Rainbow Woods

Lessons learned the hard way tend to be lessons remembered. Richard and Debbie Halvorson, who are tantalizingly close to profitability at Rainbow Woods, Inc. in Le Center, digested their share along a red-ink road since 1990. After nurturing two radically different product lines in three different communities for eight years, the Halvorsons now realize: Marketing means making more than one sales call. Homemade brochures save money but may not move merchandise. If you sit and wait for orders, it’s a long wait. Big companies do not necessarily place big orders. Rapid growth in sales does not magically produce profit.

“We’re not over the hump yet, but we’re on the road leading to the hump,” said Richard. The hump, of course, is the dividing line between red and black ink. Rainbow Woods began in the Halvorsons’ garage when Richard lost his job in 1990. Their little company produced custom-made cornices, those decorative boxes which give a finished look to windows and patio doors. But the anticipated demand for cornices failed to materialize, so the Halvorsons shifted to bedroom furniture, cedar chests and deacon’s benches.

Now they’re phasing out furniture because the cornice market, once their dream, finally is a reality. Rainbow Woods custom manufactures cornices in six different styles with another five or six new styles to be introduced this year. They provide the labor and wood, generally using oak, cherry or Southern poplar, bought from a Minneapolis wholesaler. Stores and designers furnish the fabrics or papers chosen by their customers to decorate the custom-built cornices. Their current output is 95 percent cornices and 5 percent furniture, a complete flip-flop from recent years when it ran 90 percent furniture and 10 percent cornices. They’re sold under the trade name of “Tiara Custom Cornices.”

“We had a 1,500 percent increase in cornice sales in 1997, and so far this year we’re running at a 500 percent increase over that,” he said. In 1996, Rainbow Woods shipped $8,000 worth of cornices. In 1997, it was $122,000. This year it should be $490,000. In 1999, it’s going to be nearly $1 million if his projections are accurate – and they have been so far. “It’s kind of satisfying to see the plan happening, meeting and exceeding goals and projections on a monthly basis,” he said.

But in mid-March, Debbie said the office mail still contained more bills than checks. “That’s hard for a woman,” she said. Richard responded with a small shrug of his shoulders. “She worries about it, but I see the projections being met,” he said. And he’s forecast the first flow of black ink in a matter of weeks. Meanwhile, the Halvorsons keep going on reserves of energy, enthusiasm and the self-deprecating humor so common among entrepreneurs. “If we had any brains, we’d both be making more money doing something else with less hours,” Richard chuckled.

The twisting, turning story of Rainbow Woods begins in Chisago City, where the Halvorsons enjoyed a less hectic, more stable life in a three-bedroom home they’d built across a road from a lake, good jobs, two kids and a new car. Not bad for high school sweethearts who married early, skipped college and settled into the American dream. Debbie dabbled in the sales of home products, so she wouldn’t have to leave their young sons with a baby-sitter, and worked part-time at the Hazelden Foundation, well known for its treatment of chemical dependency. Richard started with Waldoch Crafts, Inc., a conversion van manufacturer, as a laborer in 1975. When he left the Lino Lakes company in 1988, recruited as general manager for a Twin Cities manufacturer, he was head of Waldoch’s woodworking, fabric and upholstery operations. As it turned out, Richard said his new employer only wanted his skills in CNC (“computer numerically controlled”) equipment, and when he’d trained their employees, he was let go in March of 1990. Unfortunately, he found that comparable jobs ranged from scarce to nonexistent. “There was nothing out there in 1990 in management. There was a recession, everybody was cutting middle management and they were walking the streets too, so we just decided we’d have to supplement with what I could do at home with the tools I had,” Richard said.

“Looking for a job didn’t take him 40 hours a week, so I made him a ‘honey-do’ list,” Debbie recalled. “We had a patio door with a crooked plastic cornice, and I had him make me a cornice for it.” With the woodworking skills gained at Waldoch and the experience of building their home, this was a relatively simple assignment. The finished cornice so pleased Debbie that she photographed it and took the pictures to work. “I showed everybody,” she said. “A friend who is an interior decorator saw it and he said we should start marketing it. He took the pictures to Sears and they wanted to start buying it.” Ironically, the person he showed it to happened to be district manager for 20 Sears stores.

