Virginia Couple Has Designs on New Business

(Editor's Note: Due to privacy concerns, information about the location of Three Potato Four's business operations has been modified since the article was first published.)

One potato, two potato, three potato four, how can I get this shop off the floor?

Eli and Morales at the computer in their "office" -- the upstairs of their Northern Virginia home. (Photo courtesy Stu Eli)

That's a question that Stu Eli and Janet Morales ask themselves every day, literally.

The two work out of their house where the top floor is dedicated to their online business of selling a mix of vintage and modern housewares, accessories and prints. They live downstairs. Boxes of inventory are in the garage.

The couple recently moved to Virginia from Brooklyn, N.Y., where they lived a more hipster lifestyle working in graphic packaging and product design.

In New York "all the while, in the back of our minds, we always wanted to open our own store," said Eli. After a few attempts to secure a storefront in Brooklyn, they were daunted by the costs, not to mention finding a suitable school district for Holly, their two-and-a-half-year-old daughter.

When Morales's family offered to rent them a house, they jumped at the chance, although Eli laments the couple's loss of big city life now that they live in one of Washington's quieter suburbs. But they were somewhat familiar with the area -- Stu and Janet met at the University of Maryland and moved to New York after graduation.

A Man with a Plan

Before the move back to the D.C. metro area, the couple methodically approached the task of opening their own business. Eli went into work at 6 a.m. in Manhattan to work on a business plan before turning to his day job at Parham Santana, a small husband-and-wife design firm that helps big-box firms like Target with trend forecasting.

He also met with SCORE in New York and attended seminars on retailing and bookkeeping, which he found highly beneficial.

SCORE's small business counselors "gave me a reality check," said Eli. "I had written the romance prose part of my marketing, but they were like 'where are the numbers?'" They helped Eli create a cash flow statement, but "at the end of the day we had a business plan but we just realized it wouldn't work."

To make it work financially, the family moved to Virginia in 2006 and Eli took a job with Pappas Group in McLean. Eli quickly got promoted to director of operations, which he says was instrumental in giving him a well-rounded look at business. He quit the job in early July to focus full-time on his own business, which is not yet profitable.

After scouring places in the D.C.-metro area, Eli and Morales determined they wouldn't be able to afford a storefront in Virginia or D.C., so they decided that "we're going to have to have an online component anyway, let's just start there." Eli said he believes the business's overhead online is about half or even less than what it would be in a commercial location.

Eli broke out the business plan for a housewares store, visited a SCORE counselor in D.C. and "every morning, every night from the day I quit my job I worked on it," said Eli. "We had no money coming in," since Janet tended to Holly full time.

They self-funded the online store, which they named Three Potato Four, launched Sept. 15. Eli said he and Morales found some creative ways to get extra money, such as an offer from American Express for small businesses allowing them to sign a check to themselves for up to $5,000 with no interest.

They also met with Citibank and took out a line of credit, which was a tip Eli got from SCORE. Eli said he hopes never to touch the money and his business plan doesn't currently call for it. "I would never want to pay that interest to use that money," he said.

A Family Affair

Everyone has "those days." Last week, the new business's computer crashed and "we lost our whole business" said Eli, who luckily had just backed up the company's data. "I literally ran to the store and picked up a new computer so we could continue selling things online." Morales is now heavily into the business too, taking pictures of the products to showcase on the site, doing copy writing and buying.

Like anything, there are pros and cons. Eli said online retailing can be a little isolating as "it's all about digital and e-mail," but "lately we've been thinking wow, we get to spend so much time with each other and our daughter."

The couple reads "countless design-related blogs" like DesignSponge, Decor8 and OhJoy, along with magazines like Domino and Blueprint to get ideas for what's hot. "The blogs are a better place to find products because it's 'at the moment' and designers almost always find out what's hot on the blogs. It's really the blogs driving the designers," said Eli.

They also publish a blog as a way to keep customers apprised of what's going on and to give a personal touch since "we probably won't meet many of our customers since we don't have a physical store,' said Eli. Most of their clients, they said, are women in the 25 to 45 year old range living in California.

To differentiate some of their products, Eli and Morales have struck exclusive deals with small independent designers. For example, they have an agreement with a woman in South Africa for tea towels in a particular color and another in the South of France for handbags.

They find the designers through blogs. "They are just like us -- they are artists and they just stumbled into stores. We're all just trying to figure this out together," said Eli. They have asked some artists to remove a particular item from their personal Web sites, such as hand-painted cards, for a limited time while Three Potato Four sells them.

The couple also has sold a lot of their own personal collection that they cultivated through years of shopping experience. They make at least two to three trips a week scouring the East Coast for antiques. Eli is contemplating upgrading to a car larger than his mini Cooper, although his wife's Subaru can hold more.

"This is a great job," said Eli, but muses that it's sometimes hard to part with things. "We had this wood rhino. It was cool with a black ebony finish, and I thought I'm never going to find anything similar. It was so awesome. I didn't want to sell it, but it sold for $64."

"Every other day we're going on some kind of trip and that's the part of the stress of our life," said Eli. They often bring Holly, who's been to about 60 antique stores already.

"She's kind of starting to point out stuff that we like, probably since our office is also her playroom," said Eli. "Everything is handpicked, and we're not going to put it into the store if we don't like it."

By Sharon McLoone |  October 2, 2007; 11:21 AM ET Profiles in Entrepreneurship
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