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Advice on Financing Your Business Idea - The Money Chase

Case Study

Ice Tubes Inc.
Mogadore, Ohio
Pam Moore, Founder and CEO
Year founded: 1997

It was 2002, and Pam Moore, founder and CEO of Mogadore, Ohio-based Ice Tubes Inc., had finally hit it big. Moore's company, which manufacturers and sells trays that make ice cube-like cylinders slim enough to fit in bottled water and sports drinks, had just received $1 million in purchase orders, including a large national order from retail giant Wal-Mart. Moore realized she needed to ramp up production and, consequently, would need cash flow--lots of cash flow. Yet, she was rejected by not one, but six banks when she applied for a loan.

"You've got to be kidding me!" Moore recalls thinking. "Here I've got $1 million in business, and I can't even get a loan!"

It had been a long journey from soccer mom to president of her company, and Moore couldn't believe things were grinding to a halt just as she seemed to be hitting her stride. What was especially frustrating for Moore was she had come so far with so little outside assistance. Now, when she needed it most, she found herself shut out.

Moore started her company back in 1997 with little more than a moment of inspiration. A mother of two, Moore spent a lot of time freezing half-filled bottles of water to keep her son's water cold for his soccer games. On one particularly frustrating day, she forgot to freeze the bottle the night before and struggled to cram square-shaped ice cubes into the bottle. 'I can't believe there's not a better way to do this!' Moore thought to herself. That's when the light bulb went off and Ice Tubes was born.

Moore began experimenting with ideas to make smaller, thinner ice cubes, and created her first homemade prototype using syringes filled with water. She took that prototype to a local attorney, who told her he thought she had a patentable winner. It seemed as though Ice Tubes was starting to crystallize. So while her attorney started her patent application, Moore got serious about the Ice Tube design.

Moore has a business degree from the University of Akron and had worked as a college recruiter and in real estate, but when it came to product design and development, she was in unfamiliar terrain. Undeterred, she picked up the phone and started cold calling industrial designers, prototyping companies and manufacturers. Mostly, her calls were met with disdain and disinterest, and it was weeks before she found a firm, Colonial Patterns in nearby Kent, willing to work with her on a prototype. She then tapped all of her personal savings and sold some real estate investments to bankroll her fledgling company.

Moore recalls the day she excitedly walked into her manufacturer to watch the first Ice Tubes tray come off the press. Instead, she found the press manager prying the tray from the press with a crow bar. The manufacturer spent the rest of the day experimenting with numerous plastics before finally finding a winning combination. Moore took that first tray home, only to find the ice cubs wouldn't pop out. The $30,000 mold was useless.

Moore was frustrated, and a little nervous. Because while the Ice Tubes design was still being perfected, Moore was out selling her product to the nation's largest grocery store chain, The Kroger Company. Before a single Ice Tubes tray existed, Moore had purchase orders totaling more than 50,000 trays.

Needless to say, there was significant pressure to finalize the Ice Tubes design and begin production. Back at the drawing board, Moore and her manufacturer discovered that the mold's rounded bottom was serving as a vacuum holding the ice in the tray.   Eventually they came up with a tray that had a detachable bottom. Finally, in May of 1999, Moore had a workable mold, and Ice Tubes was on its way.

Business was brisk from the start and Moore sold several hundred thousand trays in her first year of production. On top of her own marketing and sales efforts, Moore got a big boost from an unprecedented amount of free publicity: she was profiled in local newspapers and her product featured in The Washington Post , the Los Angeles Times , the Dallas Morning News , Good Housekeeping , Self , and Working Mother . This helped her make gradual, yet steady, inroads with local and national retail chains. In 2001 Wal-Mart agreed to let her test market Ice Tubes in 60 stores across the country. She even did a cross-promotion with Ice Tubes and Coca Cola's PowerAde sports drink in a Dallas-area Wal-Mart.

At the same time, Moore lost one of her largest accounts, Lechter's Housewares. They filed for Chapter 11 owing Ice Tubes almost $100,000. Although it was devastating at the time, it taught Moore that large companies are not invincible, and she should only extend credit to the extent that she could absorb the loss. Around this same time, Moore was receiving a large purchase order from Kmart. While the prospect of doing business with Kmart was exciting, Moore had heard they were slow in paying their vendors. She decided the risk was too great and she walked away from the deal. Two months later, Kmart filed for bankruptcy protection. While Moore could absorb the Lechter's loss, the Kmart loss would have put her out of business.

During this time, Moore stayed ahead of her expenses by requiring payment within 30 or 60 days with retailers, and 90 days with her manufacturing company. She also obtained a loan and revolving line of credit to expand her business. She had a few problems with quality and inventory control, and had to switch manufacturers more than once; but for the most part, Ice Tubes was succeeding beyond her wildest dreams.

Then, in 2002, Moore hit the big time: Wal-Mart placed its large national order and several other customers simultaneously increased their others. With more than $1 million in orders, Moore increased her production and manufacturing, but needed cash to cover her short-term expenses. She headed to her bank to tap her loan and line credit line, but was dismayed to learn both had been cancelled. The bank said it had been burned by too many small-business defaults and so cancelled all high-risk credit.

Shocked but determined, Moore applied for a loan at another local bank. And another, and another... In all, she heard 'no' from six different banks. Unwilling to halt production and cancel the orders, Moore went without pay and used faith and credit cards to carry her through. Finally, she found a local lender participating in the U.S. Small Business Administration (SBA) guaranty program. Through the guaranty program, the SBA shares the risk of the loan with the bank. Moore quickly applied and was approved for a credit line of $100,000 and a business loan of $250,000.

The loan helped her through the production crush, and today her product is available in Wal-Mart and several other national retail chains, including Krogers, Linen's N Things, Giant Eagle, Bed Bath & Beyond, and Kitchen Collection.

By the end of 2003, Ice Tubes had sold more than 2 million trays. Moore was recently recognized by the SBA as small-business person of the year for northeastern Ohio, and she received the Ohio Governor's 2003 Rising Star Award for Excellence In Enterprise. Ice Tubes recently rolled out a new product, Ice Tubes Singles, which come in packs of 16 or 10, and Moore is very excited about a soon-to-be-introduced new product line that has nothing to do with Ice Tubes.

As far as advice for other entrepreneurs, Moore says: "I believe faith and perseverance can overcome any obstacle, and when you make mistakes, and you will, remember that tomorrow is a new day.   Focus your energy on positive action and what you want, and the rest will eventually come together."

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