Neil Johnston knew exactly what kind of entrepreneurial life he wanted -- eventually.
What I Know Now
Four times Neil Johnston has tried growing a company -- and the first three times he got it wrong. But that's how he learned the lessons that enabled him to progress from a partnership that made him miserable to the company he has now -- one designed to provide the life he wants. Here, in summary form, are Johnston's four acts, sketching his march from misguided ambition to financial and psychological sanity. It wasn't as easy as it looks.
Company #1: Archer Holdings
Business: A property-management company
The Plan: Young turks amass a fortune
Number of Partners: Five, including Johnston, who owned 20% of the business
Capital: Minimal -- maybe $1,000 each
The Lowdown: "Too many different people with different thoughts," Johnston says. The partners' first job was to manage an apartment complex in Carbondale, Ill., that was owned by one partner's grandfather. "We were all going to quit our full-time jobs and make the company our full-time job," Johnston recalls. "It was 'Sky's the limit.' We were dreaming of a large company."
The Epiphany: Johnston, who had a good job at the time, spent his weekends painting apartments in the complex, but some of his buddies turned out to be free riders. In the end, all concluded that the business was a money loser -- and a distraction from their day jobs.
SO FOURTH: Neil Johnston's happiness as a business owner required starting or relaunching businesses four times.
Company #2: ID Label & Systems
Business: A manufacturer of labels for inventory management
The Plan: A group of partners capitalize on the new technology of digital presses
Number of Partners: Five, including Johnston, who owned 25% of the business; his brother owned another 25%
Capital: A $100,000 note that came due after six months
The Lowdown: "I quit my job for this company. I was at it full-time and making no money. Our overhead was four grand a month, and we didn't get sales until months four and five, and they were only about $22,000, so we couldn't pay back the $100,000."
The Epiphany: "I had told [one of my partners] that my job was to bring in business and his job was to bring in financing, and that I wasn't going to worry about it." Again, Johnston was confronted with the peril of relying on others too much. Faced with not being able to pay back the note, Johnston made a deal with another label company, which acquired ID Label's press and Johnston's expertise in exchange for paying off the $100,000 note. Johnston earned $22,000 a year in salary while he mastered the label business. Eight months later, he was back in business for himself.
Company #3: ID Labeling Systems, the one-man show
Business: A one-man label-printing shop -- Johnston managed to spin himself off from the business that had bailed out Company #2
The Plan: "I figured if I failed this time, that would be three strikes and I was out [of entrepreneurship], and I'd go back out on the job market," says Johnston.
Number of Partners: Zero. Partners suck.
Capital: $100,000 in venture capital and $10,000 in personal credit-card debt
The Lowdown: Johnston persuaded his bosses at the business that had rescued Company #2 to let him strike out on his own, so long as he sold labels to them, too. He landed a $150,000 account at his first trade show. "I've never had that success at a trade show since," he says.
The Epiphany: Dirty hands make for a happy soul. The sales guy filled with hubris discovered he loved every step of his business, from getting the sale to making the labels to packing and shipping them to his customers. "I didn't think I would like production at all, but I learned that I liked running the company by myself because I had to take care of all the production and manufacturing. I like to get my hands dirty -- it fosters a sense of pride, a 100% satisfaction."
76 % of the Inc 500 CEOs surveyed said that the economic downturn rendered "no noticeable effect" on their work life.
Company #3A: ID Label (#423)
Business: Same as Company #3, but with partners, because the whole not-having-partners thing means you work too much
The Plan: Valuing the company at $1.2 million, Johnston sold a 30% stake to a neighbor; then, last June, the two partners merged their business with one of their biggest customers, a one-man company that sold bar-code labels to libraries
Number of Partners: Three, with Johnston owning 41% of the company
Capital: $383,000 contributed by the partners
The Lowdown: "When it was just me, I was working 75 to 80 hours from Monday to Friday, and it was just killing me. I was making $180,000 to $200,000 a year, so I was doing good, but there was only so much good I could do. And it was taking a toll on my personal life. I have two daughters at home who were growing up without me."
The Epiphany: "I don't care for size; I care for profit. I don't care to have 50 employees -- we can stay at this size and still do $5 million a year. As soon as I brought on [my first partner] my income dropped to $140,000, but my workweek dropped to 65 hours a week almost immediately. Now it's at 50 to 55 hours a week; I leave at 5:30 every day, I play golf twice a week, and I make $220,000 to $250,000 a year. Each of the partners is putting $40,000 into our retirement. And I have peace of mind. I can go home and not worry about anything." After four iterations, Johnston's business finally gives him the life he wants.
The Entrepreneurial Ego
What I Know Now
Until You Get It Right
The Question, Popped
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MIKE HOFMAN was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City.