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

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?

BOWEN: I don't think so. I tried to change the culture of my company a couple of years ago, and I got in extreme hot water. I had never borrowed operating capital in 17 years of my company, but I brought in a consultant who told me we should leverage, we should use the bank's money. We actually slowed down because we were no longer concentrating on growing at a profit. We were concentrating on how we could use this money. It took the focus away from our real business.

INC.: The money took your mind off the business?

BOWEN: Yes, it did. It took our minds off the way we'd always operated. We always had a step-by-step plan. We knew how much money we had to operate with, and we grew around the money we had. All at once we had this outside money, and it just distracted and slowed the company down.

RODDICK: You hate it when people come in and try to tell you what to do, people who come in with big-money thinking.

INC.: What about disguising your poverty in the early days?

QUADRACCI: We used to call them dog and pony shows. The client would come in and see rolls of paper stacked up but not know that in the middle it was hollow. Or we would have the press printing this one magazine, which had a run of maybe 15,000. The press would print 25,000 an hour. Here comes the client, and we'd start the press up and get him to move very quickly because the paper was going through. Then we'd get him out into the office, and suddenly the whole plant would shut down. "What was that?" he would say. "Oh, it must be everybody breaking for lunch." It's perception.

RODDICK: I used to have friends call me when a potential franchisee was arriving so I could have an absolutely ridiculous conversation. Ring, Ring. "Oh, yes, this is where you'd like the franchisee, Barry Street, Edmonds? No, I don't think it's the right town for that. Besides, we've already had 14 other applications." That went on all the time.

BOWEN: We'll try to work you in.

QUADRACCI: The best thing I ever did in my business was that I spent some money. I decided that if I can't beat them, I have to join them, and I spent the money to have my operating plan formatted and put into an Arthur Anderson folder. It was a Big Eight operating plan in a Big Eight, Arthur Anderson folder.

RODDICK: You stole the folder.

QUADRACCI: No, no. I had them go over my cash projections, balance sheet, and so forth. Not that the local CPA couldn't have done the same, but a Big Eight name is the thing you need to validate even the smallest idea. Validation. That's what I spent the money for. Then I sold the idea myself.

RODDICK: But that's a lot of money, Arthur Anderson. QUADRACCI: Not as bad as you might think. They have small-business divisions, and they will do an operating plan for you at a very reasonable cost. At least it helps you get the numbers put in the right format and the proper presentation by someone who is respected by the banking community.

HENDRICKS: And the bankers can believe the numbers, can believe that somebody didn't just write them down.

QUADRACCI: You sit there and let Arthur Anderson ask the questions that the bank is going to: what about this cash flow? What's readily available? It gets you somebody on your side to prepare the financials that potential investors are going to ask for anyhow.

INC.: Not having money, bootstrapping -- does it put you in positions of having close calls ethically? You've never been tempted to shortcut? Anita, you accused Harry of stealing the Arthur Anderson folder.

RODDICK: Well, if it was a criminal act, I wouldn't do it, but you could put AA on the folder or you could put Arthur Johnson or something. It doesn't mean anything, but you certainly don't ever do criminal acts, I don't think, unless you're stupid.

BOWEN: Never shortcut your customers -- that's what you're talking about.

INC.: I'm talking about a fine line between deception and impression. You have a prospective franchisee come into the store and you stage a little bit of theater on the phone with a friend, creating the illusion that the company is much larger than it is. Is that deception?

HENDRICKS: Are you kidding? You don't think GM does that? When you're having your picture taken, you pull your gut in. Is that illegal?

QUADRACCI: Puffing is not something we invented.

INC.: You still think of yourself as a bootstrapper?

QUADRACCI: Yeah. Maybe it will change with my kids, but once you're a bootstrapper, you're always a bootstrapper. You just live that way.

BOWEN: I don't buy expensive office furniture and things like that. I don't want people to think that we're too successful.

INC.: But if you like nice furniture and can afford it now, as most of you can, why not?

HENDRICKS: We still buy used, but nice, furniture. My desk came from somebody that had gone bankrupt. I've thought about the tears that had to fall on that desk, and it's something that reminds me everyday I'm not going to let this happen to me.

RODDICK: The staff doesn't want me in fur coats or in big cars or acting like I've got the million dollars that I have. They want me to be as I am. Other people, the City [London's Wall Street], want me to be respectable. So you are dealing with multitudes of different people. There are so many planks in the platform of running a business.

