Then and Now

This article looks at how individual bootstrappers have changed business practices as their companies have grown.

By David Whitford | 
 

Sure, these CEOs still substitute imagination, know-how, and effort for capital. Sometimes

Once a bootstrapper, always a bootstrapper? Not quite. If you're going to move beyond the start-up phase, there are habits that have to be undone and skills that have to be honed to jibe with your company's growth and maturity. It doesn't happen in a single day, but gradually you may find that your business no longer benefits from certain policies and procedures you insisted upon when it was a struggling start-up. For example . . .

* * *

Then: If you didn't have it, you didn't spend it.
Now: You borrow. It's OK to owe.
There comes a stage in the growth cycle of almost any business when the need arises for an infusion of outside capital. And that need, once recognized, changes everything -- how you present your company, how you present yourself, how you spend your time, even how you define the concept of ownership. Tough transitions, some of them, but they're unavoidable. If you want to grow, you may have to owe. Or even let go.

Karen Behnke financed PacificCare Wellness Co., now a $6-million health-services company, with credit cards -- a very grand total of 17 credit cards -- and proceeds from the sale of personal belongings (her skis, her car). Sound familiar?

Back then, Behnke says, first thing each morning she'd read her cash and receivables report. She guesses she spent about 25% of her time managing cash flow, just making sure she had money enough to pay the bills. Then three years ago she sold her company to a multibillion-dollar health-maintenance organization and stayed on as president. Now that her company has access to deep pockets and survival is less problematic, she's free to devote more of her time to issues of marketplace presence and long-term goal setting: marketing (25%), strategic planning (50%), and financial planning (25%).

Taking on new roles can be disconcerting. Richard Rose of Sharon's Finest, maker of TofuRella ("tastes, melts, and stretches just like regular cheese"), would rather he didn't have to spend quite as much time explaining himself and his business to bankers. Rose calls himself a "counterculture businessperson" and "the longest-haired M.B.A. in Santa Rosa"; last summer he toured as guest guitarist for a band called the Pink Flamingos. He says it's a bit weird getting used to the idea that because the local bank gave him a $160,000 line of credit, "it's no longer just me doing what I feel like." Still, he's been able to maintain control of his persona and his style.

"I cut my hair off and wore suits and stuff for a couple of years," he says. "I thought I needed to do that to make it in the business world. And it didn't work. So I went back to plan B, and that was to be myself. And it's working fine."

* * *

Then: Pinching pennies was a religion.
Now: You sin sometimes, but that's a good thing.
Every day Fred DeLuca, owner and CEO of Subway, a chain of 9,109 franchise sandwich shops, buys lunch for the employees at headquarters -- all 400 of them. Once a month he invites them to the movies, along with their family and friends. He figures all that probably costs him, oh, about $300,000 a year. But he's just guessing, and he's not too worried about it.

DeLuca does those things partly because he's a nice guy, but mainly for reasons even his chief financial officer would accept. A free lunch on the premises, he reasons, keeps the staff from straying in the middle of the workday. It saves time and encourages shoptalk. Of course, it makes people happy, too. And happy workers, DeLuca believes, are productive workers.

Sacrifice and self-denial, especially in the beginning, are part of the game. Later on, when the company is up and running, you may remember all too well the days when, perhaps like DeLuca, you diverted $14 a week, no more, from cash flow for personal needs. How could you forget? It was hard, sure, but heroic. Every dollar reinvested, every penny redeployed. And yet, as DeLuca has come to appreciate, "it's virtually impossible to keep doing things that way." You change because you must.

Likewise, there comes a time in every growing company's life when it's no longer appropriate to do business in, say, a two-bedroom apartment. Jim Noble of Noble Oil Services did that for years, and managed just fine -- until he began going after the kind of clients whose comfort levels plummet when you take their coats and offer them seats at the kitchen table.

"You have to give those things up because your role and your company's position have changed," says Noble, who four years ago finally left the apartment for a real office. "What started out as being wise hurts you later on. Nice offices, nice furniture, dress codes -- those are things you have to grow into to make it all work."

* * *

Then: A customer was a customer. A job was a job. Who were you to say no?
Now: You can afford to be more choosy, and it pays.
The business of All Americas Inc., in Vancouver, Wash., is brokering freight. Truckers call, looking for loads. Shippers call, looking for trucks. Agents scare up business in the field.

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