Going for Broke

Interview with five bootstrappers on the trials of having had too little money to start their businesses.

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Five owners argue the merits of having had too little money to start their businesses

THE ROUNDTABLE:
Harry V. Quadracci Age 54; founded Quad/Graphics Inc., magazine and catalog printer, in 1971. The Pewaukee, Wis., company had sales of $375 million last year and 5,000 employees.

Ken Hendricks Age 48; founded ABC Supply Co., roofing distributor, in 1979. The Beloit, Wis., company had sales of $280 million last year and 850 employees.

Mary Anne Jackson Age 37; founded My Own Meals Inc., packaged meals for children, in 1986. The Deerfield, Ill., company has 5 full-time employees plus part-timers and consultants and has yet to make a profit.

Anita Roddick Age 48; founded The Body Shop International, purveyor of natural cosmetics, in 1976. The U.K. based company had sales of $141 million last year and 1,200 employees (not including franchisees).

Susan Bowen Age 49; founded Champion Awards Inc., screen printers, in 1970. The Memphis company had sales of $7 million last year and 150 employees.

No one we've heard of complains more about money -- or the lack of it -- than entrepreneurs starting companies without it. And even if they have it, they never have enough -- or so they say then. But that's when they're just getting started and having to bootstrap their way into growth. How, we wondered, do they feel about their humble beginnings once they're well beyond having to worry where the next payroll is coming from? So at the INC. 500 conference in Milwaukee in June, we locked four former (and one current) bootstrappers in a room with three INC. editors to talk about starting out poor. Here's what they had to say.

INC.: All of you, I take it, either started with little money and had to build the business out of cash flow, or you had to raise capital as you went along. Do you think this bootstrapping has made you a different sort of a businessperson?QUADRACCI: Nobody understands what cash flow is unless they've lived by it. The experience changes you permanently. I have a telephone in planes, trains, cars, and bedrooms because I have a phobia. I break out into a cold sweat if I'm away from a phone. It goes back to those days when I was always calling to ask, "Did the check come in in the morning? OK, release those other checks."

BOWEN: Starting small, you're so very careful with the money that you can't afford to lose. You want to survive, and you want your business to grow, but being careful with money became part of the way we worked.

JACKSON: Bootstrapping affected us negatively. We've had four private placements, and I personally had to sell all of them. So about half my time is used up raising money. That's half my time taken away from operating my business.

HENDRICKS: I think bootstrapping builds character in the person who is doing it.

INC.: Builds character?

HENDRICKS: You gain character when you make mistakes and go home and don't feel good about what you did. I read stories about tyrants and how they treat people, about guys like Joe Kennedy and John D. Rockefeller at Standard Oil. I read them to remind me that that's definitely something to stay away from. I was not an ethical person, if I were to describe myself in the first years of business. I was not. I had a dream of making money and, thank God, as I grew and looked at the money, I liked it less. I liked more what I was doing for people.

INC.: But let's stay with the start-up for now. What might you have done differently if you had had more capital?

HENDRICKS: Made more mistakes.

RODDICK: Because we had no money, we had to use our brain cells. We had five sizes of every product; that was the only way we could fill the store. When we started, we only had 700 bottles to sell, so we broke every rule in the game by filling little bottles that people brought in. They could bring in anything they wanted, 10 pence a squirt. We had to create theater. We brought the entire shop outside of the door. We sold everything. We had a typesetting drawer, the old-fashioned layout drawers, that we put the perfume bottles in. If they didn't want the perfume and they wanted the typesetting drawer, we sold it.

QUADRACCI: I really believe that the innovative companies are bootstrap companies. They're innovative because they've learned how to take advantage of opportunities, because they haven't had the money to wait for the right opportunity.

INC.: So you made a virtue out of a necessity, all of you. But couldn't you have been just as smart and done better still if you had had more money to work with?

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