From sheer frustration
Back in the mid 1980s, whenever Mike Pratt hit his Salt Lake City health club, he started his workout by wrestling a too-big gym bag into a too-small locker. One day Pratt -- a high school graduate working as a car salesman -- pried out his bag, drove home, and headed for the drafting table he had acquired to support his design hobby.
Using cardboard, scissors, and tape, the 24-year-old athlete created the model for his dream duffel. He shaped the rectangular bag not only so that it would slide into a standard gym storage unit -- measurements he'd obtained that same day by calling several manufacturers -- but so that it would easily hold shoes, a water bottle, and toiletries. And unlike most soft-sided bags, Pratt's prototype surrounded a durable rigid frame that made it easier to access the bag's contents.
That wasn't Pratt's first invention. At 19 he'd designed a cup holder for use in cars and, thanks to a tip from a local businessman, arranged to have it manufactured in Macao. Five years later Pratt again looked to Asia and, based on a recommendation from another entrepreneur, contracted with a factory in Taiwan that he still uses to manufacture his bags.
23 % of the Inc 500 CEOs surveyed got the original idea for their business by spotting an opportunity in an industry related to one they worked in.
Back in the States, many retailers were skeptical about Pratt's Original Locker Bag. "Who's going to want to carry around a box?" one asked. But Foot Locker agreed to take a batch on consignment; after selling 50 bags in a single weekend, the sporting-goods chain ordered more. Sales soared as Nordstrom and other retailers followed suit. In 1987, Pratt officially launched his company, Ogio International. (The name, pronounced OH-gee-oh, sounds catchy but, Pratt says, means absolutely nothing.) The following year, Pratt recalls, "we had $8.5 million in sales for one bag in three colors."
These days Ogio (#473) employs 75 people at a 90,000-square-foot distribution center about 25 miles south of downtown Salt Lake City, plus an international sales force. The company, which had 2001 revenues of more than $47 million, still makes gym bags but now manufactures backpacks and golf bags as well. Pratt, now 41 and the father of four, still works out and, like many of his employees, sky dives, hang glides, and rides snowmobiles. "We're kind of an extreme company," he says.
From failing and trying something else
In 1996, Mike Robson was working full-time, helping to raise his three kids, and finishing up a bachelor's degree in business while simultaneously starting work on a master's. But Robson, then a chemical engineer, apparently still had a little room on his plate, which he filled after chatting with a fellow M.B.A. student over lunch at a Burger King.
It happened like this: Robson's pal, a sales rep for Diebold Inc., which makes and installs automated teller machines, mentioned that the manufacturer was having trouble obtaining "toppers," metal boxes that hold the ATMs' modems. Before Robson finished lunch, he'd decided something: "I said, 'I'm going to start a business. I'm going to start building toppers."
He launched his company that fall, financing it with a $20,000 home-equity loan. But eight months later he'd spent it all without selling a single box. Then he made a fateful sales call at a local credit union, where a bank official asked Robson whether he knew anybody who could spruce up a dilapidated ATM. Drawing on his chemical background, Robson cleaned, polished, and painted the machine until it looked new. His new business was born. "Suddenly, these people who wouldn't let me in the door before said, 'Come on over," he recalls.
As CEO of ATA Services (#180), in Salt Lake City, Robson still sells a few toppers -- very few. "We've never made back the money we spent to develop them," he says. But with 39 employees, $2.6 million in revenues for 2001, and maintenance contracts with 10% of the nation's financial institutions, he's cleaning up anyway.
From pure fear
Quick -- free association. Think about rural Iowa. Now think about a business need that might come to light there. Chances are, you didn't think of anything to do with boating.
But Jerry Handsaker did. As a kid growing up on an Iowa farm, he had loved boating with his family on the state's scattered lakes. He'd taken a 10-year hiatus from the sport while launching a career as a lawyer, marrying, and raising a family. Then, on the Fourth of July weekend in 1987, Handsaker went boating with friends on the popular Saylorville Reservoir near Des Moines. As darkness fell Handsaker nervously watched dozens of boats zipping around his group's unlit craft. Eventually, his friend left the boat's controls, dug around until he found a light on four-foot-long aluminum light pole, mounted it on the stern, and switched it on. Although the process took only a few minutes, Handsaker found it unnerving. "Not only were we not visible because we didn't have our lights on, we didn't have anyone at the controls," he recalls.
Once he was safely back on shore, Handsaker did a little research and discovered that most state-of-the-art, luxury-level boats had similar bargain-basement lighting. After talking to boaters and traveling to trade shows, he started designing a motorized light that, like a power antenna, could be raised, lowered, and switched on and off from the boat's controls.
Handsaker says that his facility with electrical work, like his love of boating, stems from his childhood. "I grew up on a farm, and we fixed a lot of our own equipment," he explains. So once he had put the idea on paper, he teamed up with an engineer, built a prototype, tested it, and patented the design. After trying unsuccessfully to persuade established manufacturers to license the concept, he decided to make the lights himself and founded Innovative Lighting (#424), in the northern Iowa city of Algona, later moving a couple of hours south to Roland (population 1,342), near where he'd grown up. By 1998, Handsaker had left his law practice to run the company full-time. Recently, he expanded into making lights for truck, trailer, and motorcycle manufacturers, a move that helped boost the 15-person company's 2001 revenues to $1.6 million.
Handsaker, who owns a boat, admits he's so busy that he doesn't hit the water as often as he'd like. But when he does, he sometimes flashes back to his company's genesis during a few scary moments on a big lake at dusk. "If necessity is the mother of invention," he says, "maybe fear is the father."
Anne Stuart is a senior writer at Inc.
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