flipping orders like hamburgers, and one buyer alone wants 1,200 units.
Still, they wonder whether that appearance of success is a mirage. So, like any entrepreneur concerned about committing precious capital, they face a tough choice. Should they order 10,000 copies? Or should they spend more to order 50,000 copies, which would lower their per-copy costs?
"We're holding off to place this order until we see that inventory moving out really quickly," says Mary Martin, who is president of the HOMEFILE division of the family business, Financial Advantage Inc. The magic number: "When we get down to 5,000. It could easily be in a week or two."
But right now, the Martins are stuck in that game of chicken -- a game played over and over amid the countless marketing, finance and production decisions faced by any young company. For entrepreneurs, it's a familiar game -- one whose results determine success or failure.
Meet the family
And the Martins' experience illustrates the difficulty of the game. As they learned, success doesn't come easy -- even to people with years of corporate experience.
Meet the HOMEFILE family. In addition to Mr. and Mrs. Martin, two of their children, 25-year-old Sean and 23-year-old Kevin, work full-time in the new business. Daughter Elizabeth, 21, a senior in college, has also spent a couple of summers helping to turn the HOMEFILE dream into a reality.
Working out of an office condo in Ellicott City, they spend most of their waking hours with one goal in mind -- making a national success of HOMEFILE and a string of other products they hope to follow it with.
Their entrepreneurial trip began in 1986. Michael Martin, who by that time had put in nine years as a securities analyst and investment manager at T. Rowe Price in Baltimore, had been daydreaming about starting his own business for quite a while. And, like most people in that situation, he had mentally tried dozens of business ideas before he made the jump.
His opening came when T. Rowe Price went public. As a valued executive, Mr. Martin had stock options, and suddenly, his net worth rose dramatically.
It's a good thing, because the financial planning business began turning a profit in this, its fourth year, and HOMEFILE is still pursuing profitability. So far, the family has invested about $300,000 in Financial Advantage Inc. Most went to launch HOMEFILE.
In having a healthy chunk of capital, the Martins are atypical among start-up entrepreneurs, says William B. Phillips, chairman of the Baltimore Chapter of SCORE, the Service Corps of Retired Executives.
"Usually money is the biggest problem, or lack thereof," he says. "And the second problem is lack of experience in the business they choose to go into."
Mr. Phillips, who as a SCORE volunteer consulted with the Martins when they were first shaping their plan for HOMEFILE, said it was clear at the time that the Martins had the experience to be financial planners. But it was not clear whether they could make the giant leap into product manufacturing or marketing.
The Martins planned all along to diversify into some form of publishing. And the idea for HOMEFILE came into focus about two years ago.
As financial planners, Mr. and Mrs. Martin noticed that just mailing new clients a checklist of documents to bring to their first meeting was enough to trigger panic.
It's not that the clients minded sharing their insurance policies, bank, brokerage and mutual fund statements, or recent tax returns. They simply didn't know which piles of paper the stuff was buried in.
So the Martins hit on an idea: creating a compact, home filing system.
Idea to product
It sounded simple: Design a set of file organizers plus a handbook to tell the consumer what to put in each part of his filing cabinet, and what not to put there.
But figuring out the format, what to say on each card, developing the look of the cards and the packaging took two years.
"It was tricky to make it so everything had a specific place and there were no conflicts in the directions the system gave you," Michael Martin says. "Just figuring out what this filing system would look like turned out to be a major challenge."