The 2010 Entrepreneurs of the Year

Sunday, February 21, 2010 at 11:48pm
Staff reports

It’s all too easy today to find businesses hiding inside their shell and riding out the recession. The nine executives highlighted here are nothing of the sort. They are the hares identifying underserved markets for their products and services, figuring out smarter ways to work and overhauling their business models to take advantages of new opportunities.

They are an eclectic bunch that has planted a flag in the financial, technology, services and apparel sectors, among others. And they are creating jobs by the dozen and growing their companies at breakneck speed. In 2009, revenues at the nine firms we’ve profiled rose by a third; in 2010, they plan to grow 70 percent. Entrepreneurs of the Year indeed.

Gina Butler
Gigi’s Cupcakes Franchising LLC

Gina Butler came to Nashville a God-fearing singer-songwriter with her eyes on a record contract in 1994. Sixteen years, one cleaning business and a $100,000 cash advance later, she’s the founder, owner and proprietor of Gigi’s Cupcakes, a sweetly stellar shop and sort of role model for ambitious entrepreneurs.

Gina — or Gigi, the nickname her niece offered when she was too young to pronounce her given name — went into the cupcake business after a fortuitous phone call from her brother, who was in New York City at the famous Magnolia’s Bakery. He told his little sister her cupcakes were better than what he was eating, suggesting it might be time for a career change. After all, their father had owned restaurants in the past, their mother and grandmother were expert bakers, and two of their great aunts had owned bakeries in Oklahoma.

Gigi’s Cupcakes opened at 1816 Broadway on Feb. 21, 2008. The owner had $33 in her checking account, and her first rent payment — $4,500 — was due at the end of the week. When an unexpected contracting expense came along, Gina nearly buckled. But within a week, boasting a line out the door that started around Day 3, she had enough bread to cover all her expenses and then some.

Now, two years later, Gigi’s — which uses family recipes and stakes its reputation on the “Swirl,” a frothy, delicate mountain of icing atop each cupcake — has 14 locations in the region, with the original serving as the standard-bearer. Gina, who owns just under half of the franchising company, said she expects to have 30 by the end of 2010.

“If you work really hard in your life, and you’re really positive, and you do good things, and you walk with integrity, you’re going to make it,” she said. “It’s going to pay off.”

It certainly has. Gigi’s revenues went from $900,000 in 2008 to $2.5 million last year, with a projected $9 million in 2010. Over the same period, staff grew from 35 to around 300 workers.

In fact, Gina said, Valentine’s Day weekend was their best yet: In 14 stores, they sold 45,000 cupcakes and turned a tasty $131,500 in sales.

— Stephen George

Shannon Farrington
W Squared

When Shannon Farrington co-founded W Squared in 2005, the idea was to stop reinventing the wheel.

She and her senior management team had plenty of experience in the startup-growth-sell cycle of entrepreneurship, but they realized that with every company they had to create the same back-office systems and processes from scratch.

“It seemed like we were recreating the wheel, the same wheel,” Farrington said.

So she and co-founders Tammy Howell and Mark Farrington built a team that could provide expertise and back-office outsourcing for small to mid-sized companies looking to focus on their core competencies and growth.

Today, W Squared provides outsourced information technology, finance and accounting, human resources and payroll functions to about 45 clients in various industries. In 2009, the company achieved $3.7 million in revenue with 35 employees. It’s projecting revenue of $4.2 million and a staff of 40 for 2010.

Moving forward, Farrington eventually would like to see W Squared open offices in other cities to support its business outside of Middle Tennessee.

Prior to launching W Squared, Farrington was senior vice president and CFO of CHD Meridian Healthcare, the country’s largest provider of on-site health care services. In that role, she was instrumental in developing the company’s standard processes, reorganizing its capital and debt structures to complete mergers, and obtaining growth capital and shareholder liquidity. The company grew to more than $200 million in revenue and 1,800 employees in 32 states by the time it was sold.

Farrington said the company’s ability to recruit and hire experienced professionals has helped contribute to its success. The opportunity to work with many different companies and help them grow has been a draw. Plus, there’s the fun factor.

“We have great clients and they’ve got great ideas, so it’s fun, too,” Farrington said. “I think if you can’t have fun at work, it’s probably not what you need to be doing.”

— Erin Lawley

Brian Fox
Capital Confirmation Inc.

You just know Vanderbilt’s Owen Graduate School of Management must be using Brian Fox in its marketing.

In his 20s, as a student in the MBA program starting in 1999, Fox started developing a concept he had been incubating in his mind while working as an accountant at Ernst & Young and then PriceWaterhouseCoopers. He found that the audit confirmation process — the often-boring, always repetitive task of checking to see that companies being audited really had the money they claimed to have in their bank accounts — was being carried out in antiquated and inefficient ways.

