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Nathan McKelvey was working as a marketer for an aircraft management company when he noticed how inefficient the private jet industry was. Planes sat on ramps waiting for passengers, or flew empty on one leg of a trip. Passengers looking to book a flight had to thumb through the phone book to find companies and collect bids. "The idea hit me that the best way to make the most efficient use of the plane was to centralize the process," says the 36-year-old. In 1997, McKelvey began work on a degree in computer programming at night and tried to develop aircraft-booking software in his spare time. His aim was to combine online reservations popularized by sites such as Travelocity with the bidding process used by long-haul truckers. "If you're a small trucking management company and you have a load to take from New York to Oklahoma, when you get to Oklahoma you're not going to turn around and drive back empty," explains McKelvey.
Although he didn't finish the degree, by 1999 McKelvey had learned enough to develop the technology to launch Quincy (Mass.)-based Jets International. His system takes flight schedules for specific aircraft directly from plane operators and feeds the information into his database. After travelers log on to his site at jets.com and enter their desired itineraries, the system sends alerts to plane operators, who then submit bids on the flights. Frequent flyers can put up to $100,000 in an interest-bearing escrow account to pay for their travel and can set a maximum price they are willing to pay for a particular trip. The site also tracks and displays safety and quality-of-service information. McKelvey's 24-employee company gets a cut of each winning bid.
In 2005, it booked about 3,000 flights and brought in revenues of $17 million. In the past year, Barbara Wolfe has used the site to book seven trips, mostly to the Caribbean. "I used to call several firms and get phone calls or faxes back. It was just too time-consuming," says Wolfe. "I just love the Internet." No doubt McKelvey feels the same.
YOU GOTTA HAVE ART
By stressing the "middle market" of collectors, Lark Mason's iGavel.com prospers in a niche the heavyweights largely ignore
While plenty of people might buy a $20 butter dish after viewing only an online photo, few would spend $30,000 on an oil painting they hadn't seen up close. That's what prompted Lark Mason Jr. to co-found iGavel.com. The site sells expensive -- but not too expensive -- art through eBay-style auctions. What separates the site from those like eBay is that would-be buyers can view the artwork before they buy at one of iGavel's 13 exhibition centers or 300 dealers, appraisers, and galleries that are part of Mason's network. Last year the company sold $6.5 million in art and had revenues of about $400,000.
Mason, 51, spent two decades at Sotheby's and watched as the auction house's online foray foundered. One problem, he thought, lay in the site's high prices. "There seemed to be a ceiling to what a customer would pay online," Mason says. That's why iGavel.com targets the "middle market," which Mason defines as art that sells for $300 to $100,000. At the high end are pieces, such as a minor painting by a major Impressionist, that would otherwise be lost among much higher-value items in a sale at Sotheby's or Christie's, says Mason. The average price for merchandise is $900, and the highest price paid so far for a single item -- $264,000 -- was for a painting by Beijing-born artist Zao Wu-Ki.
Mason and business partner Benjamin Turk Tolub, 36, a former Webmaster for Sothebys.com, spent about $50,000 in savings to launch iGavel. The six-employee New York company presents artworks in themed auctions such as "Fine Asian Ceramics and Works of Art" and "The Skowhegan Collection." Mason has experts assess the authenticity and condition of the pieces. Sales typically run for two to three weeks, with the pieces exhibited at one of the exhibition centers or partners' showrooms in the final week. IGavel earns a 5% to 20% commission on each item.
Today iGavel has about 125,000 visitors to its site during high-traffic days. Mason, who is also a regular on PBS' Antiques Roadshow, admits he was nervous about leaving a longtime job he loved. The feeling passed. Says Mason: "The first sale was a blowout success, and that gave us confidence to go on."
Bradley Inman's TurnHere.com lets local businesses take their turn in the spotlight
Peter James is not an actor. But he stars in a movie about Fog City Leather, his San Francisco leather apparel business. The cinema verité short is complete with funky guitar riffs, leather jackets, and James spouting unscripted dialogue: "I have been making leather goods for over 35 years. I'm kind of an original-from-the-'60s kind of a guy."
About 100 such mini-movies -- or very sophisticated advertisements, depending on your point of view -- can be seen on TurnHere.com, a hybrid travel and advertising Web site with the tagline "Short Films, Cool Places." The Emeryville (Calif.) startup makes short films, typically less than a minute long, featuring small companies in about 110 cities. Posting the clips online gives local merchants a chance to reach tourists without splurging on TV or national ad campaigns. Visitors to the site, mostly people planning trips, click on a city name, and presto -- clips about small companies in those locations begin to play. "We think we're revolutionizing local advertising," says TurnHere's 53-year-old CEO, Bradley Inman. He expects his company to take in $1.5 million this year.
TurnHere started in 2004 as a site for travelers featuring professionally made short films about cities around the world, including their main attractions and local shops. Inman then realized he had stumbled upon a new way for small businesses to promote themselves. About two years ago he began hiring professional filmmakers to create shorts for small companies as well as programmers to develop the Web site. In all, he spent about $1 million of his savings to launch the company.
Visitors to the site click on a city name to learn about its history, culture, and attractions. There's also a feature film about each location, with some comments from local companies sprinkled in. Entrepreneurs don't have to pay to be included in the features, but TurnHere charges $500 to $1,000 to have a mini-movie made, plus a monthly charge of $29 to $59 and 10 cents a stream for a streaming service, a player, and placement of the film on TurnHere and its distribution partners. Among those are Google and MSN video.
