Sisters behind Mockingbird Cupcakes have yet to turn a profit, but they're optimistic

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Posted: Sunday, March 30, 2014 12:00 am | Updated: 5:09 pm, Mon Sep 22, 2014.

From the small office in the back of her new cupcake shop, Sarah Alsup could hear the cash register in the front ringing up sale after sale.

“Oh, my gosh,” she thought. “We did the right thing.”

Mockingbird Cupcakes had been open for a few weeks and business was better than Alsup and her co-owner, twin sister Rachael Henderson, had anticipated. Customers flocked to the west Omaha shop, motivated by spring weather, publicity about the new bakery and a need for treats to serve for Mother's Day and graduation parties.

But the streak didn't last. School let out for the summer, and the days got hotter.

“People want ice cream, and everybody's going on vacation,” Henderson said. “It was a letdown.”

Sales fell 40 percent to around $600 a day and the sisters were stretched to meet all their bills: their lease, their loan, their supplier and their staff payroll.

Sisters Rachael Henderson, left, and Sarah Alsup

Last year, The World-Herald chronicled the startup of Mockingbird Cupcakes in its series "A Business from Scratch." Twin sisters Sarah Alsup and Rachael Henderson shared their experiences — developing recipes, getting financing, hiring staff and even managing the changes at home for their husbands, eight children and extended relatives.

A Business from Scratch

Part 1: The dream

Part 2: The message

Part 3: The loan

Part 4: The shop

Part 5: The staff

Part 6: The family

And the change in seasons was just the first challenge for these first-time entrepreneurs, who opened an independent shop without the name recognition or proven business format that a franchise system can offer. In the months to follow, the sisters would have to fire employees who disappointed them, develop more products to bring in additional revenue, adjust to a new competitor in the neighborhood, rein in costs and, through it all, juggle work with family responsibilities.

It was just over a year ago that Alsup and Henderson, now 39, cut the ribbon on their storefront bakery in the Lakeside Plaza shopping center at 173rd Street and West Center Road. Last March, The World-Herald detailed the sisters' months of preparation to open their business.

Today, the shop has survived its first year — one in five new businesses don't make it this far, according to the Bureau of Labor Statistics — but like many other small businesses at this stage, it is not yet profitable. Going into their second year, the sisters say they are committed to what they started and are optimistic this year will be better, built on the foundation of hard-earned experience.

As Alsup told a class of University of Nebraska at Omaha business students in a recent guest lecture, “If I would have known what I know now, a year ago, I'd be in a lot better place.”

Graduates of Elkhorn High School and Creighton University, the sisters were 37-year-old stay-at-home mothers, living side by side in suburban Elkhorn, when an episode of “Cupcake Wars” in February 2012 inspired them to fulfill their midlife desire of starting their own business.

They developed a line of homemade cupcake flavors, put together a business plan, took out a commercial loan, worked with a Realtor and contractor to locate and outfit their bakery, and leaned on their husbands and mother for more help in the care of their homes and eight children — Sarah's five boys and Rachael's two young daughters and new son.

Their path still looked smooth last May, two months into the business, with “crazy busy” Mother's Day sales and an invitation to compete on “Cupcake Wars.” The sisters submitted a video application and were chosen to compete.

But the show wouldn't air until October, and the cost of travel and supplies for the show, filmed in May in Los Angeles, set them back several thousand dollars. Meanwhile, school let out and, amid declining sales, the sisters found themselves scrambling to regain control of their own shop, as early hiring mistakes caught up to them.

Now they advise other business owners to take their time interviewing, hire only when necessary and avoid working with family (unless it's your twin sister).

When the shop first opened, one of the owners was always in.

But with spring sales going well, the sisters figured — prematurely, it turned out — that they could cut back on their own hours, to just about 20 hours a week each, in order to spend more time at home. Their mother, Cathy Brodersen, 66, who shares Alsup's home, had taken on more parenting and housekeeping responsibilities.

Relying on paid staff meant higher costs and difficulty controlling what went on in the shop.

In June, the owners fired a brother-sister dishwasher-baker duo after they said they caught the baker looking at other employees' paychecks. A friend of their remaining baker, whose work they praise, filled the opening. Both of those women remain with the shop today.

“We needed to be there,” Henderson said she learned. “You've got to put the time in.”

In September, their younger half sister left a job at the shop to pursue work related to her college degree, and the sisters asked a cousin they had hired to leave, citing personality conflicts that affected attitudes throughout the shop.

They regret the toll it took on this family relationship but said the move was essential to regaining control. The experience proved valuable in October when they hired a third baker, specializing in cakes, away from a competitor. But her habits of texting on the job and taking long smoking breaks were too much to put up with when cake sales did not outpace her wages. This time they acted quickly.

Henderson said the sisters hate firing people, but agreed, as Alsup said, “We have to stay true to our vision of the store.”

