Locker Lookz Looks for Higher Sales

Locker Lookz Looks for Higher Sales
Texas entrepreneurs Christi Sterling and JoAnn Brewer started Locker Lookz in 2008 with
$50,000 in personal savings and an idea based on their daughters’ interest in personalizing
their school lockers. Shopping for fun accessories before the start of school, the mothers
and their daughters found very little ready-made for dressing up a locker, in stores or
online. Eventually, they bought materials at local craft stores to create wallpaper and carpeting
for the girls’ lockers. When friends started asking where they could buy these decorations,
“We had a light-bulb moment,” Brewer says. “There’s a real need for something
that’s cute, easy, and one-stop shopping.”
The co-founders designed a limited line of locker decorations, all styled for middleschool
tastes, and priced at $10 and up. Next, they connected with a sales expert who specializes
in distributing products through local and national retailers. With his help, Sterling
and Brewer arranged for overseas manufacturers to produce the items, found a packager
to ready the products for retail display, and completed a successful sales test in several
dozen stores. Soon, JCPenney and Hallmark were placing orders, followed by Learning
Express and other retail chains.
By mid-2011, more than 1,200 stores were signed up to carry Locker Lookz accessories
for the back-to-school selling season. Now Sterling and Brewer had a few weeks to
raise $1 million to pay for manufacturing and shipping the goods from factories in China
to stores across the United States. Just in time, they raised cash from relatives and from
a church investment group. The containers filled with Locker Lookz merchandise arrived
on schedule, and soon the co-founders began crisscrossing the country to publicize their
expanding product line.
Today, Locker Lookz is an entrepreneurial multimillion-dollar company facing increased
competition from other firms that see locker decor as a profitable business opportunity.
Although the preferences of preteen girls can change rapidly and without warning, Brewer
and Sterling are paying close attention to fashion trends and asking their daughters’ advice
about new product ideas. How much room does Locker Lookz have to grow?1
As is in the case of Christie Sterling’s and JoAnn Brewer’s Locker Lookz, most
businesses start small and those that survive usually stay small. They provide a
solid foundation for our economy—as employers, as suppliers and purchasers
of goods and services, and as taxpayers.
In this chapter, we do not take small businesses for granted. Instead, we look
closely at this important business sector—beginning with a definition of small business,
a description of industries that often attract small businesses, and a profile of
some of the people who start small businesses. Next, we consider the importance of
small businesses in our economy. We also present the advantages and disadvantages
of smallness in business. We then describe services provided by the Small Business
Administration, a government agency formed to assist owners and managers of small
businesses. We conclude the chapter with a discussion of the pros and cons of franchising,
an approach to small-business ownership that has become very popular in the
last 50 years.
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Small Business: A Profile
The Small Business Administration (SBA) defines a small business as “one which is
independently owned and operated for profit and is not dominant in its field.” How
small must a firm be not to dominate its field? That depends on the particular industry
it is in. The SBA has developed the following specific “smallness” guidelines for the
various industries, as shown in Table 5.1.2 The SBA periodically revises and simplifies
its small-business size regulations.
Annual sales in millions of dollars may not seem very small. However, for many
firms, profit is only a small percentage of total sales. Thus, a firm may earn only
$40,000 or $50,000 on yearly sales of $1 million—and that is small in comparison
with the profits earned by most medium-sized and large firms. Moreover, most small
firms have annual sales well below the maximum limits in the SBA guidelines.
Small businesses are very important to the U.S. economy. For example, small
businesses
• represent 99.7 percent of all employer firms;
• employ about half of all private sector employees;
• pay 43 percent of total U.S. private payroll;
• have generated 65 percent of net new jobs over the past 17 years;
• create more than half of the nonfarm private GDP;
• hire 43 percent of high-tech workers (scientists, engineers, computer programmers,
and others);
• are 52 percent home-based and 2 percent franchises;
• made up 97.5 percent of all identified exporters and produced 31 percent of export
value in FY 2008; and
• produced 16.5 times more patents per employee than large patenting firms.3
The Small-Business Sector
In the United States, it typically takes less than a week and $500 to establish a business
as a legal entity. The steps include registering the name of the business, applying for

Industry Group-Size Standards
Small-business size standards are usually stated in number of employees or average
annual sales. In the United States, 99.7 percent of all businesses are considered small.
Industry Group Size Standard
Manufacturing, mining industries 500 employees
Wholesale trade 100 employees
Agriculture $750,000
Retail trade $7 million
General and heavy construction (except
dredging)
$33.5 million
Dredging $20 million
Special trade contractors $14 million
Travel agencies $3.5 million (commissions
and other income)
Business and personal services except $7 million
• A rchitectural, engineering, surveying, and
mapping services
$4.5 million
• Dry cleaning and carpet cleaning services $4.5 million
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