Meanwhile, Richard had taken a temporary job as a laborer in a factory that made fiberglass boats. “When he came home at night, I’d kiss him hello and his breath smelled like fiberglass,” she said. By day, he built boats. At night, he set up shop in their garage to manufacture cornices for Sears and for Hirshfield’s Decorating Centers, which has nine outlets in the Twin Cities.

“We thought this was the start of something really big, so we rented a building with 900 square feet, put together a brochure, and waited for the orders, which didn’t come,” Debbie said. She blamed the lack of significant orders from Sears on a variety of reasons. Only the larger Sears stores had installers selling cornices and many of the middle managers who knew where the cornices could be obtained were eliminated in a Sears downsizing.

With so few cornices to produce, Richard turned his woodworking skills to making furniture, which they displayed at craft shows around the Twin Cities. Their first was a school-sponsored show in Chisago City, with a $10 entry fee. “We sold some furniture at it, so we decided to book every craft show we could get,” Debbie said. They hit 40 shows the first year “mostly in dumpy little malls.” Buyers found the furniture attractive, so the Halvorsons moved Rainbow Woods into a 1,200-square foot building and then into one with 5,000 square feet. They hired two helpers and a part-time office clerk.

Even though manufacturing furniture kept them busy, Debbie hadn’t abandoned the idea of tapping the cornice market. Richard made samples and she used her own photographs to assemble a binder with nine different styles of cornices. “I gave a few of these sample kits to decorators,” she said. “One of my major mistakes was that I didn’t go back out and make sales calls on the decorators and designers. They need a lot of hand-holding and reminders.” She also loaded a tote bag with samples and drove around, looking for stores which might be potential customers. “If I liked the looks of a store, I’d go in, call on the manager and try to get them to sell our cornices. I’d sell the sample kits for $25 and everybody bought it because they were used to spending hundreds of dollars for their samples. We got a few orders from that, but it was more than I could do on my own.”

Despite the satisfaction of ever-expanding sales, it was a treadmill life. “I worked all day making furniture, all night delivering it, and all weekend showing it and selling it,” Richard said. “Every year we saw sales increases so we thought we should keep doing it, but there was never any money left over.” Debbie said they were “getting very tired, starving and getting old fast. We had to live on $10,000 a year with a new house, two kids and a car payment.”

When the building they rented was sold in 1994, they couldn’t find another in or near Chisago City. But state economic development officials helped find them space in the old high school at Henderson. “It was only 3,500 square feet, but it was the high school shop, so it was all wired and ready to go,” Richard said. The Halvorsons sold their home at Chisago City and bought a 21-acre hobby farm between Henderson and Belle Plaine. They considered putting up a new building in Henderson, but Don Hayden, director of Le Center’s Economic Development Authority, contacted them about an empty plastic injection moulding plant in Le Center. It offered 19,000 square feet for considerably less money than the 7,000 square-foot plant they contemplated building in Henderson, so they bought it. “The City of Le Center really bent over backwards to work with us on this,” Richard said.

One of the lessons they’ve learned in recent years came when Debbie filled out a tax return. She had to check a box indicating whether Rainbow Woods was a manufacturer, wholesaler or retailer. “I had to check all of the boxes. That was our first clue that we were spreading ourselves too thin, trying to do everything ourselves.”

The Halvorsons began debating whether they should just manufacture furniture for the wholesale market “to get out of the craft show racket. But that’s a dog-eat-dog world too,” Richard said. About this time, they received a surprise call from Sears. “Now they wanted to buy our cornices again. But by this time, I’d been ‘around the block’ so I said ‘only if you do it on our terms,’ ” Debbie recalled. “I told them we wanted to go nationwide, that we wanted to be included in their advertising, and that we wanted to do our own training of the Sears design staff. I wanted to sell them so they’d be capable of selling someone else.”

