Flan man's enterprise typifies small-business loan program's triumphs

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Horacio Pena was probably never going to find a bank willing to lend him $10,000 to start a business, no matter how hard he tried.

Pena, an immigrant from Mexico, had been in Salt Lake only a few years, working as a server in a downtown restaurant. He wasn't a U.S. citizen. His English wasn't perfect and his credit record was thin. The chances that a fledgling business making flan desserts could survive were almost nil.

Yet today Pena is in business. His company, Sophi-Flan, has 90 customers around the the Salt Lake Valley. Pena employs two full-time workers. Together they make 350 flans a week in a variety of flavors at an industrial kitchen owned by Jorge Fierro, another businessman-expatriate from Mexico.

"I tried to go to a few banks. They don't accept me. I didn't have too much credit," said Pena, who found the fruitless loan search upsetting. "I don't find any money until I find Utah Microenterprise."

Now in its 13th year, The Utah Microenterprise Loan Fund is a nonprofit lender providing money to launch or expand small businesses. It lends small sums to people who want to start or expand a small business, gambling on individuals who may have first-class ideas but don't have resources of their own and fall outside the risk profiles conventional lenders use to screen applicants.

One in four borrowers are minorities. Many are single mothers. Others have bankruptcies or spotty work histories in their pasts. Most are poor or live paycheck to paycheck.

"They come to us as a last resort. We call ourselves a lender of last resort," executive director Kathy Ricci said.

Ricci means what she says. The fund's loans come at a steep price - prime (the interest rate banks charge their best customers), plus 5 percent. Right now, that comes to 13.25 percent, an interest rate that reflects the risk connected with lending to unproven borrowers. One in 10 loans goes bad. By contrast, banks typically charge off about 1 percent of their loans, Ricci said.

Most borrowers, however, build prosperous businesses. A joint study by the fund and the Aspen Institute last year discovered that the businesses of 72 borrowers had combined sales of $7 million and had created 316 jobs.

"The median revenues they [the fund] are getting are about twice what are being achieved overall in the [microenterprise] industry. They also seem to be working with a number of businesses that are much more likely to bring on employees," said David Black, a program manager with the Washington, D.C.-based leadership and policymaking think tank.

The fund lends up to $25,000 for five years, but the average loan is $8,500. Money comes from 26 financial institutions, including the state's biggest banks in the form of loans to the fund. Ricci said many lenders take part in order to comply with the federal Community Reinvestment Act. The law requires banks and savings and loans to offer credit throughout their marketing area and prohibits them from targeting only wealthier neighborhoods, a practice known as redlining. And if a loan goes bad, the loss to any one lender is relatively small.

"It looks good for them," Ricci said.

Over its life, the fund has loaned $4.6 million to 450 people. Oddly, however, demand for the loans has declined recently, and Ricci is looking for applicants. The reason for the falloff isn't clear, but Ricci suspects it's because the Utah economy is strong and unemployment is at a record low.

"It's not easy to be a business owner, so when jobs are available it's a lot easier to go that route," Ricci said.

pbeebe@sltrib.com
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Ads That Push the Envelope

Inventor makes milestone

Ads that have impact are like nitroglycerine. Handle them properly and they can move mountains for you; get careless with them and you’ll blow yourself up.

The worst thing you can do when you’ve written a powerful ad is to show it to your friends and ask their opinion. Put an ad on trial and every juror will judge two things: Could this ad offend anyone? Was it entertaining?

Consequently, most ads aren’t written to persuade; they're written not to offend. But the kinds of ads that produce results make us answer yes to these three questions: Did it get my attention? Was it relevant? Did I believe it?

Ads that twist our attention away from what we’d been doing are always a bit annoying. This is why ads that get results also get complaints. Learn to ignore complaints from controlling people, or your ads will forever be emasculated.

Were you slightly offended by that last statement? That's exactly the kind of statement that'll get complaints. But it'll also get results.

I once wrote a radio ad that included the line, “That just ain’t gonna happen.” My client, a diamond jeweler, received two letters and four phone calls from irate listeners who claimed he was contributing to the erosion of the English language. One of the letters concluded, “How can our children hope to learn proper grammar when the leading advertisers of our city speak incorrectly? I must insist that you withdraw this ad from the airwaves immediately, or my friends and I will have no recourse other than to discontinue shopping in your establishment.”

By the time my client had received the fifth complaint, it felt to him like the sky was falling. But then I reminded him that one of our goals was to be perceived as less formal and less intimidating than other diamond jewelry sellers. I told him, “These few complaints are simply part of the price we must pay to win the heart of the common man. And the common man believes all jewelers are snobs.”

I won the argument. My client continued the ad. Traffic and sales went up by 28 percent.

Later that year, I wrote the same client an ad that said, “Buy her the diamond she’s been dreaming of since she was a little girl.” Men responded exactly as we'd predicted, but we also got two letters from women who felt somewhat belittled. They said they were doing very well, thank you, and didn’t need any man to buy them diamonds.

I immediately sent the following ad script to my client: “This is Richard Kessler of Kesslers Diamond Center. I suggested in a recent radio ad that every man should buy the woman he loves ‘the diamond she’s been dreaming of since she was a little girl.’ [pause] What was I thinking? This nation is full of women who can and do buy diamonds for themselves, and we want to be their store, too. Gosh, I feel like a knucklehead.”

That apology went a long way toward winning the hearts of independent women throughout the city. We soon began to see an increase in traffic from women purchasing diamonds for themselves.

Why did I respond to the two complaints from women after ignoring the six complaints from the defenders of English grammar? Although only two women took the time to complain, it seemed likely thousands of other women felt the same way when they heard the ad. The defenders of English grammar, on the other hand, probably represented only themselves and a dozen other people. Also, an apology to the women was consistent with our goal of being perceived as less formal and intimidating than other jewelers. Transparency and honesty in admitting your mistakes is very reassuring to potential customers.

