Clever Idea, Tasty Profit

Investor's Business Daily

Jul 22, 2008 10:42 EDT

In 1998, Chris Mittelstaedt launched a startup with $20,000 borrowed from his dad. Last year, revenue hit $5.2 million. It's expected to double this year. Called FruitGuys, the San Francisco-based firm delivers fresh apples, oranges, blueberries and beyond to 3,000 corporate clients weekly. Clients range from Wells Fargo to BP BP.

How Mittelstaedt, 39, bore big-time fruit is a lesson for would-be entrepreneurs. For starters?

Come to terms. In college, Mittelstaedt ran a part-time house-painting business that scored up to $40,000 per summer. After graduating, he lost direction, trying career avenues that became dead ends.

By age 27, he'd hit bottom, delivering faxes from a basement office -- for a 19-year-old boss. Desperate for a turnaround, he returned to his roots: entrepreneurship. He linked up with a friend who'd graduated from business school.

Find a need. When deciding what business to start, his market research was simple. He called friends in the dot-com world and asked what they needed.

"They said they were sitting on their butts all day writing HTML code, eating chocolate-covered espresso beans and drinking cola," Mittelstaedt told IBD. "They were gaining 20 pounds every six months and wanted healthy snacks in the office."

When Mittelstaedt mentioned fresh fruit, they jumped at it.

He'd found his niche.

Attack the market. His first stop? San Francisco's Embarcadero Center. He copied the names of 500 firms in the center's directory that might want to buy fruit for their employees -- then went home and called the outfits. He nabbed four accounts, two of which paid in advance. He bought fruit wholesale and made deliveries in his friend's jam-packed car.

"I followed behind in a scooter; I couldn't fit in the car with the fruit and him driving it," Mittelstaedt said.

With the loan from his dad, he bought mailing lists, sent postcards and fliers, and worked the phones endlessly. As his client base grew, word of mouth spread.

Get creative. With a small budget, Mittelstaedt opted for viral marketing. He dressed in a banana suit, stood on busy street corners and passed out fliers and free fruit. His client base continued growing.

Eye profit. From the start, Mittelstaedt widened margins by compressing the supply chain. He delivers to clients direct from farmers -- cutting out four costly steps.

With just 40 employees, "we're a lean, mean machine," he said.

"Efficiency's a huge part of our success," said Erik Muller, the firm's chief operating officer.

Learn. Early on, Mittelstaedt turned a client complaint into a win. Result? "The five Rs of customer service, woven into key questions we ask ourselves every day," he said. "Have we been respectful, responsive, realistic about service boundaries, responsible for outcomes -- and have we been remembered?"

"Chris' key success secret is his respect for employees, customers and suppliers," said marketing chief Erin Giordano. "Relationships -- in and out of the firm -- are what drive this business."

Source: Investor's Business Daily


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