(CNN) — Attorneys general in 17 states have banded together to call on Craigslist, the online classified ad website, to discontinue its adult services section.

“The increasingly sharp public criticism of Craigslist’s Adult Services section reflects a growing recognition that ads for prostitution — including ads trafficking children — are rampant on it,” the attorneys general said in a Tuesday letter to Craigslist CEO Jim Buckmaster and founder Craig Newmark.

The letter continued: “We recognize that Craigslist may lose the considerable revenue generated by the Adult Services ads. No amount of money, however, can justify the scourge of illegal prostitution, and the suffering of the women and children who will continue to be victimized, in the market and trafficking provided by Craigslist.”

A Craigslist spokeswoman said Wednesday that the site agreed with at least some of the letter.

“We strongly support the attorneys general desire to end trafficking in children and women, through the Internet or by any other means,” Susan MacTavish Best, who handles media inquiries for Craigslist, told CNN Wednesday.

“We hope to work closely with them, as we are with experts at nonprofits and in law enforcement, to prevent misuse of our site in facilitation of trafficking, and to combat such crimes wherever they appear, online or offline.”

In their letter, the attorneys general highlighted an open letter, which appeared as a Washington Post ad, in which two girls said they were sold for sex on Craigslist.

When the ad came out, Buckmaster wrote a blog post in response that said, “Craigslist is anxious to know that the perpetrators in these girls’ cases are behind bars.”

The letter also highlighted a report in May by CNN’s Amber Lyon, who posted a fake ad in the adult section. She received 15 calls soliciting sex in three hours.

Earlier this month, Lyon interviewed a woman named “Jessica” who sells sex on Craigslist. She told Lyon a Craigslist ad was “the fastest, quickest way you’re for sure going to see somebody that day.”

In a later blog, Buckmaster said Craigslist implemented manual screening of adult services ads in May 2009. “Since that time, before being posted each individual ad is reviewed by an attorney.” He said the attorneys are trained to enforce Craigslist’s posting guidelines, “which are stricter than those typically used by yellow pages, newspapers, or any other company that we are aware of.”

Attorneys general from Arkansas, Connecticut, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Mississippi, Missouri, New Hampshire, Ohio, Rhode Island, South Carolina, Tennessee, Texas and Virginia made the request a week after accused “Craigslist killer” Philip Markoff committed suicide in jail.

Markoff was charged with the April 2009 killing of Julissa Brisman. Boston Police said that Brisman, a model, advertised as a masseuse on Craigslist, and Markoff might have met her through the website.

In 2008, under pressure from state prosecutors, the website raised the fees for posting adult services ads. In 2009, it started donating portions of the money generated by adult ads to charity.

A CNN investigation of Craigslist’s “adult services” section, which replaced “erotic services ads” two years ago, counted more than 7,000 ads in a single day. Many offered thinly veiled “services” for anything from $50 for a half hour to $400 an hour.

Newmark has defended his site, saying it is doing more than any other site that hosts adult ads to help filter out underage prostitutes and report them to police. Best, the Craigslist spokeswoman, said that fewer than one ad in 10,000 meets the National Center for Missing and Exploited Children’s guidelines for anti-trafficking action.

“Only Craigslist has the power to stop these ads before they are even published, and sadly they are completely unwilling to do so,” Kansas Attorney General Steve Six said in a statement.

After getting behind on rent and city taxes, Grimaldi’s faces eviction, The Wall Street Journal reports. The landlord for the venerable Brooklyn pizzeria claims she’s owed over $44,000 in back rent, while Grimaldi’s owner Frank Ciolli says he’s paid her on time, “for the most part.” Even if eviction proceedings were to swing in favor of the restaurant, Ciolli has lost the rights to renew his lease, which terminates next fall — so it’s a sure thing that the restaurant will leave its storied address under the Brooklyn Bridge. If you want a slice in the original location, better get in line now. [WSJ]

Built with two sprawling wings connected by a center section, the home will wrap around a pool on the waterfront side.

TAMPA – Rising like an aircraft carrier under construction, the future home of New York Yankees baseball star Derek Jeter is taking shape on Davis Islands.

