How plunging into debt led to sales of $1 million

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For 12 years, Andrea Herrera played it safeand stayed out of debt.

The Chicago catering business she opened in1995, Amazing Edibles, grew slowly butsteadily; 10 years after launching, the busi-ness had annual sales of $650,000 and thekind of debt-free balance sheet most businessowners fantasize about. Herrera, whodescribes herself as "risk averse," was deter-mined not to spend a single penny her com-pany didn't have. She feared that if she could-n't repay a loan, she would lose her savingsand business.

Amazing Edibles' new home finally has theprofessional kitchen the catering businessneeds.

But that caution came with a price: Herrera'sreluctance to expand was crimping her busi-ness. She rented a 1,000-square-foot store-front and relied on a six-burner range morefitting for someone's kitchen then a profes-sional caterer. She had an executive chef, butHerrera did the marketing and sales herself tokeep costs down.

That's a common tactic for female entrepre-neurs -- one that typically limits both theirrisks and their rewards. Of the 10 millionfemale-owned businesses in the U.S. only 3%have annual revenue of more than $1 million,compared to 6% of all male-owned business-es, the Center for Women's Business Researchreports.

To boost her business, Herrera in 2006 joinedthe Accelerator program of theEntrepreneurs' Organization, a networkinggroup for of business owners. Acceleratoroffers mentoring for businesses in the$250,000 to $750,000 range to help themadvance to the seven-figure sales level.

Participating in the program was like gradu-ating with an MBA, she says. Encouraged byher mentor, John Fairclough -- the CEO of

Resicom, a Chicago-area facility maintenancecompany -- Herrera boosted profit marginsby culling through and slashing her expens-es. Fairclough suggested that she hire a mar-keting manager, and helped her learn to man-age a bigger staff by delegating responsibili-ties and crafting metrics for measuring herworkers' performance objectively.

But as her business savvy grew, her officespace couldn't keep up. Herrera decided tobite the bullet: In 2007, she found a 5,000square-foot commercial condo that wouldcost $395,000 to buy and $300,000 to reno-vate. Money Herrera didn't have.

She had enough saved for a $75,000 downpayment, and the condo sellers agreed tofinance the balance of the mortgage. But sev-eral banks rejected her application for a loanto fund the renovations. One said it consid-ered catering businesses too risky; anotherwanted her to finance the renovation herselfbefore it would consider a loan.

Herrera decided to put her personal credit onthe line. She borrowed $125,000 against herhome equity, and pulled another $50,000 outof credit cards to fund the renovation work.

Leslie Grossman, co-founder of Women'sLeadership Exchange networking group, saysshe's seeing more female entrepreneurs stepup and fight for the capital they need to growtheir ventures. Women are becoming "lessrisk-adverse, funding their businesses betterand going for outside funding at a faster rate,"she says.

Statistics compiled by the National Women'sBusiness Council back that up: The dollarslent to women-owned businesses through theSmall Business Administration's lending pro-grams rose 9.3% from 2004 to 2008, com-pared to a 0.1% drop in overall SBA lending.

Herrera's new space debuted in 2008. Thelight-filled brick loft includes a separate area

for small weddings and dinner parties, astove with 12 burners and two grills, a dou-ble-stacked convection oven, a walk-in cool-er and freezer, and a tasting room.

Amazing Edibles' staff has grown to eight full-timers, including an operations manager,new executive chef, sous chef and marketer -- plus seven part-time workers. Marketingmanager Lisa Nuske has brought in steadynew clients such as the University of Chicagoand University of Illinois, and regained cor-porate customers whose catering budgets hadbeen slashed. One of Chicago's marqueebusinesses, Oprah Winfrey's HarpoProductions, is now a client.

Nuske also devises promotions and distrib-utes e-mail blasts and newsletters. "She freesup my time so I can think about strategy andmanage the staff," Herrera says.

The capital investments are paying off. In2009, Amazing Edibles crossed the $1 mil-lion mark in annual revenue for the first time,and it's on target for $1.3 million in 2010.American Chartered Bank, a local bank spe-cializing in small businesses, recently agreedto consolidate Herrera's credit card, mortgageand construction loans into a 30-year,$400,000 loan.

Amazing Edibles is still profitable, though itsmargins have taken a hit as the extra cashfrom higher sales gets redeployed into payingdown the expansion costs. But Herrera is gladshe finally took the risk.

"Having a more beautiful facility has given methe courage to go after clients like Harpo,"she says. "We're not a little storefront any-more. We can sit at the table with the bigboys."

By Gary M. Stern - CNNMoney.com

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