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HATTIE: (In the Studio) Hi. I'm Hattie Bryant. This series is about how to start, run and grow a business. Every week, we take you inside a growing business and you have the opportunity to meet a person who is happy to tell you about their successes and failures.

Out of more all the businesses we've studied here, Cowgirl Enterprises is one of the youngest and smallest.

Donna Baase, the founder, has fresh memories of her start-up, and she'll tell you how her virtual corporation is living with growing pains. Step into our Master Class.

We're going to the Rocky Mountains. Boulder, Colorado.

It's Saturday morning, but the staff of Cowgirl Enterprises is at work.

DONNA BAASE: We want to bring this in at a wholesale price of about $8.

HATTIE: Founder Donna Baase meets with her employees to discuss a new promotion.

DONNA: We want to sell our big sizes. Now we're ready to do a trail kit. And if you notice, it's just the I-A reversed. Not a trial kit, a trail kit, 'cause it's more than just trying; it's really an opportunity to take it on your next ride or wherever you're going and use it.

HATTIE:`Cowgirl'--what does cowgirl mean?

DONNA: It's about the archetype of a cowgirl. And to me, it has to do with independence, resourcefulness, staying in the saddle, taking the reins, all the things -- making use of the natural resources around us.

I meet cowgirls of all walks of life.

And I thought a cowgirl was somebody in boots on a horse, and I found out I'm a cowgirl. I know you're a cowgirl.

It's about really driving your own life.

KATHY CAPINARA: I'm the head rustler.

HATTIE: Kathy Capinara handles the finances. So you get the numbers together?

KATHY CAPINARA: Yes.

HATTIE: You make sure the money's coming in?

TREE BERNSTEIN: So what I'm thinking is maybe using the broadside idea, you know, the old wanted posters, those kind of borders and that.

HATTIE: Trie Bernstein creates the cowgirl look by designing the packaging and marketing materials.

DONNA: I'm thinking stick with the blue.

TREE: Yeah, we could do navy, like, a paler shade of this craft color with the bright blue on it.

TREE: We have this little joke that she dreams what she needs and she channels it to me and I come back with it, because we've got a really good groove with that.

DONNA: What do you--what kind of feedback are you getting?

JENNIFER BILLER: Good. Everyone...

HATTIE: Jennifer Biller calls on customers.

JENNIFER: A lot of people are wanting this now. They want pure products and they want the natural ingredients. Donna doesn't use any fillers or synthetic chemicals. It's all natural and very concentrated.

HATTIE: So what do you do in the enterprise?

PAULA GARDNER: Well, I work as a wrangler.

HATTIE: Donna's sister, Paula Gardner, does customer service.

PAULA: Donna has great ideas and she believes in herself. We all believe in her. We believe in the product. And we've seen the success because she's motivated, she has tenacity, she just keeps on going.

HATTIE: The mission?

DONNA: The mission of the business? . . . that's inspired by the cowgirl.

And the mission is truly to bring awareness about natural skin-care products to people through education and through the joy of using them, let people understand what plants really can do for their bodies.

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HATTIE: OK. You have been studying what plants can do for our bodies for a long time.

When was there a light bulb that went on in your head and said, `The product isn't there, I need to make it'?

DONNA: Well, I like to say to people that my whole life ended up in a two-ounce bottle of Cowgirl Cream. A lot of things I did from early on, from just keeping a little garden with my family in Pittsburgh, Pennsylvania, and growing up with a lot of beauty.

My mother was very inspiring and we had a lot of flowers. She was always framing covers of magazines, another Renoir or, `This is a Monet.' I just had a lot of beauty around me.

I ended up taking off in the early '70s, and went to Europe and ended up in India.

And, that was a first light bulb in my head.

I started to understand how people used the very plants that grow around them as their medicine and for beauty. I watched women comb coconut oil into their hair. Pretty soon we were doing that. And I stayed there for over a year studying, learning and did a lot of the paths of teachers and dance and whatever. But traveled to other countries, ended up in South America and, again, saw the same thing.

People use what grows very close to them for their medicine, of course, their food, which many people say is the same thing, and for their beauty.