Designed with a whopping 30,875 square feet of space, the seven-bedroom, nine-bathroom waterfront home dwarfs nearby mansions and could end up the largest home in Hillsborough County. It’s roughly the size of a BestBuy electronics store and twice the size of the previous No. 1 house, just across Hillsborough Bay on Bayshore Boulevard, owned by Lazydays RV SuperCenter founder Don Wallace.

Kered Connors LLC, which lists Jeter as the “sole member,” purchased adjacent waterfront lots on Davis Islands’ Bahama Circle in 2005 and 2006. (“Kered” spells “Derek” backward.) Kered Connors paid $7.7 million for the properties at Bahama Circle and Baffin Avenue.

Because it’s one of a kind and unlikely to attract many buyers besides the ultrawealthy, the market value of the home is hard to determine. Using the rough selling price of waterfront Davis Islands properties, the home itself could be worth $6.2 million to $7.7 million, depending on features.

Jeter is making $21.6 million this season with the Yankees.

“We’ve designed homes for many stars, athletes and politicians,” said Gary Hancock, an architect with Winter Park Design, which designed the home. “This is one of the most notable figures.”

Hancock declined to offer many details about the property but said the design will be English Manor style, with lots of gables and stonework. A small service shed that’s nearly complete suggests the final property could have a slate-style roof, red-brick walls and light gray stone around the windows.

Built with two sprawling wings connected by a center section, the home will wrap around a pool on the waterfront side. Two separate three-car garages on each wing flank the front yard, with a drive-through portico along the middle axis to keep the Florida summer rains off guests. Two large boat lifts now stand out in the water of Tampa Bay.

Take a good look now at the house, because Jeter is applying to city hall for a variance to build a 6-foot privacy fence, which is taller than normally allowed.

See More Photos

Paris Hilton posed with her extensive Louis Vuitton luggage collection before headingto South Africa for the 2010 World Cup festivities….  We need that trunk Paris!

[via: TheLifeFiles]

Check out the apartment that LeBron James was rumored to be touring the other day. It’s in the Time Warner Center (same building that JAY-Z has a Penthouse in) and it’s beautiful: hardwood floors, floor-to-ceiling windows, marble-covered bathroom, and an amazing view.

Apparently, the folks over at New York Magazine actually suggested that LeBron check it out, and he is said to have taken their advice. According to The Huffington Post, one of the brokers over at Prudential Douglas Elliman, Sherri Shang, was heard saying that she gave James a tour of the apartment.

It’s available for rent at $45,000 a month, or for purchase at $14.95 million.

Some people dream of being famous from the time they’re quite young. They crave the spotlight, and will do anything to be the center of attention.

They want nothing more than to become a celebrity, to have legions of adoring fans, and to have their name recognized the world over.

For others, fame is a means to an end. They want to be famous so people will buy their product, hire them to do something they love, or to influence others to support a cause they really care about.

They see promoting themselves and becoming a celebrity as a way to further their career, business, or other efforts, and nothing more. In many cases, these people would prefer not to be famous if they could be as effective in other ways.

Whichever category you fall into, if you’re reading this article you’re probably interested in becoming an Internet celebrity. Read on to find out more.

Why You’d Want to Be Internet Famous

As mentioned above, some people want to be famous as a means to an end while others just want to be famous. But why would you want to be Internet famous instead of old-fashioned, mainstream-media famous?

Well, to some extent the question answers itself. Becoming famous in a traditional sense is hard.

It takes a lot of time and a lot of money in most cases.

In all likelihood, becoming traditional-famous will require you to move somewhere celebrities live (like Los Angeles or New York), spend all your time trying to gain media attention, and then it’s hit-or-miss at best.

Unless you’ve got a family fortune, are incredibly gorgeous, and/or are incredibly talented and driven (and have a whole lot of luck on your side), you could spend years trying to get attention with no results.

But Internet fame is different. Virtually anyone can do it.

It doesn’t cost a lot (most of the technologies you’ll need to use are completely free, and those that aren’t you likely already have access to). And it doesn’t have to become a full time job.

Another great thing about Internet fame is that it’s fairly easy to get your followers and fans to actually do something you ask them to do.

