Stella & Chewy's

Founder: Marie Moody, 43
Location: Muskego, Wisconsin
Employees: 66 (40 full time; 26 part time)
Funding: $650,000 SBA-backed loan
2009 Revenue: $5 million
Start-Up Year: 2003
Breakeven: After one year, when annual revenue hit $120,000
Insider Insight: Find a new angle on an old trend. Moody saw that dog owners -- just like foodies -- would pay extra for high-quality organic products.
Blind Spot: Hidden costs. Moody didn't anticipate how hard it would be -- and how much money it would take in the form of free products and fees for field reps -- to persuade retailers to push her products.

Marie Moody knew her dog wasn't well, but it was still a shock to hear the vet say that Chewy, the mutt she had recently adopted, wouldn't live long unless she started giving him some extraordinary care. Most important, she needed to pay meticulous attention to the dog's diet.

Moody hadn't known that most conventional dog food is made from cereal shavings and renderings from meat packers, with some vitamins and minerals thrown in. So, despite abstaining from meat herself, she was soon making weekly trips to Whole Foods for bags of organic beef. A few months later, Chewy's recovery was striking, and Moody's other dog, a terrier mix named Stella, seemed healthier, too. A business idea was born.

After working in New York City's fashion industry for a decade, Moody had been feeling burned out and decided to take a flier. Some online research led her to a Wisconsin-based manufacturer who, for $1,200 plus $900 shipping, would sell her frozen and freeze-dried dog food under the name Stella & Chewy's. In March 2003, half a ton of dog food arrived at her New York City apartment.

At first, Moody had no idea who, if anyone, would buy it. She began by giving away samples on New York City street corners. "I'm sure people thought I was crazy," she says. By 2004, thanks to a lot of footwork, Stella & Chewy's was in about a dozen New York City stores, and sales were $10,000 a month. Still, Moody was only breaking even. She decided she needed her own packing plant to expand the business and at the same time maintain tighter quality control. She took another leap.

First, she needed a formal business plan so she could apply for a Small Business Administration loan. After taking a class and slaving away at a plan for a couple of months, she finally paid the class instructor $2,000 to pump out the plan for her. "It would have taken me 10 times as long to write it myself," Moody says. "I really believe in doing what you're good at and delegating the rest."

Meanwhile, she packed up and moved back to her native Wisconsin. Proximity to the state's meat industry was a plus, Moody realized. She would be able to develop relationships with suppliers who could sell her organic and antibiotic-free meat several thousand pounds at a time. And she would be able to tap the state's agricultural experts. Moody soon hired two scientists from the University of Wisconsin's renowned animal science department, who helped her develop recipes and food-safety technology.

In October 2006, Moody closed on an SBA-backed loan of $650,000 -- nearly all it earmarked for resellable equipment, which minimized the risk for her lender. The plant opened in January 2007. Moody had a tough time meeting her obligations during the five long months she waited for an industrial freeze-dryer to arrive. By then, though, she and her consulting scientists had developed a technology that guaranteed a pathogen-free product. Several companies had been forced to recall pet food for safety reasons that year, so distributors quickly took notice. Moody signed her first big-time distribution deal in the fall of 2007 and eventually landed Stella & Chewy's in 750 stores on the East Coast. Other distributors quickly followed; Moody had $5 million in sales in 2009 and hopes to hit $10 million in 2010.

"I love my dogs," says Moody, who recently adopted a third pooch to surprise her 5-year-old son. "So I always knew that people who love their pets would buy them better food if it was out there."