So far, the films mostly feature companies in San Francisco, Los Angeles, and New York, but there are a few from Canada and overseas. Fog City Leather's James says the film about his business, and a longer feature about his community, the Marina District, have generated sales. "They e-mail us, call us, and sometimes just walk in the store as a result," says James. "I think it gives us legitimacy because we're in a movie."
ONLINE JOB FOREMAN
HouseRaising helps homebuilders and clients stay in touch and on top of construction projects
After 40 years of building custom houses, Robert McLemore knows firsthand how builders struggle to fulfill their customers' wishes without blowing a hole in either of their budgets. Last year he turned his knowledge into HouseRaising.com, an interactive service tied to his home building business that helps custom builders reap more predictable profits.
Because builders of tract houses put up many units with the same design, they benefit from predictability in materials and are able to negotiate volume discounts. That's not the case with builders of one-of-a-kind homes. "Custom homebuilding is the most difficult part of the industry because you have to deal with homeowners who own the lot and have dreams about what they want and how much they want to pay," says McLemore.
The Charlotte (N.C.) startup acts as a cyber-middleman during the construction process, handling pesky coordination problems while allowing the builder to focus on building. This year, builders began paying a one-time fee of $2,000, plus $200 a month thereafter, for the service.
McLemore tapped into his own experience and frustrations in the construction industry to come up with the system. He identified 1,269 specific problems he had encountered when building custom homes, from homeowners who were disappointed that no trees were left standing when a building site was cleared to complaints about noisy plumbing. He then came up with 3,400 steps that solved those problems, such as requiring that homeowners be on site when land was cleared or signing a waiver, and providing soundproofing for pipes. He bought a small technology company, merged it into HouseRaising, and dumped all the problems and solutions into a proprietary online system. "It took six years to define and two years to develop the software," says McLemore. He invested $5 million of his own money, and, by completing a reverse merger, was able to use equity for the rest.
Once builders become HouseRaising members, they can store files about a particular project online, including contracts, costs, and vendors, the payments, and projected schedules. The builder's clients also have access to the file. And they can view digital photos of the building as it progresses. The builder and client put all their comments about a project in the system, so there's a record of who said what. The site also provides models of houses in a wide range of prices and an in-house staff that helps would-be homeowners figure out what their budget will buy.
HouseRaising has an offline component as well. McLemore's 35-person staff works with contractors to handle everything from accounting to referrals. The company maintains a list of 100 vendors that offer discounts to homebuilders using the system.
McLemore is marketing the site to single-family construction companies, new homebuilders, and residential remodelers through direct-mail campaigns. Mike Freeman, owner of Freewood Contracting, a custom builder in Greenville, S.C., is using HouseRaising to help build a $550,000 house in that town. "My customer has been looking at models on the site, and eventually we'll have it set up so that he can go on the Internet and see where the house is in terms of cost and at what stage it's in," Freeman says. Having all the information online is an enormous help, because his customer lives in Kentucky. "With the Internet," Freeman says, "everything is easier and quicker, and there's instant reporting. I can focus on building the house."
THESE NURSES ARE ALWAYS ON CALL
An Internet-based phone system lets Colorado Springs-based Exclusively RNs counsel nervous moms-to-be, and hire nurses, all over the country
Laura Hagler and Anne Afshari's business was born in the birth center where they worked. One night in 2002, the two OB-GYN nurses noticed the doctor on call was getting a lot of calls from pregnant women asking routine questions about topics such as diet and headaches. Afshari asked the doctor, Kevin Weary, why he didn't have someone else handle those calls. His reply: "Do you want to do it?"
Afshari, 33, and Hagler, 32, decided they did, launching Exclusively RNs that same year. The Colorado Springs company has a network of 23 OB/GYN nurses answering after-hours calls for 55 doctors and midwives who subscribe to the service for about $300 a month. Last year, revenues were $140,000, double those of the previous year. They expect sales to top $200,000 this year. "When we think about where we started -- just with an idea -- it's unreal," says Hagler, who, like Afshari, goes by the title director and owner.
At first, Hagler and Afshari answered calls from their homes. But they realized that an Internet-based phone system would allow the business to take off. They now spend $620 a month on Virtual PBX, a Web-hosted private branch exchange service that routes calls to their company's nurses. The nurses, who work from their homes as contractors, log on to the company's Web site and are alerted by e-mail or text message when a call is waiting. The service also has round-the-clock tech support and a backup system.
Using a Web-based system allows Hagler and Afshari to hire staff from around the country. So far, they've got nurses in Arizona, Colorado, Florida, North Carolina, and Texas. Their nurses, each of whom must have at least two years' experience in women's health, handle calls based on a protocol approved by subscribers. The founders conduct a three-day training session for new hires -- those who aren't from the area are flown in for a long weekend. Hagler and Afshari also listen in on their first few calls to guide them. Although the service does get calls from women who require immediate medical attention, most come from "patients with questions they think are urgent but might not be," says Afshari. Among them: a woman asking if she could have a tuna fish sandwich at 2 a.m. (She could.)
Dr. Weary, who is with Academy Women's Healthcare Associates in Colorado Springs, says he used to field about 40 calls a day when he was on call but has that down to two or three a month. "They take care of 98% to 99% of the calls," he says. "Doctors work 48 hours over the weekend when on call, so it's easy to get grumpy. On Tuesdays I was making calls apologizing for how I acted when a patient called with a headache. I don't need to do that anymore." Hagler and Afshari find clients by e-mailing and phoning doctors, as well as with direct-mail campaigns. Next year they plan to attend OB/GYN conferences to promote the service. If the experiences of doctors such as Weary get around, Exclusively RNs may soon be fielding lots of calls -- from doctors.
For more on the technology behind our WebSmart companies, see businessweek.com/go/sb/websmart
By Eve Tamincioglu