HENDRICKS: Daily you meet somebody down by a hamburger shop, and an hour later you're playing multimillionaire.

I want to remember when I didn't have any money at all, so my wife and I rent one of those little resorts in northern Wisconsin -- no pizzazz, no phones, pull-out coil spring mattress. We get a rowboat and go out for an afternoon with a can of beans, because that's the way we used to do it. We do that three or four times a year; I don't want to forget where I came from -- not that it was bad. I just want to know that I can go back.

INC.: But you do spend money now on yourselves?
HENDRICKS: I always wanted a boat, and now I'm having a hard time. I'd like a 60-or 70-foot boat, but it's against everything I've stood for. The reason I want a boat is that I want to know my managers better, and if I invite them to my home, they're uncomfortable. A motel is too cold. Well, if I buy this boat, I'll have them come, and I'll say, "If you bring any more than shorts and a T-shirt, you can't come aboard." I was going to call it the Friendship and have glasses made I could give to guests. But I'm worried. It's a culture crisis I'm going through. I'm afraid they'll say, "Look at that fat-cat bastard."

RODDICK: If it bothers you to have money or to spend it on things you want, keep what you want or spend it, but give more away. Give away to social causes as much as your boat costs. I can guarantee that you will wake up in the morning and not have a problem with your boat.

BOWEN: I put on my jeans occasionally and get in the plant and do the same work as my people -- my manual printers -- I get back there and work a day with them. It reminds me of how hard I had to work manually. I don't have to do that anymore, but I want to remember it. It also shows my people that I understand the work they're doing and how hard it is and that I appreciate it. They like to see me back there. We have a real good relationship.

JACKSON: But by definition, we're different.

QUADRACCI: That's right.

JACKSON: By being entrepreneurs and having taken the risks and done all the things that we've done, we're not like most of the people in this country. You're trying to be like they are, but you're not anymore.

INC.: Given how passionately all of you feel about this bootstrapping and how it's affected your businesses and your lives, what's it done to your attitude toward passing your wealth on to your children?

JACKSON: I have a nice will.

BOWEN: I've already given my sons a part of the business because they've played such an important role in it. They began working for me when they were 14 or 13, and I felt they've had as much part in building the business as I did.

INC.: But if you pass on the wealth, you deprive your kids of the opportunity to do what you've done.

HENDRICKS: I have seven children in the business, plus one son-in-law and one daughter-in-law. Nine. Every one has a key post, a top post. It scares me to death, the idea of giving them the money. I just don't know what to do. I think about the generation skip, but then I'll ruin my grandkids.

QUADRACCI: Give it away.

RODDICK: I deprived my kids of a normal childhood setting by my not being constantly at the house, so I feel I've compensated. I've given them a trust. My own wealth, i.e., the shares that I own, that they will not have. That is being given away.

QUADRACCI: My children did suffer. The milkman wouldn't deliver. We were afraid to go to the grocery store because we did not pay the bills, and they remember that. They know what we created was out of ashes. On the other hand, it would be absurd for me to insist they work their way through college. I don't want them to have to go that way.

HENDRICKS: My kids did work their way. I paid whatever the state tuition was, and they all left the state and went to colleges elsewhere. My oldest daughter was very upset with me about that. She has two sons and says, "Dad, I understand what you did now."

INC.: All of you except Mary Anne could walk away from your businesses now. You don't need any more money.

BOWEN: I've already started two or three other things.

RODDICK: I want to know why anybody would want to give up their business after they started it. I don't understand why.

HENDRICKS: Your employees drain you. The more employees, the more they drain.

QUADRACCI: Or clients.

HENDRICKS: You get older and tireder. You get worn out. You say, "What the hell for? When I was on top of the mountain, hell, it didn't look any better than when I was at the bottom."

My main concern about my company is that if I did get out, somebody has to carry on with the employees in mind. To hell with the money. I realize how little use money is.

JACKSON: Because you have it.

INC.: What would you say back when you were sweating out bootstrapping your own business if you had read a magazine article in which a bunch of successful entrepreneurs sat around talking about how it builds character?

QUADRACCI: It gives your company a soul.

INC.: Your response back then, though?

RODDICK: The last thing in the bloody world I would have wanted to read about were platitudes like character building. I wanted pages of tricks: 20 things to get your customers into the shop, 40 things that told how to sell product in a different way, creative ideas on how to sell or market that store, how to get into the press.

QUADRACCI: Dog and pony shows.

RODDICK: We're all Barnums.