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Jim and Vickie Kilmer made a pact that if Jim didn't have the investors he needed by September 1, 1992, he'd begin searching for a "real" job. A few weeks before the deadline, he cut a deal with three individuals; for $500,000, the investors received a little less than half the equity.
Lining up the investors turned out to be the easy part. To buy the vacant facility he finally located 35 miles from home and to do the necessary improvements, Kilmer needed more money. How much? Well, each time he added up the figures for the 17,000-square-foot plant, for the state-of-the-art cutting and blanching machines, for improvements to the water system, and, oh yes, for that refrigerated truck, the numbers kept rising. Where did you draw the line? "It's amazing how many costs came out of the woodwork," he says. Gradually, it dawned on him that beyond the equity financing he'd just raised, he'd need to borrow (gulp) another $1 million.
In his usual fashion, he got on the phone again. He found it wasn't hard to identify the best sources with the help of some people from a local economic-development agency: a loan from a local bank, guaranteed by the Small Business Administration, for one piece; a loan from the Pennsylvania Industrial Development Authority for another; to complete the puzzle and take him over the top, maybe some money from a state-sponsored equipment loan fund. On paper it looked great. But the bank wouldn't budge until the SBA signed on. The SBA wanted to wait until the state loans were committed. And the state refused to go in without the SBA. Kilmer spent several depressing months waiting for the standoff to end -- and writing checks for nearly $100,000 for application fees, appraisals, environmental studies, and lawyers. "You begin to realize," he says, "that you're really not a priority on anyone else's agenda."
To avoid paying rent, Kilmer made an office out of the enclosed porch on the back of his house. He'd ask visitors -- engineers, equipment reps, prospective employees -- to circle around the back, a feeble attempt to limit disruption in a house with one bathroom. A neighborhood woman who helped out part-time would frequently arrive at the back door just as Vickie was walking out the front. "Our other neighbors must have had a field day," Vickie says. Finally, nine months into the process, a $1.1-million loan package fell into place.
The day of the closing, Jim and Vickie sat in Fay-Penn Economic Development Corp.'s conference room, in Uniontown, Pa., signing their names to several inches of loan documents. "We signed papers for three hours," Vickie recalls. They pledged their house and virtually everything else they had -- "our children and even our first grandchildren," Vickie says. It all seemed abstract to her until she returned to work that April afternoon and her coworkers asked her how it had gone. "I was shaking," she says, "and tears were streaming down my face. Fortunately, they were real understanding. My boss had gone into debt for a business -- one that failed."
For Jim Kilmer, the closing was less significant, although it did mean he could finally draw a paycheck for the first time in 18 months. As he saw it, the new business, Remlik (his last name spelled backward) Foods, was one step closer to reality. But how many more steps remained? One thing he was becoming more aware of was the extent to which time really did mean money. He was glad he hadn't sold more equity, because he would have lost control of the business. But debt was no bargain, either; though the business was without a dollar in revenues, the lenders expected him to start paying back the loans. "The financial system," remarks Kilmer with a kind of naïve wonder, "isn't the least bit geared to the needs of start-ups."
Kilmer hired a contractor, ordered his equipment, and set about putting together his team of managers. Once everything was in place -- with what's known as a clean room, for example, for processing the squash in the most bacteria-free conditions; an ambitious total-quality system; and so on -- he hoped to shift everything into gear and generate cash by June. But, surprise! The renovations went slower than the contractor expected. Even if they'd been completed on time, some of the new machinery didn't arrive until August. At Heinz, says Kilmer, delays were irritating. "Here," he notes, "they were eating into my own equity." Each week the schedule lagged behind, Kilmer reckoned, he was burning through about $6,000, cash he wouldn't be able to spend later.
He hoped he could make up the lost ground when his spaghetti squash finally hit the stores at the end of last summer. But it didn't work out that way. At Weight Watchers, he had had ready access to the market: he could make an appointment with any grocery-chain buyer, anytime. There was rarely ever a question of whether stores wanted the products; some stores ordered sight unseen. Meanwhile, the food brokers who handled the Heinz account lived in constant terror of losing it.
But Kilmer learned from hard knocks that Remlik Foods wasn't Heinz. In many ways, he concedes, the differences have been shocking. Through his industry contacts, he's had pretty good luck lining up brokers in cities like Philadelphia, Washington, D.C., and Boston. And once the product is in the right part of the produce section (which is never a given) at the targeted price (also never a given), it usually sells at least as well as expected. But selling the supermarket chains and then the individual stores on stocking his spaghetti squash, even for a trial, has required more begging and pleading than Kilmer is used to. "I make better presentations than I ever made at Heinz," he says, "but I have less credibility."
