It's a day spent hosting some 60 children for a photo shoot for their newest catalog. Kids play with blocks, puzzles and even high-tech spy toys as the camera snaps. Outside, it's a nondescript location in an Elkhorn strip mall nestled between a physical therapy practice and an orthodontic office. Inside, it's where a thousand adventures are hatched.
And it fits that a 10-year-old suggested the idea of the company.
Couldn't find the toy online? How about we start our own web site to sell it?
Fat Brain Toys develops and sells games and toys with the idea of challenging kids as they play. The company enjoys a brick-and-mortar store at Omaha's Village Pointe South and a print catalog complementing the business' online presence, through which it receives most of its orders.
Office desks at the Elkhorn HQ are divided by walls of decorative blocks, giving the place a feel of a boy’s fort, which fits, since the founder and owner of the company used to build those--and the occasional raft--as a youngster growing up along the languid Elkhorn River in tiny Scribner.
Mark Carson brims of quiet energy with an entrepreneur’s excitement. Seems he was destined to start and run his own business; his father owned the local car wash and laundry in town and his curious brother was always sending away for mail-order stuff to see what he'd get, and eventually started a company out of college selling mail order goods. And maybe Carson was destined to start a toy company--his mother was a kindergarten teacher, after all.
About eight years ago, Carson's son, Adam, got a magnetic building toy set for his birthday. Armed with some birthday cash, Adam hopped on the internet to find a larger set but soon was frustrated in his search. So he turned to his father, a web developer by trade, with an idea. Why don't we create a place where we can sell this toy?
"We didn’t have a plan or a mission," Carson said. "With the first holiday season we treated this as a family hobby, maybe sell a few things, learn about the business, and who knows where it would lead."
They had a name, which Carson said came out of looking for a "clever, left-handed way of saying smart toys." Now they needed a plan. A few months later, Carson and his wife, Karen, went off to a toy fair in New York, where he was immediately struck by the clear difference in specialty toys and mass produced toys.
"The latter is so ever present," Carson said, "so if I go to most stores I shop at, I’m not seeing other options. You have to look harder to find them. So I thought, let’s build an online site and make them more accessible. Really good toys are hard to find."
So Fat Brain began by shipping toys out of the family basement, and after moving the operation several times, found the warehouse in Elkhorn where they're located today.
Needing to finance inventory, SBA helped provide Fat Brain Toys with a deal to grow
Seeking a season line of credit for inventory purchases in time for the annual holiday season, Fat Brain Toys was approved in Oct. 2005 for SBA-backed financing through Pinnacle Bank.
"To help grow the business, it’s all tied to inventory," Carson said. "We have to have enough of every product for every niche."
Since the loan approval, full-time staff has more than doubled from eight to 20, and part-time employees from 12 to 20.
In 2006, they spun off a developmental company, Fat Brain Toy Co., to develop their own line of educational toys now sold at gift shops at the Smithsonian in Washington, D.C., and the Metropolitan Museum of Art in New York, as well as high-end children’s toy retailers.
"So as our business grows and product line grows, our mission to get to a broad selection of toys," Carson added. "Our magic number is 6000 products."
Carson opened the retail store three years ago, fulfilling the ardent wishes of parents who wanted a place where they could touch and see more than 1,500 toys and games up close. "We focused on building a clean, parent-friendly store rather than a kid-friendly destination," Carson explained.
And last summer, Fat Brain Toys rolled off a bright, picture-filled direct mail catalog with hopes of exciting the faces of thousands of potential young customers. But their marketing efforts haven't stopped there.\
Breaking out into the big time
In July, Fat Brain Toys was named by the social-media site Facebook one of five winners of the Big Break for Small Business contest; the level of support by their fans during two weeks of online voting gave them the second-most votes in the country. The prize: a two-day social media makeover and $20,000 for their social media marketing budget.
The company also hosts game nights, even working with different schools in the area to align educational goals with Fat Brain's toys.
"We bring our staff in with our products to show the kids," Carson said. "It's not only a way to show what we sell and to demonstrate how to play the games but it's for the benefit of family interaction for all ages. Increasingly game manufacturers target a very narrow age but you end up losing the interest of parents. So we broaden the night to all ages." Last winter, they hosted eight and plan several for this school year.
Carson admits that he's concerned independent toy stores are on a decline because of economic forces. In fact, one notable nationwide chain which specialized in smart toys went under a few years ago.
"From 2005 to 2007, we were seeing 60 percent growth year-to-year," Carson said. "But that was when we partnered with (online retailer) Amazon in their toy category. By 2007, 2008, they were making up a large percentage of sales, but as so many other merchants piled in as well, it all became a big price war."
So in the company's last two years, they've backed away from that channel, focusing on higher margin orders through its own site.
"We're up 10 percent for the year, and we see that accelerating despite a tough retail environment," he added. "We’re seeing success and we're finding a receptive audience. There’s still a market out there."
And that magnetic building toy set Carson's son wanted to find online? Fat Brain Toys is now one of the largest online retailers of it in the world.
Although necessity is the mother of invention, it’s the mother of all frustrations which led to the creation of a small business in Lincoln, one that’s building a reputation nationwide as the go-to place to mix technology with historic preservation.