When you ask someone to buy your product or donate to your cause in a newspaper article, they’re not in a position to do so immediately. They’ll have to put the newspaper down, and either go to the store or go online and purchase or donate. In all likelihood, they’ll put it on their mental to-do list and then forget all about it half an hour later.

But with Internet fame, if you ask someone in a blog post or a tweet or a Facebook update to click on a link to buy something (or donate, or read something, or share something), it’s very easy for them to follow through. All they have to do is click. It makes immediate action that much more likely.

Some Initial Preparations

Taking a week or two to make some initial preparations before you start your quest to become Internet famous can save you a lot of headaches and hassles down the road. There are a few things you’ll need to do to optimize your chances of success.

Choose a Niche

First of all, you’ll need to have a niche. It’s pretty tough to become Internet famous these days if you’re trying to appeal to everyone.

If you have a product or cause you’re trying to promote, this makes choosing a niche easier (you want to appeal to those people who would be your customers or donors). But if you just want to be famous to be famous, you’ll need to give it more thought.

Pick something you’re interested in or knowledgeable about. Whatever you do, make sure the niche you choose is something you’re passionate about. That passion will shine through in your online activities and help get your followers excited.

Also, try to adapt your personality to appeal to your potential fans. This doesn’t mean you need to change who you are, but simply to emphasize one or another aspect of your personality over the others.

Take a Good Profile Photo

A good profile picture or avatar is really important. You should take a photo that shows you in the light you want to portray yourself in.

If you’re trying to come across as professional, make sure your avatar pic is professional. That doesn’t necessarily mean you have to have a photo that’s stuffy, but it should reflect a professional attitude (see the photo below for a good example).

If you’re trying to become famous in order to help stop global warming, make sure your profile picture doesn’t show you sitting in an SUV (even if it is a hybrid). If your online persona is supposed to be wacky or crazy, make your profile pic reflect that.

Social Media Technologies to Use

So you’ve decided to become an online celebrity. That’s great. But you’re probably wondering how, exactly, you’re supposed to do that.

Below is a great list of the social media technologies out there and how you can take advantage of each. This is an abbreviated list and doesn’t include everything to know about each, but it’s a good starting point and will get you going in the right direction.

• Blogs
  If you’re considering becoming an online celeb, you really need to have a blog. Whether you choose to go with a free, hosted blog (like WordPress.com or Tumblr) or host your own, a blog is an important part of your online presence. Use it to let your fans know about all the things you’re doing online and off.
• Microblogging
  Twitter or similar services are another important place to share information about your activities with your fans. Twitter is the most popular, so an account there is probably your best bet.
• Multimedia
  Branching out into multimedia content can go a long way toward getting people excited about what you have to say. Consider video (including video blogging, aka vlogging), podcasts, or even photo sharing to become even more known.
• Social Networks
  You’ll want to join at least one social network, and depending on your niche, you may want to join more than one. There are two basic kinds of social network: general networks that attract a wide range of people, and specialized networks that focus on a particular subject area or niche. Join a general one (Facebook is a good all-around option; MySpace is good if you’re somehow related to the music industry; LinkedIn is best for professionals and corporate types), and any specialized networks that are active in your niche.
• Social Bookmarking and News
  Using social bookmarking and news sites can be a great way to get your content out to potential fans and followers. If you build a reputation for disseminating high-quality content, other users will be more likely to vote up or share the content you submit.

So now that you know which platforms you should check out, how do you make the most of them?

Well, the short answer is to consistenly create high-quality content. Think of what your fans potential fans are interested in. What kinds of content do they like? What kinds of things are they looking for online? What are they not getting anywhere else?

Answer those and you’ll have a good idea of what you need to do to keep your fans happy and gain new fans.

Creating Your Social Media Strategy

Creating a strategy for your social media efforts can really pay off. Rather than taking a hap-hazzard, shotgun-style approach, come up with a plan for how to best-focus your online efforts. By doing this, you’ll waste less time and likely see better results.

Start out by deciding which technologies you want to use. Blogs are a must, as are social networks. Microblogging is another one you should seriously consider. But what you do beyond that is entirely a matter of personal choice. Think about it and decide what you’re most comfortable with. Not everyone likes doing video or audio. Not everyone is a great photographer. That’s fine. You don’t have to be to be Internet famous.

