SMALL BUSINESS OWNERINTERVIEWKATHY PARO, POSH PAKSNicholas ParoNichols CollegeBusiness and Society
Posh Paks – company overview Posh Paks is a sole proprietorship business started by Kathy Paro and her friend Lynn in 2006 They chose to set the company up as a sole proprietorship under my mom’s name. They selected a sole proprietorship because the product had little risk and it was the easiest and least expensive to set up. It also is easiest way to report income or losses on personal tax return.
Company overview The company sells designer lunch bags targeted at working women who in an effort to eat healthier are bringing their lunch to work The lunch bags look like purses and are more fashionable than lunch bags for kids The lunch bags are sold on-line, at vendor tables in corporations, home parties, and at events that attract professional women. Posh Paks started as an idea from my mom and her friend, Lynn, who are both professional working women and found the product was needed.
Company background• The first step they took was to research suppliers and identify options for selling the product. They used this information to develop a business plan.• The company was started with $12,000 of their own money. They looked at options like getting a business loan or finding investors, but in this economy it is difficult to get capital. Also once you start breaking even you can start making a profit.• Both my mom, and her business partner have Master’s degrees in business and have held various roles in corporations.• Posh Paks still is in business today, but has shifted mostly to an on-line business.
Successes• Most businesses fail within the first few years and often are never profitable. Posh Paks was profitable within the first six months and remained profitable every year it was in business.• Posh Paks were successful in keeping expenses low by limiting the cost of staffing, carefully managing inventory and managing the business out of the basement of our home.• Home based businesses also have great tax advantages.• The owners learned a lot and enjoyed learning how to start a business, but realized it was critical to make the time for the business that it required. Dedication is a must.
Challenges• Some challenges that Posh Paks faced included: • Capital – understanding what options were available and how to get investors or banks to help start their business. In the end she and her partner split the cost of the initial startup • Hidden cost add up – small things like shipping cost, the cost a company has to pay to process a credit card someone gives you for payment, or the cost of bags to put your product in for people to take home • Time – after working selling lunch bags all day, you still need to come home and order inventory, do paperwork and run the operations part of the business • Staffing – it was hard to find people who were reliable and willing to work a flexible schedule • Seasonality – 65% of Posh Paks sales were at the holiday season. It was difficult to figure out how to keep the business going year round.
Competition When Posh Paks was started the product was very new – the only lunch bags available were targeted to men or kids. In the past 2-3 years there are more lunch bag options available for women and are sold at large retailers like Target, Stop & Shop and TJMaxx To respond, Posh Paks has tried to focus on quality lunch bags at a good price. They also targeted on-line sales and repeat customers through email specials for existing customers only
Marketing/Staffing• Posh Paks used a friend to create a website to sell their lunch bags. This helped with marketing – Posh Paks was able to track people who purchased online then send them email offers to drive more sales.• My mom chose low-cost advertising like school ad local newspaper ads. She also paid for online search placement which means when someone searches for lunchbags on google her website would come up first.• Staffing – finding employees who were willing to have a flexible schedule, travel, were also good sales people at minimum wage was difficult. Much of the time the owners staffed the events which took time away from their families and other commitments
The Future My mom has decided to shutdown Posh Paks at the end of this year. While she enjoyed running the business and it was profitable, the time commitment is just too much.
My unique questions What part of owning a business did you enjoy the most? “I enjoyed learning how to get a business going. I learned so much from how to get a tax id to how to create a webpage to how to get a credit card machine”. If you could change one thing what would it be? “I would have like to actually get into the design and manufacturing process. This is a big, costly step that we were never willing to take”. Do you suggest having a partner in business? “Yes, absolutely, but make sure you know the person well. We were good compliments to each other – we each had things we were good at and that helped.”
Summary Most small businesses do not last not because they are not making a profit, don’t have a proper business plan or lack experience running a company. Posh Paks was a successful, profitable business even though there were changing market conditions and competition. I learned, owning a business is hard work with a lot of demands on it’s owners. My mom’s decision to shut down Posh Paks was simply a case of too much on her plate and the inability to “do it all”.