The Small Business Professor

Making Rapid Growth Decisions

Julie Dix and her partner, Danielle Ayotte, are the creators of a popular snuggly blanket for infants and toddlers called Taggies®. The two women had no idea they would be piloting a rapidly growing business concern when they left their respective outside careers and decided to stay at home with their children, but that’s exactly what happened.

Dix, who taught elementary school for eight years, noticed one day that her infant son was fascinated with rubbing the manufacturer’s tag and satin edging on his blanket together. Something about the way it felt and sounded caught his attention and held it. Thinking he might like to experience the feeling of different textures, Dix took a small piece of fleece and attached different types of ribbons and tags to it. The homemade fleece blanket soon became his constant companion and favorite toy.

Ayotte, with a degree in French literature and business management experience met Dix at play group, became interested, and asked Dix about the little blanket. Together they worked out an arrangement where Dix would make the 12” x 12” blankets and Ayotte would sell them. They went to a patent attorney, applied for trademarks, and drained their savings to get started. Within 90 days the blankets, named “Taggies” were selling so quickly that they needed help producing them. Hiring other stay-at-home moms to produce the blankets worked for almost a year, until they, too were overwhelmed with orders. By the time Dix and Ayotte found a company to manufacture Taggies, they were selling about 1000 Taggies per week.

Selling out at craft fairs and stores soon became the norm, but the partners didn’t really hit the big time until they contacted someone who managed a sizeable number of manufacturer’s representatives. Against incredible odds, Taggies were accepted by the rep company and business zoomed. Keeping up with the growth of Taggies, putting business processes in place, creating brochures and catalogs, and not limiting the product’s potential, became a high priority for the two women who now have six children between them.

Each was working with a computer and both basements were full of blankets. The women would take turns watching the kids or the kids would play together while the women worked. For two years, the partners didn’t take salaries because they were plowing the profits back to the business to finance its expansion. In addition, each ended up investing about $10,000 apiece to help the company grow. Outside financing didn’t enter the picture until the company had reached almost $2 million in annual sales. By 2001, Taggies were being sold in the national gift, toy and apparel markets. They moved into office space, but quickly outgrew that, and ended up moving four times before finding the 10,000 square foot space they now occupy. Currently, the Taggies product line, which includes books, pillows, rattles and touch toys supports 25 employees with $3 million in annual sales throughout the US, Canada, England and Ireland.

The Small Business Professors' Words of Wisdom

It’s not often that I meet entrepreneurs who have to make the kind of rapid-growth decisions experienced at Taggies. Both partners were very conservative with regard to financing and relatively risk averse. This prompted much anxiety on their part when professionals advised them to get a line of credit to finance additional inventory. Lines of credit must be backed by collateral – in this case their homes served and there was no crystal ball that enabled them to see the future. If the business went bad, so did their families’ finances. The partners have been offered venture capital, but have resisted the temptation in order to retain complete control.

Sticklers about quality and safety, the partners researched foreign manufacturing in an effort to become more profitable. Taking another risk, they contracted with an agent in Shanghai and ordered a small quantity of one item to start. They have not given up on domestic manufacturing – but 90% is now done in China. The partners have increased their comfort level by doing some of the hand stitching here in their US offices. This level of involvement also allows them to innovate on the fly something they learned to do in the beginning when they were doing everything by hand.

Case History: www.taggies.com

Entrepreneur’s Strategy: Finance as much of the business personally as possible to retain complete control.

Could This Work For Me? Only accept outside financing when your business is solid and growing.