Once you’ve decided which platforms you want to use, and have signed up for accounts on each, you’ll want to decide how much time you can devote to your efforts each day.

Keeping a blog updated on a regular basis, participating in social networks, and microblogging can all be done in an hour a day or less (though you should probably break that down in two 30-minute sessions or four 15-minute sessions for better results and to give the impression you’re active a lot more than you really are).

If you want to do podcasts or videos, you might want to devote another couple of hours each week to their production.

Let’s say you’re going to spend an hour each day, in four 15-minute chunks. Your social media strategy might look something like this:

• Morning 15 minutes: Check Twitter and blog comments. Send out a tweet or two. Respond to comments.
• Lunchtime 15 minutes: Write a blog post. Send out another tweet (announcing the post preferably). Update status on social networks.
• Afternoon 15 minutes: Update status and tweet. Check for more blog comments and respond.
• Evening 15 minutes: Update status and tweet.

It’s a pretty simple strategy that aims to keep you in front of your fans throughout the day.

There are various tools that can help you do these things faster (like TweetDeck or Ping.fm, which let you update your social networks and Twitter at the same time).

There are also services where you can pre-schedule updates, spreading them out over the whole day even if you’re not online. Take advantage to the technology you have available to you to simplify and automate your social media efforts as much as is practically possible.

You might not have dedicated times to update your online activities. If you use a cell phone to update your status or to tweet, you’ll likely be able to post updates throughout the day. Or you might dedicate a couple hours each weekend to writing blog posts for the week.

This can make it quite a bit easier to stay updated without having to dedicate blocks of time to these activities. Just make sure you’re consistent, and that you post updates on a daily basis (keeping a daily checklist of sites to update can be helpful).

Keys to Internet Fame

So, you’ve got a Facebook account, a Twitter feed, and a blog, and you update them all regularly. Is that really all there is to it?

Well, yes and no. Becoming Internet Famous requires a bit more than just regular updates. There’s no tried-and-true formula that will work every time.

It’s going to depend on the platforms you use, how much time you can devote to your efforts, and a bit of luck. But here are some key things you can do to improve your odds.

• Let your personality shine through
  Everyone has a personality, and one key to setting yourself apart is to let yours show. Don’t be afraid to let your followers and fans see the real you. When someone feels like they’re dealing with a real person, rather than someone who’s faking it for attention, they’re more likely to become a true fan, someone who will become an advocate for you and your content and push it out to their own friends and followers (thereby creating an even bigger fanbase for you).
• Engage your followers
  When you start getting some Twitter followers or Facebook friends or blog commenters, make sure you engage with them. Have conversations. Ask for their input. Respond to what they’re saying. This makes people remember who you are more easily, and makes it more likely they’ll turn to you when they need advice in your area of expertise.
• Be passionate
  If you’re passionate about what you’re doing and what you’re talking about, that will be evident in the content you produce. Fans and followers like someone who is passionate about what they do; in fact, it can be contagious. If they see that you’re really into something, they’re more likely to want to find out why you love it so much and to become interested in it themselves.
• Make your fans care
  This is really an extension of the previous two, but give your fans a reason to care about what you’re doing. This is done through being authentic and building trust among your fans (so they know what you’re saying is real), being passionate about what you say and do, and asking for their input, advice, and take on what you’re doing. If you involve your followers in your online life, rather than simply using social media as a soapbox, you’ll quickly turn casual followers into fans.
• It’s a process
  You’re probably not going to gain Internet fame overnight. While there are some who have done it, many of them have gone on to become one-hit wonders, better known for some extreme antics, embarrassment, or humiliation than for anything worthwhile. Instead, look at the long view when it comes to building up a fan-base and really cultivating a following that will not only know who you are, but will care what you have to say.
• Know when to call it quits
  Not every effort you make online is going to be successful. Maybe you’ll find after doing a few podcasts that it’s just not your thing. Or maybe you’ll find that even though you’re enjoying something, it’s just not providing any results (make sure you give these things a few months though, as some take a bit longer to catch on). Maybe you’ll even decide that there just aren’t enough potential followers out there for your chosen niche (or that they’re all too preoccupied with someone else in your niche that you just can’t seem to outdo). In any case, know when it’s time to move on to something else. This doesn’t mean you need to give up your dream of being Internet famous, only that you need to re-evaluate how you’re going about it and adjust your strategy.

