Fifty-one percent? Were they nuts? There's desperate and there's desperate, and giving away a controlling interest when you're starting your own company could make it seem as if, well, you were starting someone else's. The Inc. crowd, after all, tends to be an obsessively independent bunch, with the average Inc. 500 CEO owning 59% of the business, and about a quarter of all Inc. 500 CEOs owning 100%.
But there was a caveat for Lammert and Weber, and a good one: both they and their investor were keen on arranging a mandatory buyback of equity. And sure enough, this past summer, five years into the business, the two founders paid out nearly 9% of the previous year's $3.2 million in revenues and became 100% owners of their company for the first time.
"Obviously, that had been our dream, to be partners and co-owners in this business," says Lammert. "But that arrangement was an excellent way to make that happen."
The structure of the arrangement had a couple of tiers. The pair's investor, Jack Schumann, was willing to help fund the start-up stage of Wisconsin Technicolor, but only if he had a controlling interest in the first years. He would hand over $50,000 for 51% ownership and be a partner in the big decisions. He would also be a consultant on various issues, from how to run a credit check to how to budget; for that Lammert and Weber would pay him 5% of gross sales each month. Schumann agreed to send over the color-separation business of his own company, Schumann Printers, now a $25-million operation in Fall River, Wis., for at least one year. (At first, his work accounted for 95% of Wisconsin Technicolor's business; now it's 3%.) And at the end of five years, he would sell back his equity.
Not that both sides didn't have their qualms. For one thing, Pewaukee, Wis., where Wisconsin Technicolor is based, is a national center for the print business. At the time Lammert and Weber were starting up, there already were some 75 separation houses tripping over one another for work. That made Schumann queasy, as did his initial reaction to Lammert and Weber themselves.
"I was turned off," he concedes. Lammert and Weber had made their first appointment with him under the amorphous guise of "discussing business," and for the first five hours of a six-hour meeting, Schumann thought they were soliciting his business. Once they got around to asking him for the cash to start the venture about which they'd just rhapsodized so voluminously, they'd already created an impression -- and not a stellar one. They seemed cocky, not the sort he wanted working for him. But their self-assurance also reminded him of himself when he was starting out, and that proved irresistible.
"I think it was a real good benefit for us," says Lammert about hooking up with Schumann. "When things were going well, and the company was starting to make some money, he helped us keep our feet firmly on the ground. We very aggressively go out and seek new business, and try to be profitable and design good work flows for our clients, and I guess I attribute a lot of that to Jack." As for Schumann himself, his $50,000 investment turned into $280,000 in five years -- a 460% total increase, or a 41% compound annual growth rate. -- Leslie Brokaw
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Research assistance provided by Kevin McDevitt.
1994 INC. 500 FOUNDERS' SURVEY
The idea for the company came from:
In-depth understanding of the industry/profession 37%
Market niche spotted 36%
Brainstorming 7%
Copying someone else 4%
Hobby 4%
Other 11%
(May not add up to 100% because of rounding)
It took this long to start the company, from the original idea to the beginning of operations:
A matter of weeks 21%
A few months 32%
Six months to a year 26%
More than a year 20%
(May not add up to 100% because of rounding)
Here's who helped develop the idea for the company and helped turn it into a business:
Partners 44%
Spouse 28%
Potential customers 19%
Colleagues in same industry 19%
Professional advisers
(lawyers, accountants, etc.) 11%
Potential backers 6%
Potential suppliers 5%
Family involved in the company
At start-up stage Today
Spouse 31% 28%
Siblings 11% 16%
Parents 8% 8%
In-laws 4% 7%
Son(s) 4% 13%
Daughter(s) 3% 7%
The greatest source of stress
At start-up stage Today
Business finances 50% 19%
The need to succeed 23% 13%
Time commitments 10% 36%
Business competition 6% 12%
Relationship with family 5% 1%
Relationship with employees 4% 18%
Health less than 1% less than 1%
Own finances less than 1% 1%
(May not add up to 100% because of rounding)
The most important reason the founder started the company:
To create something new 29%
To control my life 24%
To make money 14%
To be my own boss 14%
To prove I could do it 10%
Frustration with a large-company employer 8%
Not rewarded at work 1%
Layoff or no advancement 1%
(May not add up to 100% because of rounding) n