Capital Confirmation Inc. was meant to be a superior system for managing this rote task. Fox war-gamed his business plan in classes at Owen and raised the money to launch the company from friends and family between school sessions.

Fox launched the company soon after he graduated in 2001 — and Italy’s misfortune promptly proved to be his boon. Northern Italian dairy conglomerate Parmalat was implicated in financial chicanery that included a multi-billion-dollar discrepancy between what the company reported in its holdings and what was really there. Suddenly, confirming capital became an issue worthy of serious attention.

Backed by more than $10 million in venture funding — including from Solidus Co., which is also an investor in SouthComm, the parent company of The City Paper — Capital Confirmation created an airtight tracking system. Its service caught on in a big way. Today, it has more than 150,000 clients in more than 50 countries, including nine of the nation’s 10 largest banks, all of the Big Four accounting firms and the Federal Reserve Bank.

— E. Thomas Wood

Mandee Johnson
Multi-Task Solutions LLC

A onetime executive aide to former Gov. Ned McWherter, Johnson teamed with former Star Transportation CEO Beth Franklin to launch Multi-Task Solutions in 2007. The two had worked together for more than a decade at Star before that company’s $40 million sale to Chattanooga’s Covenant Transportation in 2006.

MTS offers services including branding, graphic design, strategic marketing, nonprofit development and creation of promotional products. It serves both for-profit and nonprofit enterprises.

The company has grown steadily since its founding. It moved into office space at the Hill Center in Green Hills in September 2007, expanded its promotional products/wearables division and added a creative services division in the spring of 2008, and opened a second office on Trousdale Drive in August 2008. In December of that year, it established a sales office in Memphis, and last April it opened another in Philadelphia. The MTS team now includes 12 employees.

In 2009, MTS was a nominee for the Nashville Area Chamber of Commerce’s Future 50 Awards, given to the area's fastest-growing companies.

— E. Thomas Wood

John Miller
Malcap Mortgage

Forget the occasional economic-development chatter about luring the headquarters of a big-name finance firm to town. Miller says he intends to build from the ground up a national player with name recognition as strong as those of the financial industry’s giants.

And he and his partners, Josh Malnofski and his father John Miller Sr., plan to do it via the Web with a direct-to-consumer model modeled on Dell in its heyday. Backed by products from hundreds of lenders, Malcap’s online-focused operation can cater to borrowers’ needs and preferences.

“It’s about picking good markets and tailoring our products to what that person is looking for,” Miller said. “Once we have our model in place, there’s no limit to our growth as long as we can continue to add states.”

A graduate of the University of Tennessee, Miller owned and operated a retail shipping store and managed his family’s investment fund before he ran into what is now Malcap and its chief manager, Josh Malnofski.

Malcap now brokers loans in seven states and handled $151 million worth of mortgages last year, with the average loan coming in at $155,000. Miller says his 2010 goal is $200 million, with much of that growth coming from Malcap’s own warehouse line, which will substantially boost profitability.

Revenues rose by 23 percent in 2009 and are expected to jump by more than 50 percent to $5 million this year. Miller also plans to boost the number of loan officers on his staff to 100 this year, up from just 30 at the end of 2009. The turmoil in the financial industry the past two years has helped him “scoop up a lot of great people.”

“You can’t really niche out in this market,” Miller said. “We’re still looking to conquer the world.”

— Geert De Lombaerde

Suzanne Sevier Rowland
Sevier Skirts

A graduate of the University of Tennessee and the Fashion Institute of Technology in New York, Sevier’s career clicked into gear after a friend encouraged her to market her homemade skirts to other women and offered to arrange a gathering of her friends.

The designer had previously planned on being the private-label manufacturer for a number of boutique stores but applying the home-party concept to made-to-fit skirts sparked her imagination.

Since those early days in 2004, Sevier’s company has steadily built a client network in eight cities and set up a West Nashville facility that produced almost 6,000 skirts last year. Sevier’s pieces, which sell for between $130 and $180, take classic styles and embellish them with pattern or fabric flourishes. They are generally delivered within three weeks.

Already profitable, Sevier is now focused on expanding her footprint. A licensing program being launched this quarter is expected to add three sales representatives this fall and another six for the spring of 2011. With that in mind, she’s working on a five-day “skirt school” training program she’ll host in April and looking for new space that can accommodate a second production shift.

As for expanding beyond skirts and into other apparel items, Sevier isn’t tempted.

“If you specialize in one product and do it really well, you can be the best at that one product,” she said.

That focused approach should push sales to $1.3 million this year — more than double the 2008 figure — and help Sevier hire up to eight people, primarily in production. That will boost her staff to about 20 and keep her in a manageable growth mode.