What would you do if your net worth were $22 billion? If you were Indian businessman Mukesh Ambani, you might build yourself the world’s most expensive home. As designed by Chicago architecture firm Perkins + Will, the in-progress glass-tower is estimated at $1 billion and is known to feature, at the least, a health club, multiple “safe” rooms, 3 helipads, 168 parking spaces and require 600 servants to maintain, and physically, the structure stands at 27 stories, or 570 feet tall.

According to the Mumbai Mirror, the tower will also contain:

Floor for car maintenance Sources said the Ambanis would prefer to have all their cars serviced and maintained at an in-house service centre. This centre will be set up on the seventh floor.

Entertainment floor
The eighth floor will have an entertainment centre comprising a mini-theatre with a seating capacity of 50.

Balconies with gardens
The rooftop of the mini-theatre will serve as a garden, and immediately above that, three more balconies with terrace gardens will be independent floors.

The ‘health’ floors
While the ninth floor will a ‘refuge’ floor — meant to be used for rescue in emergencies — two floors above that will be set aside for ‘health.’ One of these will have facilities for athletics and a swimming pool, while the other will have a health club complete with the latest gym equipment.

Family
The four floors at the top, that will provide a view of the Arabian Sea and a superb view of the city’s skyline, will be for Mukesh, his wife Neeta, their three children and Mukesh’s mother Kokilaben.

Air space floor
According to the plan, two floors above the family’s residence will be set aside as maintenance areas, and on top of that will be an “air space floor,” which will act as a control room for helicopters landing on the helipad above.

New research shows the economic importance of home-based businesses: They account for more than half of all U.S. businesses and employ more people than venture-backed companies.

Stephen Labuda, 35, is planning to hire a fifth employee for the Web development firm he runs from his home in Cambridge, Mass. CARBONARO PHOTOGRAPHY

More than half of all U.S. businesses are based at home. These companies often are dismissed as quaint hobbyist ventures, but new research suggests that’s a mistake. An estimated 6.6 million home-based enterprises provide at least half of their owners’ household income. Together these “homepreneurs” employ one in 10 private-sector workers, and by many measures they’re just as competitive as their counterparts in commercial spaces.

Ask Stephen Labuda, the 35-year-old president of Agency3, a Web development firm he runs from his home in Cambridge, Mass. A former programmer at Deutsche Bank (DB), Labuda started building Web sites as a side job in 2003 and took the venture full time three years later. Agency3′s revenue is in the millions, and Labuda is about to hire his fifth employee, who will work remotely, like the rest of the staff and the slew of contractors he taps. “I’m not intending to go rent office space,” he says.

You can trace the rise of home-based businesses to the early days of telecommuting in the 1980s and the mass adoption of the Internet in the 1990s. Cloud computing, online collaboration, and smartphones have accelerated the trend, and recent research clarifies the economic significance of companies like Labuda’s. “We’re seeing more and more home-based businesses that are real businesses,” says Steve King, who coauthored the new report with his wife, Carolyn Ockels. (The couple runs Emergent Research, a small research and consulting shop, from their home in Lafayette, Calif.) The pair analyzed U.S. Census data and Small Business Administration research, along with data from the Small Business Success Index, a survey of 1,500 companies sponsored by Network Solutions and the University of Maryland’s Robert H. Smith School of Business.

WIDE ACCEPTANCE AND LEGITIMACY
Here’s more of what they found: The 43% of home-based businesses that provide at least half of the owners’ household income are, on the whole, smaller than non-home-based companies. Only about 35% have revenue above $125,000, compared to 75% for non-home based businesses. But they measure up to other small companies on key aspects of doing business, including access to capital, benefits to workers, marketing, and innovation. On average they have two employees, including the owners, and together they employ more than 13 million people—more, King notes, than venture-backed companies. (Venture-backed companies employed 12.1 million people in 2008, according to the National Venture Capital Association.)

