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Small Business Makeover: Expansion nearly led to a meltdown
(Omaha World-Herald (NE) (KRT) Via Acquire Media NewsEdge) Sep. 15--Dustin Culton owns the Omaha Chocolate Co., but he returned to his former full-time job last year in order to pay bills he incurred through opening a second location.
Culton had built up a significant amount of debt by the time he closed his second location after less than a year. Now, Culton is trying to dig his way out of debt so he can continue operating his original location.
Culton contacted The World-Herald Small Business Makeover team. The occasional series teams entrepreneurs with local experts to provide assistance with areas such as marketing, employee retention and, as in Culton's case, cash flow.
He wondered how to generate additional revenue that would help to alleviate his debt.
Culton opened the Omaha Chocolate Co. in the Shops of Legacy near 168th Street and West Center Road in June 2005. The store sells handmade chocolates and gelato, an Italian-style sherbet.
Culton said he was sweet on the idea of a high-end chocolate shop because he believed that the market in Omaha was underserved, compared with cities such as Kansas City, Mo.
"I thought it would take off just because there wasn't a lot of competition," he said.
Culton opened a second store in October 2006 near 132nd Street and West Maple Road, hoping the second location would help promote his original store and increase sales, which had been lagging.
Culton relied on lines of credit to finance the opening of his second location, which required the conversion of a martial arts studio. But he closed the store one year later as a result of slow sales and was left to deal with the mounting debt.
"The (second) store obviously hurt us," he said.
Last summer, Culton returned to work full time outside of his store to pay for his living expenses without pulling money from the business.
"It's very difficult to know I own a business, yet I don't even get to enjoy working there," Culton said. "But now I'm trying to regroup and get the gears going in the right direction."
Larry Gomez, director of small business services at the Greater Omaha Chamber of Commerce, said that while Culton incurred a significant amount of debt from the second store, he has demonstrated his commitment to the business by his willingness to return to full-time employment elsewhere.
Gomez said Culton's positive attitude and strong entrepreneurial spirit also should work to his advantage.
Culton was "naive in his expenditures" when he opened a second location, said Dale Marples, a financial consultant to businesses.
Gomez said Culton used good judgment by cutting his losses and closing the second location, but the debt is "an albatross around his neck."
Gomez and Marples agreed that Culton needs to increase sales at his store to pay down his debt and rebuild his business. Marples said businesses typically place paid advertisements when they want to increase sales, but Culton's approach will have to be more hands-on because he does not have the budget.
Culton does have several factors working in his favor, though, Gomez said. The once-empty retail bays surrounding the Omaha Chocolate Co. have been filled, which has increased foot traffic near the store.
Culton hired a store manager last year after he returned to employment elsewhere, and she has created several new and popular chocolate and gelato products, Gomez said.
The chocolate and gelato complement each other because they are seasonal and popular at different times of the year, Gomez said. The business offers several services, such as a gelato cart and chocolate color printing, which could drive new business if customers knew about them.
Culton bought the cart last year to serve gelato at weddings and other events, but he has never promoted the service. Gomez said Culton could use the cart as a means to advertise his business for free at public events.
Many people in Omaha are not familiar with gelato, so Culton should try to educate people about the product, which could increase sales, Marples said.
The Omaha Chocolate Co. carries a new miniature marshmallow product that currently does not have a national distributor. Gomez said the store should try to secure a dealership agreement with the marshmallow maker, which would provide an additional stream of revenue.
Gomez said Culton should try to partner with restaurants near his store to supply them with gelato and with other local businesses to offer his products as corporate gifts or employee incentives.
Culton said he wants to promote his services to other businesses, such as using his new edible-ink color printer to put company logos or business cards on chocolate items. He also hopes to sell his products in hospital gift shops.
Culton will have to expend more man-hours to market his business and learn to focus his efforts to make the most of his time, Marples said.
Gomez said Culton needs to take advantage of networking opportunities to spread the word about his business. He has reserved a booth at the Omaha chamber's Buy the Big O! Show in October and plans to display chocolates with logos of local companies.
Culton said he has hired a new employee who is being trained to run the store so the store manager will be available to help with marketing activities.
Marples said that Culton would benefit from hiring professional advisers, such as an accountant, to help him develop a plan for his finances. Gomez said that Culton might also seek assistance from local colleges and universities. Students sometimes work with local businesses for class projects or internships.
Gomez said shortening store hours during the slower winter months might also help the store save money.
--Contact the writer: 444-1085, stefanie.monge@owh.com
To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com.
Copyright (c) 2008, Omaha World-Herald, Neb.
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