Bootstrapping a Fun Social Business: Paint Nite CEO Dan Hermann (Part 4)

Sramana Mitra: How many people showed up?

Dan Hermann: We essentially got our friends and family to attend. We were gauging their reactions. Both of us wanted to dip our toes into the business. We had intentionally chosen a business that we thought we could try without having to spend a ton of money. The other thing that we did was we remained relatively hands-off in terms of running the events so we could gauge whether or not it could scale. Rather than teaching the events ourselves and overseeing every detail, we were actively trying to find local artists to run the events without a whole lot of training.

Sramana Mitra: How much of this did you do on your own before starting to franchise?

Dan Hermann: I’d say we spent a good year growing the business under our own footprint before we started to license the business around the country.

Sramana Mitra: Who are the franchisees? Are these art teachers?

Dan Hermann: It’s not a franchise.

Sramana Mitra: I thought you were operating a franchise.

Dan Hermann: No. The one I originally started 20 years ago, that was the franchise. PaintNite is a licensing business. It’s a lot more lightweight. We typically look for local artists. We look for people who are energetic and fun. We look for people who are passionate about doing it.

Sramana Mitra: It’s the art teacher types who are licensing your business?

Dan Hermann: We have lots of licensees who are not necessarily artists themselves. We have some fledgling entrepreneurs. We have some high school teachers that branched out to do this. We also have some actual artists. It’s not your typical artist that we look for. The typical artist is a little more introverted.

Sramana Mitra: What kind of income are these people generating by running one of these licensed operations?

Dan Hermann: Typically, our licensees can earn anywhere from $50,000 a year to upwards of six figures. This is part-time work. Maybe 20 hours a week.

Sramana Mitra: What is your strategy for recruiting these licensees?

Dan Hermann: When we started, we originally recruited almost exclusively off Craigslist. Because of the nature of our business, we don’t charge fees upfront. We can get our licensees started for no money out of their pockets. Removing that cash barrier to entry allowed us to look for what are considered on a franchising side as unattractive franchisees. I think in franchising, you’re typically looking for people who have a certain amount of disposable income to start with. We on the other hand were looking for people who really wanted to go after it and were very hungry but didn’t necessarily have the money to start something on their own. We started out on Craigslist. We supplement it now with different marketing spends through search engines and online.

Sramana Mitra: What about all these materials? Art supplies are somewhat expensive. I actually happen to paint myself. I’m very aware of the prices of art supplies. Who finances all that?

Dan Hermann: We finance that. We typically ask our licensees to go out and get venues and contracts, and to create some paintings to teach the classes. We then ask them to post those to our web calendar. Once they do that, we finance the supplies. We typically finance enough supplies to do the first 10 events. We worked out a program where they pay that back out of their event revenues over time. I think they’ll keep paying us 30% of their earnings until it’s paid-off.

This segment is part 4 in the series : Bootstrapping a Fun Social Business: Paint Nite CEO Dan Hermann
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