And then I ended up back in Miami, Florida. I had family there and I got there and needed a job. I needed to dig back into real life. And I worked for a plastic surgeon in Miami, who turned out to be a wonderful mentor to me. He was the brother I never had in my life, taught me, really allowed me to grow as a person.

I probably was the first paramedical makeup artist in Miami in the early '70s.

HATTIE: What's a paramedical makeup artist?

DONNA: Well, paramedical makeup is makeup which enhances bad medical conditions, basically. People who've had burns, who've had terrible scarring from accidents, and you use makeup as a way to alleviate that.

And so I learned about the body now. I learned about how the body healed. So when we moved to Boulder, Colorado, from Miami, it was a totally different life. Boulder is very much--people used to call it `the granola city.' It's come a long way since I first got here. You can actually paint your nails and wear lipstick here now.

It was different then.

Yes. But, you know, it's the aging of women of my age, sort of a transition over the last 20-something years. And when I got here, I was raising two small children, wanted to get back into studying again, and I found some fabulous teachers.

One thing Boulder has is a wonderful network of people who are in alternative therapies. So I started teaching classes in how to make your own cosmetics . . . how to take some yogurt and put in egg yolk and drop in a couple of drops of lavender and you have a mask. It is really using food for the skin. The whole skin-care industry and beauty business, so to speak, started in the kitchen. After women made their candles, their soaps, their cough syrups and put up their preserves for the winter, they might have some time left over to take chamomile and infuse it in some olive oil.

Here in Colorado, they would've found some horsetail (or bottle brush) and infused that even in lard.

HATTIE: What do you get when you put bottle brush in oil?

DONNA: Well, it extracts the silicas and the constituents and that is really good for wound healing. You could take aloe vera and or sunflower oil and you might add a little bit of the lavender from your garden, and then you have a beautiful, natural oil for the skin. So, at one time, this is what people did in their kitchens.

HATTIE: You said, `My whole life is in this two-ounce bottle that I'm making today,' and I couldn't agree with you more. I mean, that's absolutely right. And we all are that way. When did you day to yourself, `I'm going to be a business person. I'm going to start a business. I'm going to make a product. I'm going for it.' When was that?

DONNA: Well, a lightbulb went off when we were taking a family vacation and we were driving back from Oregon. And I started really saying to myself, `What the heck did people put on their skin?'

And I thought a lot about native people, the indigenous women, the pioneer women, cowgirls riding those horses, getting out in the bleak winters and also just those rough summers. What did they do? And I thought a lot about the plants grow in the West.

And I thought, `You know, they are really things that heal the skin.'

And a lightbulb went off in my head. And I thought, `Cowgirl Cream.'

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HATTIE: (Voiceover) Donna's daughter Alexis was the first person to hear the Cowgirl Cream idea.

Alexis, you're driving in the car with your Mom and she says, `Oh, I've got an idea. I'm going to make Cowgirl Cream.' Did you say, `Oh this is just another one of my mother's wacky ideas'?

ALEXIS: No, it sounded cool to us just because --I don't know, my Mom has a way -- if she's enthusiastic about something, everybody else is enthusiastic about it.

HATTIE: (Voiceover) Donna's first product was Cowgirl Cream. And now there are four other items: Extreme Cream, Trail Boss Bar, Ranchhand Cream and the Cowgirl Lip Balm.

DONNA: The truth is, I started it in my kitchen. This was a home-based business for about the first six months.

HATTIE: OK. You stirred up in your kitchen...

DONNA: Right.

HATTIE: ...the literal first product that you sold.

DONNA: Correct.

HATTIE: When did you move out of your house?

DONNA: After about six to nine months. We moved right up here in that section over there.

HATTIE: Did that feel different?

DONNA: That was a huge jump. Well, I knew I had to get out of my home. You can't really run a business out of your home. Cathy would come in twice a week and do the books. And Michelle, who was the student wrapper at the time, would sit at the kitchen table and wrap and it was nutty. It--just more packing boxes and peanut bags. And my house was just being taken over. But I knew I had a business. We moved up here. It felt frightening because it was a commitment to pay the rent. But I also really see this happening all the time. I mean, as soon as we got here, business increased.