“Slow growth is the best growth right now,” Sevier said. “To think that I’m going to be training three people to do what I do is more than I could have dreamed of.”

— Geert De Lombaerde

Stephen Tallent
Mercury Intermedia

It wasn’t so long ago that Mercury Intermedia was focused on building desktop computer applications for professional sports teams. Die-hard fans of the Nashville Predators, for example, could get Mercury’s screensaver program that would scroll through dynamic team-related content like photos and statistics from the previous night’s game.

Then an even bigger opportunity came knocking. When the company began exploring how to use mobile applications to enhance its desktop products, customers asked Mercury to build them some general mobile apps first — and it went really well.

“So well that it became clear the opportunity was far larger than what we were doing for desktop,” said Mercury President Stephen Tallent.

Today, Mercury is focused on creating mobile applications for the iPhone, Google Android and other platforms, and it’s on a growth tear. Revenue jumped from $158,000 in 2008 to $1.3 million in 2009. The company’s client list includes USA Today, CNN, Showtime and other major media outlets.

The company is projecting revenue of $3.5 million in 2010 and Tallent sees opportunities to build applications for more video-oriented media companies, including news outlets and general entertainment businesses. He’d also like to see the company get back into doing more work with sports teams.

Tallent launched Mercury to build websites. In 1995, after leaving his family printing business, the commercial Internet was still new to the market. But after being in the website business for a few years, he steered the company into desktop applications, working mainly with sports teams like the Predators, some NFL franchises and Sports Illustrated.

Looking to the future, Tallent said Mercury already has begun development on iPad applications in anticipation of the release of Apple’s new tablet computer. His developers and designers are trying to figure out how to create the best user experience for this new device, which will have a larger screen and be used in different environments from the iPhone.

“We’re really interested in the whole process of interacting with that information,” Tallent said. “It’ll open up some really different user experiences.”

And more growth avenues.

— Erin Lawley

Robert Watts
Value Vet Corp.

When almost every expert in your industry tells you to raise your prices or risk crushing defeat at the hands of an ever-slacked economy, you’d probably just raise your prices. Right?

Not Dr. Robert Watts. When The City Paper caught up with the Nashville veterinarian last week, he was in between seminars at a conference in Las Vegas, where presenters kept saying it was time to jack up rates.

“When that happens, you run away from a lot of people,” Watts said.

It may stand in direct conflict with his ability to build a nest egg for his young family (Watts and his wife, who helped mastermind the business plan, have three kids under age 5), but the veterinarian seems stuck on the model of low-cost basic animal health, a blueprint that has produced rapid success.

The flagship Value Vet clinic opened on Nolensville Pike on March 1, 2004. Six years later, there’s a litter: Four stores are cranking out bargain-priced, high-quality services right now and a fifth will open later this year in East Nashville.

While Watts acknowledges that his model has rubbed a few colleagues the wrong way — although Value Vet sends animals in need of complicated procedures to other local vets — he’s not exactly going broke: VV is projected to bring in $4 million in revenue this year.

It’s been something of a pleasant surprise for Watts and his family (his wife, sister and brother-in-law are all part of the family business), especially because his two goals — to efficiently run a business and offer high-end, low-cost services — so often seem in conflict.

“When you put your business hat on, you’ve got to pay a lot of money to a lot of people,” he said. “But on the other hand, when you take your business hat off and you put your veterinary hat on, you want to give good care to dogs and cats.”

— Stephen George

Kent Wood
PTS of America LLC

After joining two start-up companies that went belly up, Kent Wood said he was really trying to figure out where to go next with his career in 2003.

“I had a business mentor who had owned and sold his own business and was successful, and we decided to look for a company to buy together,” he said.

Wood spent six months searching for a company when he found PTS, a prisoner extradition company that transports inmates for state and local agencies. They bought the company in September 2003 and Wood said he knew the timing was right.

“We felt like it was a small company in a niche business industry without a lot of competition, and it had a lot of room for growth,” he said.

The fact that it was recession-proof was icing on the cake.

“We deal with government clients and as budgets are constrained, they do more and more outsourcing,” he said. “We’re focused on one thing, and we can do it better and save them money.”

Apparently, they’ve been doing something right. When Wood and his partner bought the company, PTS did less than $1 million in revenue. It has since grown 13-fold, doubling in 2008 alone. One of the keys to the company’s growth has been access to capital.

“With good capital, you can hire good people and provide good service,” he said.

Wood has more big expansion plans for 2010: The company employed 100 in 2008 and plans to bump that up to 125 this year.

The rising sentiment against illegal immigration is helping to grow a new line of business for PTS — transporting airplane loads of deportees back to their home countries and continents. As one of the largest international transporters of detainees, PTS flies inmates to Mexico, Honduras, Guatemala, El Salvador and Africa.

— Sherry Phillips

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