Wednesday, September 5, 2018

#22 So, you itch to start a business? Here’s how.

 Issue #22 - Wednesday, September 5, 2018

Posted by Denny Hatch

So, you itch to start a business?  Here’s how.

Milton M. Levine, 97, Inventor of Ant Farm, Dies
Milton Levine's Eureka moment came in 1956, when he spotted a mound of ants during a Fourth of July picnic at his sister's poolside in Southern California.

Recalling how as a boy he had collected ants in jars at his uncle's farm in Pennsylvania, he told his brother-in-law and business partner, E. J. Cossman, “We should make an antarium.”

The resulting product—Uncle Milton's Ant Farm—has been a staple in children's bedrooms ever since. It offers a bucolic panorama of a farmhouse beside a winding path to a barn and windmill above a warren of ant tunnels, all encased in plastic. More than 20 million have been sold. —Dennis Hevesi, The New York Times, Jan. 29, 2011

When I came across the obituary of Milton Levine, it struck a chord deep within me.

Here was a 43-year-old salesman of toys and novelties watching some ants at a July 4, 1956 picnic when he suddenly saw his future—the ant farm—a 6” x 9” two-sided plastic frame with sand, tunnels and live ants busily doing their thing as mesmerized kids watched and learned.

Sixty years later, kids are still enthralled with ant farms. The basic model currently sells for $18.95 (including 25 live ants).

In 2010 Levine sold his business for $20 million. His website,, has a slew of wonderful scientific gadgets for kids.

Milton Levine—described by one magazine writer as “anty-establishment”―gave pleasure (and inspiration) to millions of kids, made pots of money, obviously had great fun and went to the great beyond at 97.

Life doesn’t get any better than that!

So what’s a fledgling entrepreneur to do next after a eureka moment?

How do you translate an idea into a profitable business?

A number of famous businesses were launched with one product and small test ads in magazines and newspapers that were read by likely prospects:

• In 1951, Lillian Katz took $2,000 of wedding gift money and placed a small ad in Seventeen magazine for $495 offering a purse and belt with free monogramming. Her investment in ad space generated 6,450 orders and $32,000 in sales. The Lillian Vernon Catalog was born.

• In 1977, Richard Thalheimer, then a young office supplies salesman and occasional lawyer, used to jog in San Francisco and keep track of his progress on a wristwatch that had been specially designed for runners. All who jog should have this item, Thalheimer reasoned. So he cut a deal with the manufacturer and had designer Steve Sugar craft an ad offering the watch for $69 in Runner’s World under the corporate moniker The Sharper Image. The ad generated $300,000 the first year. The rest is history.

Mel and Patricia Zeigler found a batch of surplus vintage European Army shirts in 1978. Patricia designed a small space ad. Mel wrote the copy. They sold out and Banana Republic was born.

• In 1987, John Peterman bought himself an ankle-length horseman’s coat—standard gear in the West but unusual and distinctive back East. “So many people tried to buy my coat off my back,” he wrote, “that I ran a little ad in The New York Times and The Wall Street Journal and in a few months sold this wonderful coat in cities all over the country and to celebrities and to a mysterious gentleman in Japan who ordered two thousand of them.” This was the origin of the J. Peterman Catalog.

The five folks described above found existing products, figured out how to market them, and went on to build multi-million dollar businesses based on their marketing acumen.

But what if the product exists only in your head?
Unless you have a lot of money and are a crapshooter, you do not want to spend a small fortune for a warehouse full of untested product, whereupon you have to come up with a ton more money for marketing to see if it will sell.

My suggestion: short-circuit the usual process and take your idea directly to the marketplace via direct mail to see if it has legs.

Dry Testing!
Promoting a product that is not yet available for delivery to the buyer in order to test response to the product before incurring the costs of producing or delivering the product. Dry-testing is usually done on a small scale to avoid customer complaints. Any cash orders received must be refunded. Dry-testing is not encouraged, but it is legal. It is used primarily by industries with very high product start-up costs, such as magazine publishersDictionary of Marketing Terms 
I spent 15 years creating dry tests for clients. My own little business—the WHO’S MAILING WHAT! newsletter and archive service—started out life as a dry test.

