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Many tech companies have tried to tailor enterprise offerings for the small-business market, with mixed success. To see if small companies would even be interested in voice mail marketing, Holmen set up a pilot program with two dozen clients. One lesson learned: SmartReply's initial menu of options was too complex. "We overbuilt most of it," Holmen says. "The user interface was more complicated than it needed to be."

Having streamlined the product, SmartReply is ready to launch. All but three of the 24 businesses that took part in the pilot remain customers, which Holmen takes as a good sign. For the launch, he has hired three new salespeople, with the expectation that they will bring in a few hundred new clients a month. Small customers, he figures, will cost less to acquire--a couple hundred dollars each, compared with the $3,500 it costs SmartReply to bring a major retailer into the fold. And they will be easier to serve because of the system's self-service feature, which Holmen hopes will lead to higher margins.

Holmen thinks the new line of business could bring in $2 million in annual sales, but his optimism is tempered by the fact that he's been burned in the past. In 2006, SmartReply was on track to meet its goal of $10 million in sales, up from $6.8 million in 2005. Then the Federal Trade Commission proposed requiring voice mail phone marketers to get permission from consumers prior to every sales call--a rule that would effectively kill 40 percent of SmartReply's campaigns. The FTC took no action at that time, but the damage was done. Customers pulled back on voice mail marketing, and SmartReply finished the year $1.5 million below its projections. With a new offering in the works, Holmen is hoping history won't repeat itself.

An Ambitious Forecast

2007 Sales: $1.5 million
2008 Forecast: $2.5 million
Projected Increase: 66 percent
The Growth Strategy: Targeting the consumer market

Guests in 120 hotels across Hawaii use Luxus's products, which include soap, shampoo, and conditioner. But until recently, John and Patty Fulton thought of themselves as manufacturers. When individual consumers called to buy shampoo, the Fultons were surprised. "We told them they would have to buy it in a large bottle with no label, and they still wanted it," Patty says, "so we thought this was something really good."

Very quickly, consumer sales came to account for from 5 percent to 10 percent of sales and a big chunk of profits. "In the amenity business we do, we go for literally pennies on the dollar, making shampoo for maybe 15 cents and trying to sell it to the hotel for 20 cents," John says. "In the retail sector, it's two or three times better margins."

So the Fultons decided it was time to launch a line of consumer products. They came up with a brand name, Personal Paradise, and then spent about $100,000 developing attractive packaging and more than 50 variations on the original products. Rather than hiring in-house salespeople, they signed on with a local distributor called the Islander Group. The company supplies Kmart, Wal-Mart (NYSE:WMT), Costco, and a host of other retailers in Hawaii and has successfully launched local products in the past. Personal Paradise will probably be Islander's biggest launch to date, however. Initially, the line will be sold in gift shops, drugstores, and military PX outlets. "We see huge potential in this," says Islander's Steve Holmberg. "We think it has legs beyond Hawaii and into Southern California."

How much potential? For 2008, the Fultons decided to forecast an increase in sales of 66 percent, or $990,000, all of which will come from consumer sales. They have a lot riding on meeting that goal. Recently, they invested $2 million to build a new facility, which will allow them to as much as quintuple production. The upgrade was planned before the Fultons decided to jump into the consumer market, but they have since bought special equipment specifically to produce the consumer line. Hitting their forecast will go a long way toward paying off that investment.

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