In some of these companies, the operations are concentrated in the owner’s home. Others use their residence as a headquarters but do most of their work at clients’ homes or offices. The variety of home-based businesses cuts across industries, but the top sectors are business and professional services, construction, retail, and personal services.

A few trends are driving the growth of sophisticated home businesses. First, technology has made it easier to start and run a business from anywhere. But just as important, there has been a change of consciousness in the business world to recognize home-based enterprises as legitimate.

Labuda has seen that shift at Agency3. “When I first started, I really felt compelled to go rent an office. I felt like in order for me to be taken seriously as a business, I had to have an office that my clients could come to,” he says. It didn’t matter—clients didn’t want to visit him. Labuda meets most of them at their businesses or at coffee shops. He also uses on-demand office space, where he can rent a conference room by the hour, if needed.

LOWER COSTS ARE A COMPETITIVE EDGE
Now, Labuda never feels that his working from home damages Agency3′s credibility. Instead, it’s a selling point. “It’s reflected in our pricing that we don’t have the same kind of infrastructure costs and fixed costs that some of our competitors do,” he says.

Indeed, the most obvious financial benefit for home-based entrepreneurs is lower operating costs. A 2006 SBA study compared tax returns of sole proprietors who deducted home-office expenses with those who deducted commercial rent. That analysis found that home businesses, on average, had lower sales and net profits than companies in commercial spaces. But profitable home-based ventures retained a greater share of their total receipts as net income: 36%, vs. 21% for non-home-based businesses.

King predicts that as large companies try to reduce their fixed costs by outsourcing business functions, small home-based enterprises will play an even larger role in the economy. “Over the next 20 to 30 years, you could see the percentage of people who are self-employed and home-based double, potentially,” he says.

[Via: BusinessWeek]

Justin Gagnon quit a secure IT job, moved in with his parents, and turned their catering business into a $4 million provider of healthy school lunches.

Entrepreneur: Justin Gagnon, 31

Background: After graduating from the University of Notre Dame in 2000 with a bachelor’s degree in business administration, Gagnon worked for Level 3 Communications (LVLT) in Broomfield, Colo., building order-entry systems. During a short visit home to Danville, Calif., in 2003, to help his father build a Web site for the family catering business, Gagnon came up with the idea of transforming it into a full-time provider of healthy lunches delivered to local schools. He quit his job, moved home, and recruited two college buddies to help him build the business.

The Company: Gagnon and his friends, Ryan Mariotti and Keith Cosbey, each invested $6,250 into launching Children’s Choice; Gagnon’s parents put in an additional $6,250 and took a 25% ownership stake. In 2003, its first year, the fledgling business served about 550 lunches a day to eight schools in the San Francisco Bay Area and took in $400,000 in revenue. Today, its 90 employees prepare an average of 10,000 lunches a day for 122 schools throughout California.

Revenue: $3.9 million in 2008

His journal: If it wasn’t for my dad continually pestering me to come to California with a couple of friends and “build a Web site” for his school lunch business, I might have never taken the leap. But it was his pushing that made me curious about what was going on in his industry. I found that there was no one really focusing on school lunch. Everyone in foodservice did something else first—a restaurant, a deli, a caterer—and none of them had the resources or the dedication to truly focus on school lunch the way I thought it needed to be done.

When it comes to school lunches there are three distinct stakeholders: schools, parents, and kids. Schools want hands-off administration, no capital investment, and happy parents. Parents want convenient ordering, nutritional meals at a relative value, and happy kids. Kids are happy when they are given a say in what they’re eating and when what they’re eating flat-out tastes good. I knew that building a company positioned to exceed all of these expectations would be a huge undertaking. I also knew I couldn’t do it by myself.

I asked Ryan Mariotti and Keith Cosbey, two of my best friends from college, to help me refine the idea. In 2003 we flew to California and pitched my parents on spinning off the school lunch portion of their small catering company into an enterprise focused on serving healthful, kid-friendly lunches to schools that lacked the infrastructure and expertise to do it themselves. After sitting speechless for two straight hours during our pitch, my parents eventually realized we were serious about leaving our secure jobs as IT professionals to learn kid catering from the ground up. They agreed to teach us everything they knew.

