Not a diamond, not so rough
THE CHALLENGE: Developing a business that will provide retirement income in lieu of a pension.
THE STRATEGY: Sell limited-issue jewelry made of semi-precious stones.
By Larry Werner
Staff Writer
Mia Gray King admits that she spent much of her life enjoying the benefits that came from being married to men who provided her with a standard of living that included world travel and things, such as jewelry, that people want, but don't really need. After two divorces, she finds herself, at 55, with no pension or alimony - and a jewelry business.
After considering opening a restaurant with a longtime friend, Robin Gretchen Scott, King settled on a business that taps into her international contacts and love of semi-precious stones. Since the company was incorporated two years ago, gretchen gray, which takes its name from the middle names of the two partners, has been making and selling necklaces, bracelets, earrings and other jewelry designed by the two women. So far, King and Scott have invested $300,000 in loans and savings without a penny of profit or salary.
But as far as King is concerned, the company is right on plan - despite some painful setbacks.
"The near future isn't what I'm worried about," King said in the living room of her $850,000 home, which serves as gretchen gray's headquarters. "I can sustain myself for the next two or three years. I figure it's going to be at least a year or a year and a half before we can start projecting when we can take money out. I'm fortunate enough that I have enough to live off in the meantime."
Scott, who moved from the Twin Cities to Fargo, N.D., after her marriage to a cardiologist, also is in the position to wait for profits. The two women are convinced that there's a market for "couture jewelry" made from stones such as rock crystal, amethyst, citrine and topaz, even though precious stones, such as diamonds and sapphires, are better known. They also believe women prefer one-of-a-kind or limited-issue pieces rather than a mass-produced necklace that could be on the neck of another woman at the cocktail party.
The company has its roots in the friendship of two women who shared the joys of raising their children together as young wives and mothers in Grand Forks, N.D., and later shared the pain of divorce. Someday, they hope to share the satisfaction of building a profitable business that will combine their love of jewelry with King's organizational skills and Scott's 22-year career in retail.
King and Scott got to know each other 30 years ago in Grand Forks when Scott's first husband was hired by King's first husband, Tom Ingstad, who owns radio stations throughout the Upper Midwest. After King's divorce in 1986, she married a man named Shmuel Penchas, director general of a health care center in Israel.
When she was a teenager, King had worked on a kibbutz in Israel and fell in love with the country. That led to more than 20 years of volunteer work for hospitals in Israel, which helped her develop international contacts that she now uses in her jewelry business.
During her marriage to Penchas, King commuted between homes in Israel and the Twin Cities, and during that time, she got a law degree. The second marriage ended after 12 years, and she found herself asset-rich but pension poor.
King had her first paying job at age 46 as an assistant attorney general under then-Attorney General Hubert Humphrey III. She left that job when Humphrey ran for governor and lost to Jesse Ventura. After that, she worked briefly for two health care companies but concluded that she doesn't like working for others.
So she and Scott, who love to cook, talked about a restaurant. Plans changed when King was traveling on business and stopped at a store that sells loose stones. Curious, she priced the same stones that were in a $1,000 necklace she had bought for Scott at Neiman Marcus and found they were selling in this bead shop for about $100.
The two women decided they had a plan that would provide King with a way to combine her project management skills with Scott's expertise from 22 years working for Dayton's. They bought 200 pounds of stones at a Tucson gem show, hired a Fargo artisan to assemble the jewelry they designed and sold $115,000 worth of jewelry at home parties in their first year of 2003.
However, their revenue dropped to $73,000 last year because King was laid up with a herniated disc and the two partners realized they had to take time to reposition their business from home parties to retail stores.
"There's only Robin and me, and people like to meet the designers," King said.
So they mortgaged their homes to raise capital for distribution through retail stores. So far, they have got gretchen gray jewelry into two stores in Edina - Alfred's and Grethen House - and in some high-fashion shops in areas that draw large numbers of affluent tourists in California, Utah and Arizona.
They project $200,000 in revenue for 2005, based on prospects for adding 15 new stores.
The two women have made contacts for semi-precious stones in Brazil, which resulted from King's contacts in Israel. They network constantly and will travel on short notice anywhere in the country to show their products to shop owners who express interest. They are looking for distributors who will represent their line to retailers, and they might open a gretchen gray store in the Twin Cities someday.
It's a long-term plan they can afford, thanks to a comfortable income earned by Scott's cardiologist husband and a financial settlement King made as part of her divorce. Instead of alimony, she got a cash settlement. That allowed her to pay $500,000 for a Golden Valley home she figures has appreciated to $850,000.
"I'm living off my home now," she said.
Home equity pays her personal bills and provided the collateral for the business loans. But if she is going to avoid taking a job working for someone else, or hanging out her shingle as a lawyer at 55, she must make gretchen gray profitable.
"The idea is to build a foundation so we've got a core group of stores that we will continue to grow with," King said. "Jewelry is nothing anyone would die if they never had. Having said that, it's like most things in life - jewelry is about enhancement, about engagement, about relationships, memories."
The expert's opinion: Mary Daugherty, associate professor of finance at the University of St. Thomas College of Business, said King and Scott should be aware of the volatility of the fashion industry and the danger of investing more money than they can afford to lose.
"In such an endeavor as this one, the amount of up-front money invested into the business must be very carefully weighed so as not to dig a deeper long-term financial hole for the entrepreneurs."
Larry Werner is at werner@startribune.com.
The Star Tribune, Business Section