HATTIE: Where did the idea for the cake -- the bar come from?

DONNA: Well, actually, a really good friend of mine brought me something similar from Italy and said, `This is cool. Look at this.' It was olive oil, and that was it, in a little cake in beeswax. I said, `This is brilliant. You know how brilliant this is?' Because the truth is, every product for hand and body care, hand creams particularly, are pump bottles, as we describe them.

HATTIE: Right. DONNA: Just more liquid, more lotions. I said, `I know I could make that cake.' And I came up with a formula. I worked--beeswax is difficult to work with, because if you spill it, it immediately dries, horrible to get off your floor. It's messy. So you need a place where you can really be sloppy with beeswax, which isn't your kitchen.

HATTIE: Do you have beeswax on your kitchen floor?

DONNA: I do. I always will. And that's where I had to start to find people to make the product. So I'm thinking about the cleanser, how we could do a cleanser that would fit the Cowgirl Cream and also Extreme, certainly an aloe base.

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HATTIE: (Voiceover) Donna consults with Ben Fuchs, a pharmacist and owner of the Rocky Mountain Natural Laboratories, which produces her liquid products.

BEN: I develop a very strong personal bond with all my customers. I get to know them personally. I need to know what her needs are, not just as a businesswoman, but also from a personal standpoint, so I can provide the best service. And also, I love my customers. I love working with people who are creative and...

HATTIE: But she couldn't afford you. She could not afford to have you on her payroll.

BEN: Right. She doesn't need to. She can just pay a fee. She can have a product developed for her and then she can pay us to manufacture it and bottle it.

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HATTIE: With independent sales reps, contacts from trade shows and cold-calling, Cowgirl has developed three retail channels of distribution.

DONNA: First of all, I initially opened my products at local Boulder, Colorado, natural product stores and their branches around the Denver area. And then it went into Santa Fe. Those are natural products markets. I had, really, some terrific sales reps that got out there and said, `Hey, I'll take it on the road for you.' And then we would--we sent press releases. I tried to call a lot of people. I would make presentations when I went on the road with the product myself in the local area. Then we started getting into the gift market. We found a showroom down at the Denver Merchandise Mart and these ladies said, `We sell a bunch of Western hats, Western wear, jewelry, we'll put it in there. We don't have much time to sell it, but we'll put it there.' That started generating sales. So that suddenly took us to a gift market and...

HATTIE: Which was a whole new world.

DONNA: A whole new world. They didn't even know how great the ingredients were. They just thought they were adorable little boxes. And they liked the name. Then we found out, wow, you know, these are decent products. They're really good, in fact. And we still have some of our original gift stores.

The other group of people are the spa market. Now they wouldn't use it as their primary skin line, but they certainly use it in the auxiliary gift area. And it fits because once people truly understand the ingredients, they realizethis is what people want. This is great for the skin.

The third product we developed was called Trail Boss Bar. And that's the herbal rub for sore muscles. We called it the Trail Boss Bar because she would be the one on a trail ride who would have the medicine kit. And if someone fell or, you know, had a bruised or sore area, she'd get out that old, little cake of trail boss.

And that's the same concept as the Ranchhand Cream. It's the beeswax base, sunflower oil, but we added to that some wonderful herbal ingredients that are known, have a long history in promoting circulation and wound healing. And it's the natural BenGay, doesn't--it's not greasy, it doesn't have that heavy aroma, and instead of feeling cool to the skin, it feels warming. It brings warmth and circulation.

HATTIE: On popular Pearl Street in downtown Boulder, we found a gift shop that carries Donna's products.

ROBIN COLLIER: Well, about five minutes ago, I walked into the store and I went, `Oh, my gosh. I'm out of Cowgirl Cream.' And they go, that's funny because they're coming to film it here right now.

HATTIE: I want you to meet Donna Baase.

ROBIN: Hi. It's nice to meet you. I'm Robin Collier.

