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Editor’s Note: This story is part of Bloomberg Businessweek’s occasional series on the world of startups. The series focuses on MBAs and undergraduate business students who developed their ideas or launched their businesses while still in school, and the many ways their schools helped them get their new ventures off the ground. For a look at some business students trying to build their own businesses, check out our slide show.
In 1999, Maria Hatzistefanis wanted to start her own line of upscale beauty products, but she had no experience in the cosmetic industry and little knowledge about where to begin. So she approached the business venture with the same critical eye she had used to tackle the hundreds of case studies she dissected in her two years as an MBA student at Columbia Business School.
“I started by thinking like the consumer I wanted to target,” Hatzistefanis says.
She identified a hole in the considerably saturated cosmetics market: Women wanted a line of products that provided quick, noticeable improvements to the face and body without having to go under the knife. “When outlining my business plan I kept asking myself questions like, ‘Would I buy this product?’ ‘What do I need that I cannot find in stores?’ and ‘What’s the most profitable way to make this happen?’”
Those key questions ignited a year of researching potential competition, exploring labs that could make the products, and testing packaging companies. Hatzistefanis relied on the networking skills she honed at B-school as she visited trade shows to build a list of contacts and resources. “That whole first year of preparing to begin the company I used so many skills from Columbia,” she says. “The math classes, the derivative equations—that all proved to be useless. But the training in deadlines and the lessons in marketing were invaluable.”
Rodial, Hatzistefanis’s company, produces a range of anti-aging and body-sculpting creams, including customer favorite Glamoxy Snake Serum anti-wrinkle cream. The serum mimics the effects of a viper’s venom by freezing facial muscles—it’s Botox without the needles. The products can be found in more than 1,000 stores—including Bloomingdale’s and Nordstrom—across 35 countries and sell from $30 to $200 to such fashion-conscious buyers as Claudia Schiffer and Victoria Beckham.
Hatzistefanis first conceived the idea for Rodial in the early ’90s as a beauty writer for Seventeen magazine, where she often found herself writing about the perpetual search for an effective beauty product line with instant, noticeable results. In 1994 she moved to New York to start her MBA at Columbia. When she graduated in 1996, Hatzistefanis decided, like the majority of her colleagues, to go into finance. “Banking was the automatic go-to after an MBA,” she says. “I was in my mid-20s, needed the money to pay my student debt, and it was painted as an exciting career.”
She took a job at Salomon Brothers specializing in mergers and acquisitions. But after three years in banking, she knew the industry wasn’t right for her, so she revisited her passion in cosmetics.
With the $30,000 in savings she and her husband put into the company, Hatzistefanis, currently chief executive officer, launched Rodial at the end of 1999. The company’s first product focused on re-sculpting the body to a tighter, more toned shape. Hatzistefanis invested in the best-performing ingredients and worked with the lab to create a product she felt would be unrivaled on the market. With her tight budget, she could afford the production of only 200 units, and she spent a considerable amount on a public-relations agency to drum up attention. After a year of hustling, an upscale central London department store, Fenwick, finally gave her some counter space.
She kept the operation small and opted to pack the boxes, take orders, and make sales herself. It was a lonely and frustrating process, Hatzistefanis says, but she didn’t want to bring in any outside investors.
In February 2010, U.K. department stores Harrod’s and Harvey Nichols agreed to stock Glamoxy Snake Serum and sales jumped. Hatzistefanis reinvested in the research of new products and began to steadily expand the line. “The key is the price,” she says. “The margin has to be big enough so that retailers make profit while not pricing self out of competition.”
The London company with a staff of 70 expects sales of $30 million in 2011 and will know whether it hit that target in April. Last October, Rodial launched a lower-priced skin and body care line called NIP+FAB, which in the U.S. is sold at Target. The goal is to rival such mass-market competitors as Nivea, Neutrogena, and Oil of Olay, with such products as a cellulite reduction cream and a bust-enhancement treatment that retail for less than $20. Hatzistefanis says her strategy is to use the same high-quality ingredients as the Rodial line but use a smaller amount of them by diluting the concentration, thus making the products more affordable. The company predicts $2 million in revenue for NIP+FAB’s first year.
Hatzistefanis is taking a trend she knows is popular in the high-end cosmetic realm and bringing it to a bigger beauty market—expanding her audience and her profit. It’s a lesson she’s sure she learned at business school.