From Business Failure to Business Opportunity

  • AUTHOR: StartupNation Writer
  • DATE: 03/27/2006

Many startups fail right out of the gate. Usually their ultimate
success depends on the entrepreneur’s learning from and adjusting to
major challenges. The story of George and Mary Ann Clark is a case in
point. They have a great product – carbonated milk – but have struggled
mightily in making a thriving company out of it. Fully 10 years after
they opened for business, the Clarks finally see a light at the end of the tunnel.

The
Clarks invented a fantasy beverage for kids and parents: real milk that
is carbonated like a soft drink! And now their e-Moo and RPM
(Refreshing Power Milk) product lines – in fun flavors like Bubble Gum
and Orange Sparkle – have made their way into 31 school districts,
serving tens of thousands of students, around the United States.

But
their company, Mac Farms Inc., could be so much more than it is. Only
now do the Clarks believe that they’re solidly on a path to long-term
success. “It would have been easy to give up, but this wasn’t just a
blind labor of love,” says George, who is 72 years old. “There was
clearly a market need out there and also a market opportunity, and we
were given a unique chance to solve the problem.”

Entrepreneurial innovation strikes

Article is continued below

The
Clarks were living a fine life in the mid-Nineties in Burlington,
Mass., when the George came up with a way of creating a beverage that
would appeal to kids’ love of fizz, while providing them much more
nutrition than a Coke. George, a biochemist by training, and Mary Ann,
a retired school nurse, approached his alma mater, Cornell University,
for help in developing the concept and patenting his formulas. In 1996,
e-Moo was born.

The appeal of a genuine dairy beverage
with soft-drink bubbles would seem to be a no-brainer. But it still
took about a half-million dollars to get off the ground. The Clarks
were willing to invest much of their life savings, but they needed more
capital. So George made a move that can be successful for startups: seeking business financing from
a potential supplier. The dairy-farmer members of St. Albans
Cooperative Creamery in Vermont – the same savvy organization that once
bankrolled another startup called Ben & Jerry’s Ice Cream – ponied
up because they saw the potential for e-Moo to increase fluid-milk
sales.

Business planning disaster

George
sees now that he and Mary Ann made a crucial mistake right out of the
gate: they failed to line up enough outside capital for the company,
which forced them to rent an existing production facility in
Cooperstown, NY.  The results were potentially devastating on two
fronts.  First, the market readily bought in to the Clark’s concept,
but they proved unable to satisfy the demand.  And second, during the
early stages, when the innovative nature of e-Moo was starting to
attract news-media attention from all over the country, the Clarks
couldn’t take full advantage of the public relations spotlight due to
that inability to keep up with orders.

By the fall of
2003, Mac Farms had sold e-Moo into a handful of school-lunch lines. 
But then they got to a point of reckoning: After managing to land a
plum deal to supply e-Moo to the 1.1-million-student New York City
school district, beginning in the fall of 2004, the Clarks simply
couldn’t make enough e-Moo to fulfill the contract and had to withdraw
a few months later. It was “a comedy of errors,” George says.

“Here
we got the opportunity of a lifetime,” he says. “Unfortunately, we just
couldn’t deliver the product. We were sad and embarrassed.”

Turning business failure into a business lesson

Refusing
to allow failure to lead to anything but success, George and Mary Ann
have adjusted. The crucial decision they made is to address
manufacturing capacity – and having enough control over it – so that
they would never blow a deal like New York City again.

Instead
of trying to conduct production on a shoestring, they were going to
secure enough new capital to build their own plant, where they wanted
to build it. “I found out this just isn’t a business where you could
pull yourself up by your own bootstraps,” George says.

So
George diligently pursued and lined up significant new financing that
he is now using to prepare to break ground on Mac Farms’ new plant in
Virginia.

The short-term adjustments to their new
strategy have been painful. They had to lay off their handful of
employees in Cooperstown and end their operations there. They haven’t
been able to go all out on marketing e-Moo and RPM lately because they
need to know for sure when they’d be able to supply any major new
customers.

But now, George and Mary Ann are full of
confidence about the future once again – even hoping to correct the New
York City debacle. "When we can show any large school district that
we're ready to supply our products and do it without interruption,"
George believes, "we'll be able to get back into New York City. I'm
targeting the fall of 2007."

Our Bottom Line

It’s
how you react to adversity and a business failure that determines
whether your company will succeed over the long-term. The story of the
Clarks and e-Moo provides a valuable case study in entrepreneurial adaptation and perseverance.

  ABOUT THE AUTHOR:
StartupNation Writer
StartupNation Writer

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