DONNA: Hi. (To Hattie) Thank you! I get to meet a customer.

ROBIN: I am a fan. I swear. I even...

DONNA: Well, thank you.

ROBIN: I took it with me to Greece and it saved my skin. I mean, it's very dry and hot there. I send it to my boyfriend in California. He's hooked now, too.

Store Owner: We're fortunate to carry Cowgirl products because we have a customer demand for it. Especially living here in Boulder, I think you've noticed how dry it is and the women do need it. And, at first, they're attracted to the package. I mean, the packaging is beautiful. And so they give it as gifts or take it home. But once they try it, they're back for more.

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HATTIE: So your title around here is?

KENDRA HARRIS: Trail boss. Trail boss is our fun title for operations manager.

HATTIE: So, Kendra, do you ride a horse?

KENDRA: I do, but I ride my Harley more than I ride the horse.

HATTIE: Do you ride your Harley to work?

KENDRA: I do.

HATTIE: This is really cowgirl stuff. OK. Now running the office, keeping up with customers, what do you do to keep your name in front of customers?

KENDRA: Well, one of our marketing communications programs is to put together direct mail to our customers to let them know of new promotions that we have put in place. And every six to eight weeks, we put together a program and have our designer put together postcards, such as these, and we send them off to our retail accounts and also to our mail-order customers.

HATTIE: You've learned some things because you've sent a lot of postcards. What have you learned? What piece of advice could you give someone about using direct mail?

KENDRA: One of the big things we've learned is that in the past our artists used line drawings and graphics to put on our postcards. Recently, we have now started using photographs of our products. And we understand that our customers really like seeing the photograph rather than trying to imagine what it looks like.

HATTIE: Are you trying to tell me when they see the photograph, they buy more?

KENDRA: Yes.

HATTIE: All right. So, again, you have to weigh out the risk vs. costs because it costs money to take these pictures.

KENDRA: That's right. But we definitely say it's worth it. Through our software programs that we use to keep track of all our accounts. We also are able to create an inventory item that describes the source of our orders. So we are very easily able to track where our orders come from, which marketing programs are producing what kinds of numbers.

HATTIE: OK. So if I got this postcard and I called in and said, `All right. I want this gardner special.' Then whoever does the data entry here says, `OK, gardner special is 1009.'

KENDRA: Right.

HATTIE: And then they add it up at the end of the month and we know that that worked.

KENDRA: Exactly right.

HATTIE: What's the hard part about working in such a tiny business?

KENDRA: I would say the obstacles are trying to find sources of labor that will handle our volume. We've had to do some searching for those people. We found them but it took a fair amount of effort to get there. I would also say that some of the difficulties come from sales. We don't have a solid distribution network set up yet. We're in the process of doing that and that takes a lot of work for a small company.

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HATTIE: Here is Donna's packaging operation in the Boulder County Jail.

DONNA: I didn't want to build a whole team of employees to do that. And secondly, I didn't know, if I keep doing it this mish-mash way, how would I ever get over the hump of doing more in enough volume? Two of our most important things are keeping it really neat, neat, neat and clean. Why are you a volunteer? Why do you do this?

Unidentified Man #1: It's better than being in other places in jail.

HATTIE: Would you rather work than not work?

Man #1: I'd rather do this than be locked in my cell.

HATTIE: Chuck Pringle is the captain of the Boulder County Sheriff Jail Division.

CHUCK PRINGLE: We do an assessment of every inmate once he or she is brought to the jail. And that assessment includes asking two questions. One question is, `Would you like to go to school?' And another question is, `Would you like to work?' What we found in this facility is that 80 percent of the inmates answer they would like to work and 20 percent answer that they would like to go to school.

Twenty-five percent of the money that we earn goes to restitution. Twenty-five percent of the money goes to child welfare payments. Another 25 percent goes to cost of care. And the last 25 percent each inmate can stipulate a family member or dependent.

HATTIE: So someone watching this program who wants to find a productive day program or an industrial program...

CHUCK: They can call their local jail administrator and ask them if they have a program like this, because we have found, in our experience, that we need resources in the community that we can tap to obtain work.