The secret of the dry test is to market a non-existent product—make an absolutely terrific, highly charged and emotional offer to the right people and see if your concept fogs the mirror.

The Dry Test that Launched a $100 Million Empire
In 1979, a young entrepreneur named Bill Bonner had an idea for a lifestyle newsletter that combined the worlds of investment and travel.
Bonner’s wrote a 3,600-word sales letter for International Living. His lede:

Bonner doesn’t open with a lecture on the high cost of living in America nor the rooking you get from federal, state and local taxes.

Instead, he offers exclusivity and salvation, a virtual Garden of Eden that is very real today and attainable for every person.

His half-price offer asked for just $38 for a one-year subscription ($58 for two years).

Out of the box the mailing pulled 300 percent of breakeven and launched his business.

Today, Bonner owns two chateaux in France, a flat in Paris, a collection of historic Baltimore townhouses (his corporate HQ) as well as real estate around the world. And he is proprietor of Agora—a sprawling international publishing and financial empire.

The flagship—International Living—is now a handsome full-color magazine with100,000 print subscribers, 500,000 e-letter readers and over 400,000 visitors to the website every month, 80% based in the U.S.” Subscription price: $49.
Okay, Technically Dry Testing Is Illegal
The Federal Trade Commission has the “Mail and Telephone Order Merchandise Rule”—known in the trade as the 30-Day Rule.

In a nutshell, it is illegal to make an offer for money unless you can―with reasonable certainty—fulfill the order within 30 days.

It’s easy to create and mail a newsletter within 30 days. (Now it’s even easier— and more cost efficient—if you go the online route.)

But how do you get around the 30-day rule when you want to dry test a product that requires a prototype, manufacturing, warehousing, shipping?

Saying the product won’t be available for six months—if ever—is an immediate deal killer.

1. Write a delay letter, saying in effect that due to production difficulties the product cannot be shipped right away.

2. If you ask for a credit card, you tell the customer that the credit card will not be debited until the product is shipped.

The Bill-me Option
I worked with many clients who had it in their heads to start a magazine. The sequence of events to bring it to market:

1. Find a venture capitalist willing to put up the cash for a test mailing.

2. Hire a direct mail consultant plus copywriter/designer to create a subscription offer and mail it to selected lists. The usual come-on was a free issue and a deep discount for the remaining 11 issues. Bill me. No request for cash or credit card. If you don’t like the first issue, return the invoice marked “cancel” and you are under no further obligation. The first issue is yours free.

Jayme-Ratalahti Launch Mailing for Utne Reader

3. Use direct mail. It's secret! A space ad is a public announcement. A test via email could be all over the Internet in 30 seconds and your idea is hijacked.

4. If your test mailing generates the budgeted response—satisfactorily fogs the mirror—the VC should supply enough money to put you in business.

However, under this model, a huge question still existed: Would anybody pay for the actual magazine once it was in the reader’s hands? What if it failed to live up to the hype of the mailing and all who signed up for a free issue wrote in and canceled?

If you fail to live up to your hype, it's dead.

The Doscher Solution
One of the savviest research brains in the direct marketing business is Bob Doscher of Response Innovations.

Many years ago, Doscher of did a series of market research surveys for Historical Times and came up with nine potentially winning projects—a book (or series of books) and a continuity card series for Civil War buffs. I was hired to write and design the dry test packages. Eight of the nine were big successes. (The ninth ran into legal problems and what I was told to create was different from what the survey promised.) Delay letters were written to all who ordered, the products were produced, and the company made barrels of money.

However, at one point, the corporate lawyers were getting skittish over the idea of dry tests and the potential violation of the FTC 30-Day Rule. They wanted to say on the mailing, in effect, "This product does not exist," which would have been a deal killer.

Doscher and the lawyers went round and round the legal mulberry bush on this point, and finally settled on a line of copy they felt would satisfy the FTC. In 8-point mousetype under the name and address on the order card was the following:

What happened?

This line of copy raised response 15 percent! What's more, it was tested multiple times and the increase held.

Ultimately it was used on every single mailing that went out of the place―even on products that had been around for years. Response to everything went up 15 percent!

Could this line of copy run at the bottom of a space ad or a DRTV effort, much like the disclaimers in pharmaceutical ads that warn of blindness, nausea, impotence and death?