Tired of climbing up and down to swap out windows, so he designed his own
John Spencer was a historical renovation contractor by trade who bought a century-old home in Lincoln some 20 years ago. While the house was a dream, with classic moldings and quality workmanship, it came with a catch: every spring, he had to climb up and down ladders to remove each wooden storm window and replace it with wooden screens, and every fall had to do the reverse – and we’re not talking just a couple of windows, either.
After a few years he was frustrated with all that work every time the seasons changed. So he looked for a better way.
“I couldn’t find a wood frame with the storm window and screen combination,” Spencer said, “so I went to my workshop, designed one myself and came up with a prototype that worked.”
If the story ended there, it still would be a nice tale of ingenuity. And for about 13 years afterward, that’s where it stayed.
As Spencer continued to find jobs renovating historic homes in the area, and customers who demanded materials which preserved the appearance of days gone by, he reached back to his invention to offer it on a particular task. His customer was delighted with the results; the next job asked for building his custom windows for a 50-unit apartment building.
Owners of classic homes passionately sought to retain their home’s original windows, but they often leaked, and a single pane of glass did little to insulate against a winter’s chill. Spencer’s design kept the classic character adorning these houses yet offered solid insulation and ease to switch storm windows and screens. From the outside, the work looks just like a traditional storm window – all the mechanics are concealed.
“A few more people I did restoration work for told me they wanted those windows, too,” Spencer said. “So I said to myself, ‘there might be a future in this.’”
Riding the wave of historic renovations
The timing was perfect for SpencerWorks. As customers across the country were put off by lowered standards in modern housing construction, the value of older homes rose, especially “since they look that much more impressive. These homes and the way they were built are irreplaceable.”
So he found a niche market with his wooden storm windows. Time to find out if further fortune favored the bold.
Spencer was flipping through a magazine one day and discovered a trade show in Philadelphia where vendors offered the latest in archetypal designs. So he made plans to travel across the country – then picked up the phone to chat up the editor of the magazine.
“I met with them at the show,” Spencer added. “I showed them my design and asked them if they had seen anything like this before, and would their readers be interested in learning more?”
The answer: They hadn’t, and they would be. A month and a half later, Spencer opened the latest edition to find that the editor had put a picture of his wooden window design in their new products section along with a couple of paragraphs in explanation.
Just like that, the endorsement from the magazine propelled Spencer into a national market. He got a patent on his design and a stamp of approval from the American Architectural Manufacturers Association, and became a regular at traditional-builder trade shows, and built a network of architects and builders who would rely on his windows for their clients. One such project completed two years ago was with the Museum of Nebraska Art in Kearney. Other jobs include a historical building in Kansas, and the company has done work from Oregon to Denver, across the Midwest and the eastern seaboard.
Time to turn to the SBA to help with a bigger shop
Eventually the business outgrew the shabby old metal building in Lincoln the company used as a shop; with the landlord only offering a month to month lease, he turned to Lee Anderbery, senior vice president at Heartland Community Bank in nearby Bennet. The lender financed Spencer’s purchase of a larger shop in Dec. 2010 which more than doubled his previous space.
“When he first started out,” Anderbery said of SpencerWorks, “he was trying to to keep the overhead as low as he possibly could, and consequently was working in very cramped quarters. You can only do that for so long before you need to give yourself some elbow room.”
The building needed a new sprinkler system, a three-phase electrical system and Spencer wanted to make energy efficient improvements such as thicker insulation to bring it up to code and save money in the long run, but that asked for a further amount Anderbery admitted his bank’s loan committee was uncomfortable approving without an SBA guarantee.
While the locally-owned bank had made 16 SBA-backed loans over the past 15 years, they had only made one in 2009 and another in 2010 before the deal for SpencerWorks.
Anderbery leaned on the advice from Suzanne Stearman, a lender relations specialist at the Nebraska District Office.
“It’s nice to have someone hold your hand and walk you through the process,” Anderbery said. “After we got the approval, I went back to her to answer a few questions when it came to closing. If I didn’t have her support, I’d be in a world of hurt.”
Stearman also led him through a potentially thorny eligibility issue: Spencer had set up a company — JMS Rentals, a passive-income company – which would own the property and lease it back to SpencerWorks. That was solved with Stearman’s quick suggestion: make the loan to both entities. The bank was approved Aug. 1 for an SBA Express loan for $73,200.
Stearman also made a face-to-face visit to Heartland for a lesson in E-Tran to set them up to submit future applications electronically.
“This deal helps stretch out some short-term debt into a longer amortization, frees up some working capital and the deal has a pretty good interest rate on it,” Anderbery said.
Opening for the window business to pick up
Just in time for the fall, which Spencer said is his busiest time of the year. Currently, SpencerWorks is working on a building at the Herbert Hoover National Park in West Branch, Ia., and has been named to work on another structure in the village, work which may begin this fall.
“It’s not just about building the windows,” Spencer said, “it’s about solving a problem. I kind of enjoy that.”
