Sit! Stay! Make Money! Good Company

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Go too broad and you risk going belly-up, like the former employer of a certain illustrious sock puppet. "Pets.com created great brand awareness, but their business model was all pet products at a discount on the Web. No one has made that work yet," says Andy Pierce, vice-president of branding strategy at Mercer Management Consulting, in Lexington, Mass. According to Greg Kyle, president and CEO of Pegasus Research International, in New York City, Pets.com sold items for less than what it had paid for them. Add shipping costs, and the company lost $277,000 on about $9.3 million in sales in its last quarter in business. The self-funded Kruegers don't have the luxury of losing money on sales.

But last fall, the Kruegers' approach didn't stop SitStay customer Donna McKay (and numerous others) from fearing that Pets.com's failure would presage SitStay's untimely death. McKay posted this message on SitStay's online forum: "Ever since I heard about the demise of Pets.com, I've been worried about SitStay. Is there something we should be doing to ensure its viability?" After a flurry of similar postings, Kent replied, "Let me put your minds at ease. SitStay.com isn't going away. We're like the tortoise. We just keep on going while the hares are running out of steam."

After four years in business, the Kruegers still like their steady pace and don't want any venture capital with its attached strings. They have already spurned one suitor. And no, they're not crazy. "Companies that adopt a risky strategy of growing as quickly as possible without any thought to the bottom line or profitability haven't managed their growth effectively," says Pegasus's Kyle. Instead, the co-preneurs envision growing to $25 million and 25 employees in five years on their own terms. They'd consider a microcap public offering in which they'd retain the majority of stock.

SitStay's biggest challenge will be succession. Someday Darcie won't be able to handle all the phone calls herself. Someday Kent will want to take his motorcycle out for more than half a day's ride. Realizing that their business could play dead -- for real -- without them, the Kruegers are beginning to work out a plan. "As we grow, we'll cross-train the employees" so that they can take over if necessary, Darcie says. "We'll still be the soul of the business, but we won't be the heart anymore, and it can go on beating without us."

With no fanfare and little venture money, the companies profiled here are delivering real stuff to paying customers and making a buck in the process. There may not be any "new rules," but there are rules, and we suspect every one of them will look familiar.

DVD Empire: The Bootstrapper
SitStay.com: The Mom-and-Pop
Shoebuy.com: The Scorekeepers
Accuship.com: The Traditionalist
Fashionmall.com: The Conservative
Healthcommunities.com: The Underwriter

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