Maybe worth a test.

I’m not giving this line of copy any kind of imprimatur.

But it does honestly state your intentions may be worth testing.

Takeaways to Consider
• Creating a new product or service is exciting and fun. Marketing is a tough,  precise and expensive slog.
• Just because you are a whiz-bang entrepreneur doesn’t necessarily mean you are a marketer. Hire professionals.
• "If you think it's expensive to hire a professional to do the job, wait until you hire an amateur." —Red Adair (1915-2004), Daredevil oil well firefighter
• "The most important word in the vocabulary of advertising is test. If you pretest your product with consumers, and pretest your advertising, you will do well in the marketplace." —David Ogilvy
• When going after investment capital to launch a new product or service, it’s essential to have solid evidence that a market exists—harder data than the soft results of a survey or focus groups.
• With a magazine launch—or any other business—full funding for at least three years is necessary to acquire customers and start generating serious revenue.
• For example, it took Sports Illustrated 10 years to become profitable after Henry Luce founded it in 1954. Many of the publications I helped launch were just on the cusp of viability when the VCs called in their markers, fired the founders and sold the properties to big publishers for a fat profit. Many talented, committed professionals found themselves in the street, their dreams shattered.
• A VC is not interested in an entrepreneur coming back, hat in hand, asking for additional money, because of unforeseen problems.
• In war and business, the thing to avoid at all costs is surprises. 

Web Sites Related to Today’s Edition

Mel and Patricia Zeigler’s Banana Republic: a History


Word Count: 1967

Note to Readers:  
May I send you an alert when each new blog is posted? If so, kindly give me the okay by sending your First Name, Last Name and e-mail to I guarantee your personal information will not be shared with anyone at any time for any reason. I look forward to being in touch!

Invitation to Marketers and Direct Marketers: Guest blog posts are welcome. 
If you have a marketing story to tell, case history, concept to propose or a memoir, give a shout. I’ll get right back to you. I am:
215-644-9526 (rings on my desk).

You Are Invited to Join the Discussion!

Do you have a start-up story (success or failure)? Additional advice? Share your experience in the Comment section below. Thank you. —DH


  1. Don't forget to mention those seahorse kits!

  2. Ricardo, Many thanks for taking the time to Comment.
    I vaguely remember seahorse kits and Googled them. They are for sale. But what should be said about them? Asking for your follow-up to what is a fascinating teaser. Do you have experience with them? Thank you.

  3. Thank you as always. I am trying to launch a new service and it is hard work. Your post gave me the outlook to keep trying and not give up. I wish it was all one page so I can post it on my wall. Sorry to hear about Milton Levine.

    1. Philip, Thanks for taking the time to comment. Nobody said marketing is easy. It is a perpetual challenge to make meaningful offers and slavishly studying and interpreting response. Don’t feel sorry for Milton Levine; he had a fascinating life, made pots of money and did not assume room temperature until the ripe old age of 97. It doesn’t get any better than that!

  4. Denny - I bet I've written over 150 infomercial scripts / storyboards. We know the percentages of what works and what doesn't. Almost every one of them were with prototype products, and the call centers were instructed to not accept a credit card and be transparent about the ads being a "test."

    That way we avoided FTC's 30-Day Rule. Standard procedure.

  5. I had some pressing work to do so was going to save reading your latest blog till later. But then I started reading and kept on until the end. Stop being so interesting and compelling, Denny; you're not helping me get through my to-do list;)

  6. At age nine while living in Chugiak, Alaska, I ordered that ant farm. It came all the way to Alaska, complete with ants! As best I remember, the ant farm included soil, and all the ants survived the long trip through the postal system in their small plastic tube.

    After I dropped the ants into the farm from the tube, they immediately went to work digging a latticework of tunnels. They died week or two later, and I replaced them with local ants. I didn't take the ants to school, because school was out for the summer.

    The ant farm was a short interlude from my main interests, which were World War II history, my garden, our Husky, and tether ball.

    1. Hey, Arnold, great hearing from you after so long a time. And thank you for your terrific post. It answered a lot of questions I had about ant farms (e.g., life span of ants, what they did in the farm and attention span of grade schoolers. Do keep in touch. Cheers.