SpencerWorks, with two employees in addition to Spencer himself, has seen steady growth, with revenues of $250,000 last year and as much as $275,000 this year, “and that’s in spite of the downturn economically.”
Still, that’s not bad business. And a whole lot less frustrating than climbing up and down a ladder every few months to swap out windows.
When Tia Love was a 10-year-old kid living nearby the Applewood Golf Course in Ralston, she would spend summer days bolting down the fairways, wading into the ponds to retrieve errant balls to sell them back to the golfers at 25 cents apiece.
These days, she’s still hustling business for her own North Omaha-based Love Enterprises, and last year revenues for her companies under that corporate umbrella hit a combined $275,000. An owner of a retail store, salon, construction company, rental property management and lead paint abatement consulting firm, she often heads straight from work at a steamy construction site in tee-shirt, jeans and a ballcap to handle other parts of her businesses. It’s apparent she’s come a long way from selling second-hand golf balls.
“She’s very entrepreneurial with diverse interests,” said Vicki Wilson Tederman, executive director of the Omaha Small Business Network, who over the years has offered Love guidance on growth, tax filing, and advice on tracking the flow of cash through her different ventures.
From a young age, Love had a mind for business
Love’s entrepreneurial spirit grew in junior high and high school, when she would purchase wholesale candy and sell it to her fellow students at a markup. By 17, she was heading to Arizona to bring back niche items not yet available in Nebraska to resale at Omaha area flea markets and festivals. She expanded that Arizona-to-Omaha pipeline, reselling classic cars kept rust-free in the dry desert climate. Four years later, she opened a storefront in the city’s quirky Benson neighborhood where she found a wholesaler in California ship to Nebraska low-rider bikes and pedal cars, popular retail items which had caught on in other parts of the country.
She hit a snag after a move to a place on 72nd Street and adding airbrushing services to the mix didn’t work out. But Love rebounded by taking a class at the area YWCA to learn construction trades: electrical, painting, plumbing and carpentry. One instructor mentioned opportunities in lead abatement inspecting, so she eventually earned a license as a lead supervisor risk assessor inspector.
With experience running a retail and construction business, Love looked for her next opportunity. She found it in 2004 while working with another company with an office at OSBN’s Business and Technology Center at 24th and Lake, and later moved into her own space.
Love’s construction firm had won a handful of contracts with the city, but needed the cushion to handle the 60-to-90 day lag in payment; she turned to OSBN for a microloan to purchase materials and enough working capital to handle payroll expenses.
“She has a good business head,” Wilson Tederman said in admiration. “We’ve only honed those innate entrepreneurial skills she has."
OSBN offered guidance and financing
One of four micro-lenders in Nebraska to use a loan from the SBA at favorable rates to expand access to capital to start-up businesses and firms in underserved markets, OSBN has made nine microloans this year at an average of nearly $30,000 each to entrepreneurs in its target area east of 72nd Street. Wilson Tederman said the microloan program is a non-traditional means of loaning capital to businesses denied credit by financial institutions.
“One goal is to develop these borrowers into viable businesses that can then acquire financing from financial institutions going forward,” the OSBN executive director added. “We develop bankable entities.”
While OSBN offers spaces at the 24th and Lake building serving as a small business development center to up-and-coming business, there’s a limit to their generosity for area entrepreneurs. There is an expectation after a period of discounted rent for their business that tenants will grow into an “anchor,” paying market price for the office space, something Love has done.
Last year, Love’s company served as a subcontractor on a huge project excavating yards for lead abatement work as part of the Environmental Protection Agency’s Superfund declaration in Omaha, which affected some 15,000 homes in the eastern part of the city. Already enrolled with the federal government’s Central Contractor Registry, Love is pursuing further federal contracting opportunities, seeking certification as a minority-owned and 8(a) business to leverage set-aside contracts to greater success.
In addition to financing help from OSBN, Love credit’s the non-profit for offering her business accounting services and credits vital networking events for helping her continue to grow.
“It’s a great way to find out about the different things going on in the era and get others’ perspective on things,” she added.
Always on the hunt for more opportunities
Love also has a real estate business, buying run-down properties at bargain prices, “fixing them up,” she explained, making them available for rent and expanding the pool of affordable housing in the city.
Last October, Love took out another microloan from OSBN to open and hire a manager for Rare, a full-service salon and boutique on south 13th Street in the Old Market tabbed as “Hollywood in the Heartland.”
And if that wasn’t enough, she acquired a commercial building and a dealer’s license to open what she calls an “auto spa for cars,” not only to sell vehicles but provide customers with detailing and customization services.
“Sometimes, it’s just hard to find sources to give you the capital you need. That’s where OSBN came in. They were the ones there for me,” said Love, who added that she also has put “a lot” of her own money into her projects.
These days, she’s spending time on a business plan that will get larger, SBA-backed financing to expand her enterprise even further.
“Definitely have a plan and map out your goals,” Love said. “Stay encouraged, find people to support you and always look around to find new information about opportunities out there. There might be people around you who are negative, so stay true to your goals, don’t let them talk you out of what you want to do. Stay committed and work hard until you see your vision through. If you want to do something, do it. I say it’s one percent the idea, 99 percent sweat.”