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KAI RYSSDAL: When the talk turns to the economy this fall as the election heats up, at some point you’re going to hear either Barack Obama or John McCain — or maybe both of them — talk about how small businesses create as much as 80 percent of the new jobs in this country. That’s a political point that has the added benefit of being true, according to the Small Business Administration.
What you probably won’t hear is the flip side of that coin, also from the SBA, that more than half of all new small businesses don’t make it past the first five years.
But petering out isn’t the only danger for new companies. If they’re good at what they do, and if their very first product is a smash hit, they have to learn to grow fast and not flame out.
From the Marketplace Entrepreneurship Desk, Mitchell Hartman reports.
MITCHELL HARTMAN: This is a story about when opportunity comes knocking.
Marie Osmunson was an accountant and suburban homemaker, until she tested out a recipe she’d made up for veggie burgers at a family birthday party. Friends liked them so much they convinced her to start a business.
A year later, Osmunson had scratched out a few inches of shelf space for her frozen veggie patties in some local grocery stores. She was producing 3,000 a week, more or less on her own. Then she got a call.
MARIE OSMUNSON: They wanted 30,000 patties by the end of the week.
“They,” is Burgerville, the dominant regional fast-food chain with 39 locations in Oregon and Washington. Burgerville had pulled all its Gardenburgers off the menu. Kellogg’s, which owns Gardenburger, issued a voluntary recall. Suddenly, Osmunson had all that business.
OSMUNSON: So I called on family and friends and everybody showed up. It was chaos trying to get everything done. But we did it.
Now, just three months later, Osmunson’s company, Chez Gourmet, has 10 employees. She’s producing 40,000 to 50,000 patties a week, mostly for Burgerville.
Oregon State University’s Food Innovation Center gave Osmunson technical help. Sarah Masoni is the director. She’s seen lots of start-ups faced with this dilemma: How to grab a lucky break and turn a one-person, kitchen-table business into a full-blown enterprise.
SARAH MASONI: Mostly what we see is people giving up. So they may be able to distribute through farmers markets. And then one of the local groceries says, “Hey, people are asking for your product.” And that may become a stumbling block. Sometimes those stumbling blocks end up becoming roadblocks.
Osmunson is driving full-speed ahead at her roadblocks, moving into a new production facility that’s 10 times bigger, and continuing to go after new business. She’s taking some big chances.
OSMUNSON: It’s been fairly risky. I have had family invest in my business, which has been extremely helpful. Establishing credit with some of the vendors has been a challenge, because they don’t want to take a risk with you when you don’t have any history.
And she does face one big risk. A Kellogg’s spokesperson says Gardenburger’s quality problems are solved, and it wants Burgerville’s business back. If it succeeds, the food giant will eat Osmunson’s lunch. Burgerville says it’s still considering its options.
Osmunson does have one thing on her side: Burgerville says customers like her patties. She’s selling them in 60 stores, as well as from the front office of her little factory.
OSMUNSON: Let me get some sweet and sour sauce and you can take it home and try it. It might not be enough for the wedding party . . .
She recently sold several boxes to Theresa Ashford for a vegetarian reception. Ashford says she fell in love with them when she tried them at Burgerville.
THERESA ASHFORD: We went in one day to get a Gardenburger and they’re, like, “No, sorry, they’re unavailable.” And we’re like, “What?”
She tasted the burger from Chez Gourmet.
ASHFORD: So we fell in love, definitely.
Osmunson’s other advantage, ironically, is the slowing economy, which makes it easier to find new workers. She says she’ll need more hands on deck as she diversifies. She wants to make a number of other veggie and vegan varieties.
She’s got two new flavors in the works, plus a basil-mayo sauce — just something she whipped up in her spare time in the kitchen.
In Portland, I’m Mitchell Hartman for Marketplace.
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