Start-Ups from Scratch
Eight companies launched with (almost) no money down
First Team Sports
Mounds View, Minn.; founded in 1985; manufactures and distributes in-line roller skates and accessories
Founders: John Egart, David Soderquist
Current Stats: $35.5 million in revenues, 1.8% profit
Founding Capital: $1,000
Initial Salary: Nothing until the company went public, in 1987
Shameless Ploy: Listed friends, wives, and distant relatives on the company information sheet and gave them titles. Egart played phone tag with himself. "We had a 'credit manager,' a 'warehouse manager,' the whole bit," he says. "I'd put people on hold, wait, and pick up again!"
Pressing Start-up Need: Sales leads
Creative Solution: Borrow from a former employer. At trade shows Egart hovered around the Adidas booth, waiting for big customers to drop by. "When they'd leave, I'd go introduce myself and walk them down to my little booth, where my partner stood ready to pitch the line."* * *
Noble Oil Services
Sanford, N.C.; founded in 1984; provides waste-petroleum services
Founder: Jim Noble
Current Stats: $5.4 million in revenues, 7.5% profit
Founding Capital: $4,000 bank loan
Initial Salary: Nothing for the first year and a half
Shameless Ploy: Ignored zoning restrictions. Operated with 15 employees out of a two-bedroom apartment. "Both bedrooms were offices," says Noble. "The living room was an office. The kitchen we converted to a laboratory where I kept glassware and oil samples. I stored hose on the balcony. On paydays, the employees came at 4 o'clock and parked their trucks outside. I tried to get everybody turned around before the residents got home from work."
Pressing Start-up Need: Start-up capital
Creative Solution: Buy a backer. His girlfriend's well-heeled brother agreed to cosign an initial $4,000 loan but asked for equity in return. Noble offered to, in effect, buy him out on the spot. Both parties agreed on $500. Noble left the table with $3,500 -- $2,000 for a truck, $1,500 in operating capital -- and full control of the company.* * *
Alpine Computer Systems Inc.
Holliston, Mass.; founded in 1988; provides computer-networking services
Founders: Bob Willis, Michael and Tom Sheehan
Current Stats: $9 million in revenues, 10% profit
Founding Capital: $300 on personal credit cards
Initial Salary: Nothing for two years
Shameless Ploy: Won a rate increase from their only customer by playacting. Invited the customer in for a consultation. "The whole concept was that we were getting so busy we needed to raise our rates," says Willis. "So the brothers called our own number from the other room. I'd pick up the phone and make up technical conversation."
Pressing Start-up Need: Office space
Creative Solution: Barter. Subleased 500 square feet of warehouse space from Cape Cod Soda. In lieu of rent, the partners stuffed rubber washers in bottle caps for four hours daily.* * *
Papa John's International
Louisville; founded in 1984; owns and franchises pizza restaurants
Founder: John Schnatter
Current Stats: $164 million in systemwide sales, $89 million in total revenues, 5.5% profit
Founding Capital: $1,600 in personal savings
Initial Salary: Nothing
Shameless Ploy: Started in a broom closet in the back of a bar and survived on profits from selling rivers of cheap beer. "I knew the bar would support me," says Schnatter. Later he sold the bar. "If you're selling 50¢ beers and you're doing $7,500 a week, you're getting a lot of people drunk."
Pressing Start-up Need: Cash
Creative Solution: Float checks. "On Fridays I used to figure out what the three or four stores I had were going to do for the weekend, and then at 4:05 I would start mailing out checks. I never had one bounce. We're a cash business. I could beat the mail."* * *
Arizona Sun Products
Scottsdale, Ariz.; founded in 1982; retails, wholesales, and direct-mails skin-care products and gifts
Founders: Robert and Ellen Wallace
Current Stats: More than $1 million in revenues, 30% profit
Founding Capital: $1,000 in personal savings
Initial Salary: Nothing for four years
Shameless Ploy: Raided garbage cans. "At the end of a day, after my retail neighbors went home, I'd change my suit and slip out the back door into this alley of dumpsters. I'd bring a giant bag and fill it with popcorn, packing materials, and boxes."
Pressing Start-up Need: Staff
Creative Solution: Tap a needy nonprofit. "We paid a local church group $1,000 and provided pizza and a deejay to round up 200 kids. They put together the packaging for 500,000 pieces in an afternoon."* * *
Santa Rosa, Calif.; founded in 1987; develops and markets health foods such as tofu-based cheeses
Founders: Richard and Sharon Rose
Current Stats: $3 million in revenues, 5% profit
Founding Capital: $400
Initial Salary: Nothing for the first year
Shameless Ploy: Stuffed suggestion boxes. Whenever the Roses found a health-food store that didn't carry their product, they'd slip a note (or six) into the suggestion box, clamoring for TofuRella. Friends were expected to do the same.
Pressing Start-up Need: Business savvy
Creative Solution: Be someone's project. Picked by Service Corps of Retired Executives (SCORE) to take part in its Adopt-an-Emerging-Business Program. Received a year's worth of (almost) free guidance from local experts in marketing, finance, and management.* * *
PacificCare Wellness Co.
San Francisco; founded in 1983; provides work-site health programs
Founder: Karen Behnke
Current Stats: $6 million in revenues, 12% profit
Founding Capital: $0
Initial Salary: Nothing for three years
Shameless Ploy: Financed her start-up with 17 credit cards. "If you open them all on the same day, they'll all be approved."
Pressing Start-up Need: Faster collection of accounts receivable
Creative Solution: Bill aggressively. "When I got started, our corporate customers thought of us as a 'medical' service, which meant they thought they could pay 90 days postdelivery. The biggest thing we did was to bill at 30 days, with 1.5% interest every 30 days after that. In year five we began asking our annual accounts for a 25% deposit on their fees."* * *
Milford, Conn.; founded in 1965; operates and franchises sandwich shops
Founders: Fred DeLuca, Peter Buck
Current Stats: $2.2 billion in systemwide sales, $170 million in royalties to headquarters, profitable
Founding Capital: $1,000 (borrowed from Buck)
Initial Salary: $14 a week
Shameless Ploy: Chose to open a second shop rather than pay suppliers. "If we hadn't, we definitely would have gone out of business -- the first store was in the worst location I could have imagined, and we had no customers. Without new revenue we wouldn't have survived."
Pressing Start-up Need: Cash
Creative Solution: Get personal. Paid meat, bread, vegetable, and paper suppliers in person. When money was tight, DeLuca told them about it. "As we grew they financed us, extending credit from a week to up to four months. They sort of adopted us. I suspect if we were more sophisticated, with once-a-month pay in an envelope with a stamp, we wouldn't have gotten credit."
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