We started off with eight schools that my parents already serviced but the cash flow didn’t even come close to sustaining three new partners, let alone retaining earnings for future growth. We all moved in with my parents and spent the first couple of years barely paying ourselves enough to warrant the paper the checks were printed on. We would drag ourselves into the kitchen at 5 a.m. to prep and cook food, visit school sites during the lunch hour, and eventually end our days in our “office” [a room that adjoined Keith's bedroom]. There we built our IT systems and discussed every aspect of the business until midnight or later. The next day we got up and did it all over again.

As a startup, we experienced one of our most deflating lessons after discovering that no matter how hard we tried to build accurate assumptions into our business model, the truth always seemed to be far from our speculations. For starters, we thought that with greater volume came more purchasing power, and with more purchasing power came lower prices.

What we failed to factor in, however, was that my parents were procuring many of their ingredients from Costco (COST) and similar restaurant supply houses that already offered rock-bottom prices. As our volume grew, the daily task of going to Costco together to buy product for the following day became unsustainable, and we knew we had to look to food-service distributors. We were shocked to find out how much more our products cost through these channels—and how well Costco and others had negotiated their pricing. Not only did we not save any money, we spent quite a bit more through these distribution channels. It took years of substantial growth to even come close to big-box pricing.

One advantage we did have was that our collective expertise was in IT and we were able to realize efficiencies by streamlining many manual processes in the business. We built an IT system that would scale and grow with our business; it was far more sophisticated than would be expected of a company our size. That was the easy part. The hard part was figuring out how to scale the operation to match the sophistication of our technology.

When we first came on board, the distribution model for the meals was based on parents from our schools working for us part-time. They would pick up the lunches from our central kitchen and deliver them to the schools in thermal bags. As we added more schools, we realized there were a whole host of issues around scaling with this delivery model—not least, finding replacement drivers to accommodate the field trip schedules of our employees and finding a place to park all of those SUVs. Developing a model to distribute our meals in customized, heated transport ovens and utilizing truck distribution was costly. As sophisticated as our systems are, we haven’t yet found a way to automate our trucks to drive themselves.

Our business plan also had major flaws in our growth projections. While we were lucky to have some level of historical financials from the years my parents ran their program, we were too inexperienced as entrepreneurs to understand that profitability does not scale linearly. We knew that we would have to take on additional overhead as we grew, but we vastly underestimated just how much the timing of the overhead would impact profitability at different stages of the business. It turns out that the profitability of an independent operator is actually quite good if the individual keeps busy, as the business rests almost solely on his or her shoulders. But eventually, it’s not just you in your business. It’s you managing people. And then you are managing people who manage people. And then you are directing people who manage people who manage people.

At each stage of the game, you are most profitable the moment before your volume pushes you into needing the next rung of management—at which time your profitability dips yet again. The key is deciding how large you really want your business to become, and how to maximize all of your resources at that stage without overburdening them. We haven’t targeted a revenue figure for our optimal size yet, but we envision this being the point at which we all can focus on the job functions we love most, day in and day out. I would strategize on new ways to engage kids in their relationship with food, Keith would assess new markets for our services and roll our program out, and Ryan would spend his days focusing on building IT systems that better support our customers and the company’s daily work. We would leave the rest to everyone else. Until that day comes, what keeps us going is the fact that we all love our jobs, we’re used to wearing many hats, and we have a fairly high threshold for pain.

As I think back on our story, I almost wonder how in the heck we survived with so little experience in the industry and with a business plan that, quite frankly, was fundamentally flawed in so many ways. A smarter person than I might have foreseen all of these shortcomings on paper and pulled the plug on the idea before it even got off the ground. And that would have been a tragic mistake. Don’t misunderstand me on this point—business plans have value in helping you work through your ideas in the concept stage and keeping you on track toward your goals once you’re up and going. But while a business plan may win you a competition, it’s not going to run your business for you, and it certainly won’t be the final determining factor in your success. That, ladies and gentlemen, is up to you.

—Edited by Stacy Perman

[via: BusinessWeek]