You can, however, go too far when advertising. When handling the nitroglycerine of a statement with impact, always avoid: racial stereotyping, obvious sexual innuendo and matters of religion or faith.

If you avoid these three categories of insult, you’re not likely to do your company damage. But if you've committed a genuine blunder, follow these guidelines:

1. Apologize for it openly, sincerely and transparently in the same medium in which the offence was made.
2. Send a handwritten apology and thank you to the person or persons who brought the faux pas to your attention.
3. Don’t make excuses.

My jeweler client, a genuinely nice guy, had a fabulous year. During the week after Christmas, he aired the following ad. See if it fits the image of the rest of his campaign.

The hardest thing about being a jeweler is that you never know how big a store you should build or how many people you should hire to work in it. No matter how small you build it, there will be plenty of times when it’s empty and you’ve got no customers at all. And no matter how big you build it or how many people you hire to work there, there will be times when you’ve got more customers than you can serve. And that’s even worse.

This is Richard Kessler of Kesslers Diamond Center. If you came to Kesslers during the holidays and found way too many people ahead of you, I hope you’ll accept my apology. We work hard to ensure that every person who walks through our door has a magical experience, but sometimes we fall short of the mark. This year, my New Year's resolution is to find new and better ways to make sure that you have a relaxed and pleasant experience at Kesslers Diamond Center, no matter when you come to see us. I’m Richard Kessler, and I really dowant to be your jeweler.

We didn’t include a street address or phone number because that would have commercialized the ad and made it seem insincere. Do you have the courage to run two or three ads like these a year? If so, go write some ads that get attention, drive traffic and generate complaints.

---

Roy Williams is Entrepreneur.com's "Advertising" columnist and the founder and president of international ad agency Wizard of Ads.

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Mom dips into business world

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KINGSTON -- Christine Hanisco is always in a hurry these days.

"You're my second interview today," she says as she opens the door of the Kingston ranch home where she creates and sells "Dippy Chick" dip mixes. "I just finished a radio interview for the Start-Up Nation radio program."

Hanisco is on her fourth career. She's worked as a nail technician, then as a graphic artist for 15 years, and spent three years in real estate. In addition to the national radio interview, she has been interviewed by ABC Television for a program on mothers with home-based businesses, and will be featured in Family Circle this winter. "Things are moving really fast," she says with a smile.

But while Dippy Chick is exploding, Hanisco remains true to her original goal: Spending more time with Mack, 4 Ѕ and Angus, 1 Ѕ.

While many mom-and-pop businesses begin with mom making a product and pop saying she ought to sell it, Hanisco's story is a little different.

Though she has always cooked, she says it wasn't a "huge hobby" of hers.

She'd never given dips one thought over another until she started going to craft fairs and noticing how many people sold homemade dip mixes.

Hanisco knew it was something she could produce with a relatively small start-up cost, and she'd been looking for something to do out of her home since she became pregnant with Angus. She concocted a spinach dip and a garlic dip first, trying them on friends and family, and then branched out.

"I think I created my entire product line in one week," she recalls. Her husband remodeled part of the basement for her to create and package dips.

Surprise, surprise

While she knew dips would be easy to sell, the popularity and media attention have been a surprise for Hanisco. She knows her dips are good, but thinks the packaging has helped with sales. "Most people just sell their mixes in plain packages that say 'Dill Dip' or whatever," she said.

But Hanisco used her graphic arts background to create funky packaging and even funkier names. A dill dip is called "In the Dill of the Night." She started doing craft fairs, but didn't like being away from her family on weekends, and eventually switched to selling wholesale. She is now featured in 50 stores across the country, but still has booths at the Made in NH Expo and the Deerfield Fair.

The media attention began when ABC contacted her for its segment on home-based businesses. "I have no idea how they found me," she admits.

Start-Up Nation is a "community" of entrepreneurs who meet through a message board and a Web site. She had posted messages on the site, she says. "It's actually a huge community, and they have their own radio program." Ellen Parlapiano and Patricia Cobe, authors of "Mompreneurs," found her Web site. Parlapiano contacted her for the Family Circle article, which will be published in January. "That's six million readers,' Hanisco says with a smile.

Product line

Hanisco now produces 15 dip mixes, with names like Kamikaze Wasabi and Battlestar Garlic-tica. The dips are appropriate for special diets, she says. All her ingredients are natural, some are organic, and all are gluten-free, as she and the boys have celiac disease. All are vegetarian, and some can be vegan if mixed with tofu, according to her. She is working on a coconut-ginger curry.

She also makes a line of candied nuts called "Squirrel Bait," in four flavors. She is developing a line of Killer Crock crock-pot helpers.

"We'll have one where you sprinkle the mix on chicken and some cream cheese, and you come out with Alfredo sauce," she says.

Not-so-dippy chick Hanisco still does most of the work herself, relying on a part-time nanny and two friends who come in occasionally. She says she probably works 80 hours a week, but likes it that way. "I get bored very easily," Hanisco says. "I love being my own boss, wearing many hats. I hate not having something to do. I get very little sleep." She's thinking about renting a commercial space and hiring more people.

However, an off-site shop will still have space for Mack and Angus. "I'll have my husband build a special area where the kids can come and play," she says.

Her commercial facility will have a small shop in front, for her items and other local products, and a production room in back. But she doesn't want to get so big she neglects her family, the original reason for the home-based business.

Hanisco has never taken a business course. "I read a lot," she says. "When I want to learn something, I grab a book and read it, or go on-line." As her business continues to grow, she'll be doing more reading. "There's so much I want to do," she says, "and it seems slow in accomplishing it."

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