Donn Rappaport and Liza Price, husband and wife cofounders of American List Counsel Inc., tried to continue running the company together after getting divorced. Here's why it all fell apart.
Despite the breakup of their marriage, Liza Price and Donn Rappaport did all they could to continue comanaging their successful company. They took smart legal steps; they maintained their professionalism; they acted with the best intentions. And in the end, they didn't have a prayer
Liza Price and Donn Rappaport never meant to make their employees cry. But when they announced to their key managers in the fall of 1992 that they were splitting up, the president and chairman, respectively, of American List Counsel Inc. (ALC) were unprepared for the reaction they got. Thinking they were merely formalizing what everyone already knew, the couple had gathered the group together for a somber lunch. "We said, 'We have some news," recalls Rappaport, "and then we told them we were separating. The reaction wasn't that different from when we told our children. It was very sad."
Price and Rappaport were taken aback because during ALC's then 14-year history of building and managing customer-prospecting databases for national catalogers, publishers, and marketing firms, the couple had consciously tried to create the kind of professionally run company at which either of them would be dispensable. Unlike many couples who tend to view the business as their baby, the pair regularly welcomed outside consultants and shared decision making and profits with employees. They even had the business equivalent of a prenuptial agreement in place to ensure their company's survival. "What I think neither of us really ever grasped," says Rappaport, "was how really, truly embedded in the culture of this company was the idea that the owners were married to each other."
Like many company success stories, ALC's comes with the stereotypical hard-luck start. In 1978 Price, 28 years old and seven months pregnant, lost her job creating marketing plans for Ed Burnett Consultants. "The guy fired me and told me he was doing me a favor because I was pregnant. He thought I'd be able to collect unemployment while I was on maternity leave. At the time it didn't feel like a favor," says Price. "I didn't take it very well." Taking a few customers with her, she started ALC out of her basement the next day.
Supported by her husband of five years, Donn Rappaport, who was running the direct-response division of a New York City advertising agency, Price set about building a small lifestyle business compiling, managing, and brokering mailing lists for companies like the Goldhirsh Group, which owns this magazine. (ALC still manages and brokers Inc.'s lists.) The work enabled her to stay home with her child while earning spare cash. Rappaport lent visionary support in the evenings.
Price's plan to stay small failed. Her earliest customers themselves grew so fast that within two years she had four employees crammed into the basement of the couple's Scotch Plains, N.J., home, and a fifth working out of an extra bedroom. Fran Green, then a personal friend and now a key manager at ALC, remembers the early frenetic pace: "It was crazy. Liza had just had a baby. So in between nursing, she'd type purchase orders." When the sixth worker took over the family's den, Price, pregnant with her second child, finally started shopping for office space. The company wasn't quite three years old and was grossing roughly $3 million annually.
Around that time, Rappaport did what an increasing number of spouses do every year--sometimes for better but often for worse: he hopped into business full-time with his wife. And she welcomed him. "He was bringing a marketing expertise to the company that none of us had," she says. Early on, the pair signed a simple partnership agreement delineating the terms of ownership--something far too few entrepreneurial couples do. Even though, under New Jersey law, Rappaport automatically had rights to the assets of ALC, the agreement gave him 50% of the company's stock in writing. It granted Price a right of first refusal, she says, giving her the first option to buy Rappaport's shares.
The couple's willingness to visit the often emotionally charged issue of drawing up a written agreement was remarkable, according to Azriela Jaffe, a consultant to entrepreneurial couples. Only 20% of business partners properly document their business relationship from the outset, she explains. The percentage of business-owning couples who do so is much lower, she estimates. "The worst part is that they don't do it because they think it'll jinx them. They think it will somehow make them start acting as if they had a problem marriage."
Rappaport and Price thought little about how being married would affect how they'd run a business. Perhaps that's because they were such a natural fit. Rappaport calls himself a big-picture guy, born to market and sell. Price says she's more at home working the back end, keeping software up-to-date and taking care of employees and customers. "If you were a headhunter, you couldn't have gone out and found a better-matched pair to run the company," says Don Nicholas, a longtime ALC customer and the owner of publishing-services company Blue Dolphin Group Inc., in Wayland, Mass.
Dreaming together of the ideal work and living space, Price and Rappaport purchased an 18th-century dairy farm in Princeton, N.J., for $250,000. Employees wax poetic about ALC's early days there. Kathy Witwer recalls going from her previous job on the 30th floor of an insurance building on Michigan Avenue in Chicago to the relative wilderness of ALC--with employees dressed in shorts, poolside picnics, and Price's animals, including horses, sheep, some peacocks, and the goat that used to sneak into the offices. Drive up the winding path to the farmhouse today, past the white picket fence lined with black lanterns, and you can almost imagine Price in a floppy straw hat, crouching over a circular stone flower bed, planting impatiens. "We had to get rid of the goat," Witwer explains, "because he jumped on the cars."
Price and Rappaport originally planned to live upstairs and work downstairs. But by the time the town had approved the zoning and the contractors had finished remodeling, in late 1980, ALC had 11 employees, leaving little room for living space. Idyllic though their farm may have been, the tempo was anything but serene in the early 1980s. As the direct-mail industry blossomed, so did ALC. From 1980 to 1985 gross sales grew from $1.4 million to $16.3 million, earning the company three consecutive spots on the Inc. 500 list, in 1984, 1985, and 1986. Winning big accounts such as U.S. News & World Report in 1986 forced the $17.2-million company to add a $700,000 modern wing, two or three times the size of the original farmhouse, to accommodate close to 60 employees. By the late '80s, revenues were still growing by more than 20% a year.