With payroll under control, and with the addition of well-received new products like house-made fruit pies and cinnamon rolls, sales and expenses were back into line by late summer, when cupcake sales rose again with school back in session.

The sisters then looked at cutting costs further, and noticed that several of their staple supplies — butter, sugar, vanilla extract — were cheaper at Costco than through their restaurant supplier. So once a week, since around November, one or both of them make a trip to Costco, loading up a pallet and saving $800 to $1,000 a month.

After a profitable spring, the shop lost money in July and August, and the sisters relied on their own families' resources to pay the bills. After downsizing the staff and adding the other baked goods, they broke even in September and October, especially with a rush the weekend the “Cupcake Wars” episode aired.

They didn't win the $10,000 grand prize and, unlike the experience of another local food retailer that has appeared on national television — eCreamery's turn on “Shark Tank” — the national publicity didn't prove helpful in the long run. All Mockingbird's sales are local, unlike eCreamery, where more than half of sales come online from around the country.

October also brought a new competitor when Jones Bros. added a west Omaha location just a few blocks west. With no prior-year sales to compare, it was hard to assess the impact, Henderson said.

Whether it was the season or the competition, November through January were another string of losing months where the sisters had to rely partially on their own resources to pay the shop's bills. Even a Black Friday special couldn't lure shoppers out of a long line at the Gordmans next door. The sisters won't bother opening the day after Thanksgiving this year.

December losses would have been bigger if not for a few big orders — including a friend who spent about $6,000 on cupcake gifts for business clients — and marketing events like the chance to have a photo taken in the shop with Santa. Those didn't totally make up for slow daily sales, however.

Then came January: Same slow traffic, no holiday orders to make up for it.

“Crickets,” Henderson said. “Brutal,” Alsup said.

At home, Alsup said, it got harder to justify to her husband why he had to pick up more household responsibilities when she, who has a degree in elementary education, still wasn't bringing home an income.

Meanwhile, she and Henderson, who has a law degree, juggled their schedules to spend more hours at work, while their mother drove the children to their activities, pitched in with laundry and squeezed in her own exercise routine and community theater rehearsals.

However, when Alsup prepared her profit-and-loss sheet for the month — a task she admits to often procrastinating about — she said in February that the numbers didn't look as bad as things felt.

They temporarily cut employees' hours, asking the bakers to bear with them and have faith that sales would improve. (The women since have been given raises and more hours.)

February picked up, thanks to Valentine's Day sales. However, next year, they said they won't spend as much on advertising. They believe the biggest sales driver turned out to be a sign they placed outside the Hallmark store in their shopping center promoting four cupcakes and a rose for $12.

“Do you know how many guys came in with Hallmark bags?” Henderson said.

They've also recently started networking with other small-business owners in nearby shopping centers, coordinating with Oscar's pizza on a dessert coupon and delivering cupcake packages to other businesses as a way of introducing themselves.

A contract they signed in February for a point-of-sale rewards system is an effort to continue to hone their marketing, limiting more costly citywide ads and targeting messages to just the most likely buyers.

Customers are asked to input their email address and sign up for deals, rewards and information. Larger chains and franchises, such as competitor Gigi's Cupcakes, have point-of-sale systems already integrated with rewards programs, while Mockingbird started its email marketing system 11 months into operations.

“We need to get over our fear of being pushy,” Alsup said. “We believe in our product and we shouldn't be afraid to be pushing it hard.”

Kayla Cunningham did not know the sisters before she hired Mockingbird for her fall 2013 wedding. Now she recommends the shop and goes there with her family, saying she likes the cupcakes' homemade, individual style. “If we're just craving cupcakes, they're our go-to place.”

Another customer, Jennifer Buda, brought her preschool-age daughter in for a treat on a recent weekday, saying she's been a regular since she hired the shop to provide cupcakes for a Junior League fundraiser.

She chatted with the sisters like they were old friends, sharing details about her impending childbirth and asking how things were going at the shop.

The sisters answered optimistically, and later said that with a March wedding behind them and another $1,200 wedding order booked for June, things are looking better as they enter their second year. One early March day saw $1,300 in in-store sales, one of their best days for sales so far.

It remains to be seen whether the shop owners will be able to tackle all the challenges ahead, or whether they'll be among the more than 50 percent of small businesses that don't make it to the five-year mark.

They want to develop a regular accounting routine, expand their following of repeat in-store customers, network to build their catering business, retain trusted staff members and stay ahead of evolving trends in the food business.

Although they haven't brought home a paycheck, the sisters said one unexpected benefit has materialized: the sense of purpose they find in business ownership and community interaction. They've created special Girl Scout cookie cupcake flavors as a scouting fundraiser and worked with the Elkhorn schools to provide work experience for a student with Down syndrome.

“I feel like we're just laying the groundwork, brick by brick,” Alsup said.

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