HATTIE: (The Lighbulb in the Studio) Donna Baase is not interested in running a manufacturing plant. She wants to give her customers unique, botanical-based, skin-care products. So to achieve that goal, Donna is building a virtual corporation. She has just one full-time employee, several part-timers and four business alliances. An outside lab makes the liquid products. Two other companies make the bars and lip balm. And, of course, jail prisoners do packaging.

This is the new way to run a business. You do what you do best, then find others to do the rest. The old way is to hire employees. The new way is to form alliances. This way is efficient and saves you from burdening yourself with infrastructure and overhead. Donna may change her mind as she grows, but for now, she's glad to have teams of people who don't work for her, but with her.

Delete on the Web You can find jail industries programs similar to the one Donna is using in Boulder, click on links from the profile page.

Delete on the Web As a result of taking a course called Fast Trak, Donna wrote the business plan that got her a bank loan and she formed a board of advisers. You might want to take this class. For details, click on links from the profile page.

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Donna doesn't leave anything to chance. Cathy Price is a customer and her insurance adviser.

CATHY PRICE: One of the main concerns in cosmetics is the pollution exposure, a lot of chemicals and ingredients that can cause real pollution damage. And that's a real concern when you're the insurer. The other real high-risk end of cosmetics is how it can possibly hurt a customer. But those are usually products that have a lot of chemicals in them. The beauty of Donna's product is it's all natural ingredients.

HATTIE: What is good work to you?

DONNA: Well, it's really not separate from the rest of my life. It's being able to be who I am. And the people that are here--we have a great time. We have fun. We have a million funny things to say.

I often will walk in and say, `Hey, what do you think of this?' I want everyone's opinion. It's--you know, it's important that we all--and it's really important that the people here buy the Cowgirl way. They have to see this through my filter in a sense. There's plenty of room for self-expression and who we all are, but ultimately, I have to be the one leading it.

HATTIE: Do cowgirls wimp and moan?

DONNA: We don't. We kick. Estee Lauder started -- I love her history. She started in a little tiny store in flat--in little salons in Flatbush passing out cream to women who didn't even know that their hands--skin could look softer. She started the exact same way. It's the American dream.

It's just being a cowgirl.

See, our products and people, why they like them--it's not some fancy chemicals from New York City. It's just a little hunk of sunflower oil with some beeswax and a little bit of healing herbs. And you rub it on and it works.

And I think, for me, that's kind of where I am. Just be me. And just hold the reins.

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HATTIE: John Wargo, our marketing adviser, explains the difference between marketing and sales and tells us what to include in a marketing plan.

JOHN WARGO: Sales is a part of marketing. Marketing is the whole game plan. Marketing is making sure that you've got the right product, a unique product. It's making sure that you're pricing it right because your product and your price have to be unique in order to be competitive. It's got to be positioned properly. You've got to sell it in the right places. So you put those three together, now you can begin selling. Because what you're really selling is a unique product at a unique price at a unique place. And you put that all together, now you're ready to sell.

HATTIE: This product is unique. I mean, it's not often you get lotion in a bar.

JOHN: Right.

HATTIE: So she's got a product that's standing out. But still, for every small-business owner, marketing needs to include ...

JOHN: Price, place and then promotion.

HATTIE: The promotion part. You were noticing that you thought she was doing a good job of marketing with the postcards. Now why is this working?

JOHN: Well, first of all, postcards have the highest read rate; it is very, very easy to read a postcard. So what she's doing is sending a very concise message that can be read very easily by a very busy employee or manager of a firm. She is really communicating with them. And her message--her message is right to the point. Here is my unique product, here's the unique pricing arrangement I have, and this is when it's available. She has done everything in one simple postcard. She made herself competitive with the largest sales forces in the country and, yet, with a very small, concise message and a simple postcard.

HATTIE: OK. Product, price, place, promotion. Got to do all that.

JOHN: Got to do it all.

HATTIE: You can't be all things to all people. Follow Donna's lead and do only what you do best. We'll see you next week.

The Closing of the Show.

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