Getting started: Greeting cards - Jun. 11, 2001

Getting started: Greeting cards - Jun. 11, 2001 NEW YORK (CNNfn) - The story of the greeting card company Max & Lucy is really the story of Russ and Mike and Brad: three guys who came together about three years ago to make a stab at starting their own card company and quickly found an audience for their very unique sense of style.

"We have been growing like gangbusters," said Mike Oleskow, one of the company's founders.

It's hard to put a label on the Max & Lucy style. It's whimsical, clever, stylish, and very minimal. The images are small and spare. The words, if any, are few.

Consider this Max & Lucy card that took the runner up award at this year's Greeting Card Association awards. A tiny stroller on the front of a simple white card with the words "push, push" written across. Open it and find the single word "breathe" on the inside.

The creative sensibility of the company is at the heart of starting a successful greeting card company. Create a product that stands out from the crowd that has a fresh look and an unusual appeal and you are off to a strong start.

But as Max & Lucy founders Russ Haan and Mike Oleskow soon learned, there is much more to the business than cool images on nice paper with clever messages. It is a demanding industry that requires constant creative innovation, flexibility, and the ability to become as much a business person as a creative force.

Capricious beginnings To hear Oleskow tell it, the partnership with Russ Haan that led to Max & Lucy had a purely capricious beginning. Haan invited Oleskow to join him at the national stationery show in 1998.

Haan suggested the two start their own stationery business, and voila! a company was born. Brad Smith soon joined the pair as the primary artistic force at the company.

As whimsically as he describes the beginning, the pair realized they needed to know as much about business as good design. Between the two they had a pretty good beginning. Oleskow had been in sales and marketing with AT&T Corp. for 23 years and Haan was something of a serial entrepreneur who had run a design firm for years before starting Max & Lucy.

Getting started in the business is really not all that difficult or expensive. For a few hundred or thousand dollars, designers can create a line of cards and begin placing them in small shops in the area in which they live. In the beginning, many connect with sales representatives who handle many clients. The sales reps then place the cards in shops for a cut of the pay.

Turn around in the industry is high, however, because a lot of designers simply don't have the background or the proper guidance they need to handle their business affairs well.

"You have to have a creative person who is creating the cards," said Mary Ann McDermott of the Greeting Card Association, a Washington, D.C.-based trade organization. "Not everyone figures out they need a business person who runs the business."

This is particularly important if you aspire, as the Max & Lucy crew did, to have a national rather than a local presence. And that is something they have achieved in just three short years. Their cards and stationery are carried in small but discriminating card shops and bookstores as well as in national chains such as Papyrus. Their revenue has soared from $0 to somewhere comfortably in the seven-figure range last year.

"We are shipping palettes now instead of boxes," said Oleskow.

Growth is great, but ...

Growth is great, but it comes with its own set of business headaches. The bigger you get and the faster you grow, the more difficult it becomes to manage cash flow, said Oleskow.

And then there is the age-old problem of securing financing for a growing small company.

Like many small business owners, Oleskow and Haan hoped to take out a bank loan to finance their growth. They needed additional money to boost their inventory, get some additional space and a few more staffers to achieve another jump in sales. They were refused.

Ultimately, although the small company could show the bankers they were growing at a rapid clip, Haan said, "the bank didn't want to end up sitting on 18 million cards in a warehouse."

The lack of bank financing for such ventures is an oft-discussed dilemma for small business owners.

Small businesses need financing to grow into medium-sized businesses. Banks don't want to give money to business owners who can't offer guaranteed repayment.

Oleskow and Haan ended up taking a line of credit from a factoring company, a type of financing company that buys a percentage of a company's receivables. It is an alternative to bank financing that has allowed the company to move forward with its expansion, but at a price. The cost of the money is much higher than through a traditional bank business loan.

For obvious reasons, Haan said the pair still want to work with a traditional bank. If nothing else, after their recent attempt and failure to get a loan, they think they know how to come at the bank in the future.

"If you get a little flush, that is when you go," said Haan. "You go to the bank when you have absolutely no need for them."

When not unloading shipments of envelopes and the like, or trying to nail down a loan, or arranging financing for a client, the cards still have to keep coming.

The Max & Lucy crew are putting out four new releases a year. Trying to make fresh, distinctive

products that still have a Max & Lucy feel to them is a constant creative challenge. Meanwhile, the company is expanding into other areas including creating private label products for companies.

"We are showing people we are innovators because we are a small firm doing a staggering array of designs," said Haan.

Long hours, hard work, and lots of mental energy have gone into this small company, said Oleskow.

At the same time, however, the owners of Max & Lucy try to make work as fun and whimsical as the cards they create.

"We're in it to have fun," said Oleskow. "Why else would we be working in a warehouse that's painted purple?" http://money.cnn.com/2001/06/11/sbstarting/q_cards/index.htm