Sears agreed, but set down three conditions of its own. The Halvorsons had to install electronic data exchange to eliminate paper invoices and bills, train designers in every Sears district at their own expense and furnish free sample kits worth $100 to about 500 designers. The Halvorsons agreed. “We decided to refocus our energy on Sears again,” Richard said.

That call came 2 1/2 years ago and Debbie has since visited most of the 20 Sears’ district headquarters to train designers. She has a U.S. map taped to her office wall, with red circles drawn around those locations, stretching from Seattle and Los Angeles in the west to Philadelphia and Baltimore in the east.

Rainbow Woods now has eight employees working in 9,000 square feet of shop space in the building they purchased and renovated near downtown Le Center. (They rent out the remaining 10,000 to the previous occupant, which built a new plant in Le Center’s industrial park, for storage of finished goods.) Richard anticipates adding two to three more employees this year to produce the $490,000 worth of cornices he’s projected.

After their earlier disappointment with Sears, you’d think the Halvorsons would be nervous about dealing with this retail giant, especially since there’s no written contract covering their arrangement. But they’re not because Sears accounts for just 20 percent of their cornice sales.

Some of the other 80 percent comes from the sample kits Debbie laboriously distributed to designers, decorators and small stores in the past, but most are flowing from advertising in a national trade magazine and from contacts, including new distributors, developed at trade shows. “One day a Sears buyer said our product is so nice and our customer service is so great, why didn’t we advertise in Window Fashions magazine?” Debbie recalled. She hadn’t realized the trade publication even existed, but said “I got the phone number, called the magazine and we started advertising cornices and doing the magazine’s trade shows.”

The Halvorsons attended their first trade show in Minneapolis in February of 1997. “It was fantastic. They loved our product. I sold 40 stores at the show to carry our line,” Debbie said. Results were even better when they exhibited at an international trade show in Atlanta last year. That put them in touch with large distributors, which now market Rainbow Woods’ cornices across the U.S.

After learning the lessons of recent years, their perspectives have changed. “That first cornice I made (for Debbie) was uglier than sin,” Richard said. “There was no fabric in it. I wouldn’t even consider making it today.” And Debbie would never do another brochure like her first. “I just gag when I look at them now,” she said. This time she had it done by Concept and Design in Nicollet, where she also rented the booth for their first trade show.

As they get closer to black ink, Richard feels he’s in familiar territory. “I’ve seen growth before and I’m seeing it again,” Richard said. At Waldoch, he started as one of three employees in 1975. When he left in 1988, Waldoch had mushroomed to 175 employees and $14 million in sales. And the Twin Cities company where he worked next as general manager doubled its sales in the 15 months he was there. “I can see it happening again right here,” he said.

Debbie finds satisfaction in the sales and creative aspects of her role in the company. She describes herself as a “creative entity. I can share my ideas with clients and they think it’s fantastic. That makes a person feel good.” When their children, Ben, 20, and Chris, 17, were younger, “I sold home party plans, home interior products, crystal, wicker, lingerie. When I sold something, if I believed in the product, I’d be No. 1 in my district,” she said.

The Halvorsons have developed a division-of-labor system for merging their talents in Rainbow Woods. “In order for us to be in business together, we need to draw specific lines or boundaries,” Richard said. “I manufacture the product, she sells the product. I don’t get involved in selling, and she tries not to get in manufacturing.” Debbie laughed at that description of their working arrangement. “‘Try’ is the key word. I demand a certain product in a certain way. Sometimes I have to be told that it can’t be done. That’s hard to take,” she said.

Although they’ve made a considerable investment in Le Center, they’re going to keep making the 22-mile commute from their hobby farm because they share a love of forested land. “We both grew up in the trees,” Debbie said. Their 21-acre spread is mostly trees and they’re not about to move out on the prairie “where an inch of snow makes three-foot drifts and the wind never stops blowing.”

©1997 Connect Business Magazine