Autopsy of a Start-up
Ask Chris Nolan what went wrong with his idea to sell prepaid legal plans, and he'll cite the disinterest of his financier. Ask Randolph Orr, one of the people who tried to make the Denver start-up a reality, and he'll cite the disinterest of customers, insurance agents, and Chris Nolan. All that combined disinterest became insurmountable. Landmark Legal Plans Inc. essentially shut down last December, three months after Inc. profiled it ("Cheap Counsel," September 1988, [Article link]).
The idea had been to get individuals and businesses to pay a couple hundred dollars a year for a package of legal services: phone consultations, reviews of contracts, threatening letters to errant suppliers. Landmark would pay a commission to the insurance agents who brought in the business plus a percentage to the law firms put on call to serve the clients, and it would pocket the rest.
Two of our commentators warned there'd be trouble getting insurance agents to sell the plans; the amount such brokers sold for him "wouldn't pay our light bill," said Harland Stonecipher, chief executive officer of a 17-year-old competing firm. Others projected the firm would need more money. And indeed, everything began unraveling over finances.
Landmark's rent, utilities, and salaries were being paid by a Denver law firm serving Landmark customers. As it turns out, the same firm also was working with several other legal plan services, including Stonecipher's Pre-Paid Legal Services. Shortly after the Inc. article appeared, a senior partner at the firm, Richard Hughes, notified Landmark that his office would no longer pay the start-up's bills. Nolan maintains Hughes was pressured by Stonecipher; Hughes says he simply decided Landmark's marketing plan didn't make any sense. Nolan signed a corporate note to repay the firm $75,000.
Landmark moved into the offices of an insurance company, but after a few weeks was told it couldn't stay. Marketing was in limbo, the firm was broke, and no new investors could be found.
As a last shot, Nolan began trying to sell the plans at estate-planning seminars. He found, however, that the elderly attendees weren't interested in buying the legal plans; what they did want was to talk directly to financial planners and lawyers. Bingo, Nolan thought, a new business: he could make good money running seminars full-time, linking people with planners, and drawing a commission. "It produced capital immediately," he says, "and that's the position I'd been put into, needing a mechanism that would do that for me." Landmark went by the wayside. Nolan had something better.
Orr and Landmark's other principal, Lois Shoemaker, wanted to buy the company but couldn't raise enough money. "I really think Landmark was a good idea," Orr muses. "We set it up to be a better product than what was on the market. But I was seeing rainbows. Chris is a likable guy, but if you have to depend on him, he can be scary. He's too impetuous." In January, Orr and Shoemaker bought an employee-leasing company and moved into offices across the hall from the former Landmark site.
Landmark Legal Plans, meanwhile, still has 67 customers, who are being served by a number of Colorado law firms. The last contract runs out in September.
-- Leslie Brokaw* * *
Update: Keener-Blodee Inc.
There's a lot of "hurry up and wait" when starting a new business. Just ask Richard Keener and Leif Blodee. The cofounders of Keener-Blodee Inc., a manufacturer of stylish laminated-wood office chairs, had hoped to have their main factory up and built by last fall and orders flowing fast by this summer ("Hot Seats," June 1988).
Surprise. A delay between getting approval for an SBA loan and being able to draw on the money set back construction, and by the time they broke ground in September, winter was fast approaching. The building was finally completed this spring.
Orders are starting to creep in, and sales this year are projected at 3,000 units -- $300,000 in orders. "Everyone told us it would take twice as long and cost twice as much money," a resigned Keener says. "They weren't too far off." -- Leslie Brokaw