Mississippi Gambler

Gina Tallman quit her job with a telecom company after the emergency phones it promised customers in response to Hurricane Katrina didn't come through. In November, 2005, she opened Gina's Gourmet Grocery in Bay St. Louis, Miss., stocking the shelves with milk, bread, and other basics. She later added upscale items. But a convenience store has opened a few blocks away, and Tallman's store's revenues are down. Says Tallman: "I put everything I had into this store."

GOAL: TO MAKE A PROFIT

GAME PLAN: To help Tallman make her store a success, BusinessWeek SmallBiz turned to Marlene Franke, CPA and managing member of business adviser Franke & Shields in Chicago, and Bryan Hancock, president and founder of Timberchase Financial, a financial planning and investment management firm in Birmingham, Ala.

The advisers agree: Tallman needs to sharpen her focus. High-end items accounted for only 2% of the goods she stocked last year. "If Tallman is going to call herself a gourmet grocery, she needs to buy gourmet items," says Franke. Right now, Tallman's gross profit margin is 15%, far below the 60% to 70% Franke says she needs. She suggests Tallman bring in more specialty products that reflect her New Orleans roots, and those that carry high margins, such as specialty cheeses and beer, which Tallman marks up about 100% and 35%, respectively.

Tallman has one part-time employee, but hiring a full-time worker would give her more time to find vendors and devise a better pricing strategy. That's crucial, as the business spent $285,756—85% of its revenues—purchasing goods last year. "The business will die at that rate," says Franke, adding that costs of goods sold should be 30% to 40% revenues.

Tallman will need financing to build inventory. She has applied for a bank loan of $35,000 to $50,000, but Hancock says given that she lost money last year and does not own a home on which she could get a line of credit, the bank may not give her what she needs. Franke thinks she'll need at least $75,000. "People always think they don't need as much as they do," she says. Hancock urges Tallman to look for an outside investor or raise money from friends and family.

More worrisome, says Hancock, is that there isn't much demand for gourmet foods in Bay St. Louis. And he expects Tallman will face more competition as the area rebuilds. "It's just a matter of time before a big-box grocery chain comes in," he says. Her best bet may be to sell. Hancock notes that she could bring in about $36,000 for her coolers and inventory, pay back her current debt of $16,000, and walk away with $20,000 in cash. "My perspective is to do what's best for the financial health of the person," says Hancock. Franke is more optimistic, though she concedes that Tallman has her work cut out for her. Says Franke: "She's going to have to invest some serious time and money, but if she is in a resort area and she does it right, she could make it."

Tallman has no intention of giving up. "Failure is not an option," she says. "I want to be a gourmet grocery and have clientele who come from all down the coast to my store." Once the Bay St. Louis bridge is rebuilt in May, she says, tourists should return to the area. In the meantime, Tallman intends to tweak her business plan and ask her mentor, who is affiliated with the Service Corps of Retired Executives, the retired business executive network, to help her find investors. "I'd rather work hard for me than for someone else," she says. "I'm going to do this one way or another."

By Virginia Munger Kahn

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