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Street Smarts: My First Year

When my start-up found itself face to face with catastrophe because of conditions beyond my control, I learned how to cope

Thirty years is a long time to be in business, and it's sometimes difficult to recall exactly what happened when. But there is one period that, looking back, most people remember clearly, mainly because it represents such a sharp break from whatever they were doing before. I'm talking, of course, about Year One.

My first year in business began on August 13, 1979, about the time Inc. was coming out with its fifth issue. On that Monday morning, I started my first company, Perfect Courier, a messenger and delivery service. (I'd had a law office before, but that doesn't count.) I remember the year as incredibly exciting -- I mean, just overwhelmingly exciting. Whenever I turned around, new opportunities presented themselves, and I spent way too much time thinking about them. Like most first-time entrepreneurs, I didn't understand the importance of maintaining focus -- of not letting yourself get distracted from building your main business until it's able to sustain itself on internally generated cash flow and you've begun to establish a good reputation in the marketplace.

But opportunities weren't the biggest distraction. My investors were. I had eight of them, accountants and lawyers all, each of whom had put up $25,000. Without their money, I couldn't have started the business, and so I owe them a debt of gratitude. That said, they certainly made me pay -- in part by reinforcing my own fixation on the top line. You'd think accountants would know that profit and cash flow matter more than sales, but the company's growth rate was all these guys cared about, and it was never fast enough for them. Not that we grew slowly. Perfect Courier went from zero to $12.7 million in five years and landed at No. 47 on the 1984 Inc. 500. Yet my investors were never satisfied. They always wanted more, more, more, and let me know it every chance they got.

But of all the challenges I faced that first year, one in particular stands out in my mind. It taught me an important lesson about what to do when you're suddenly confronted with potential catastrophe because of conditions over which you have no control -- something a lot of companies are facing today. In my case, the problem wasn't a recession. The United States was in one, but recessions can be good for start-ups, as I've noted before (see "Starting Up in a Down Economy," May 2008). Rather, the problem was a strike of New York City transit workers that shut down all subway and bus lines and brought business in the city to a standstill.

We had seen it coming. The union and the Metropolitan Transportation Authority had been negotiating since early February 1980, and as the strike deadline of April 1 approached, they were still miles apart. A strike seemed inevitable. To make matters worse, it looked as though workers at the Long Island Railroad were going to strike at the same time.

I realized I was facing a potential disaster. Perfect Courier was barely seven months old. We were doing about $30,000 or $40,000 a month in sales. Deliveries by car or truck accounted for about one-third of our revenue. The rest came from messengers who got around the city on public transportation. Losing the messenger sales would cripple us. Granted, we could live off our receivables for a while, but we wouldn't be generating very many new ones. What would we do when the cash ran out?

And there were other issues: How would our people get to work? For that matter, how would our customers' people get to work? Would we be able to keep selling? Would our customers stop paying us? How would we meet payroll? We couldn't very well lay everybody off for the duration of the strike, which -- for all we knew -- could go on for months. Somehow, we had to come up with a plan that would allow us to survive until some sort of settlement was reached. But what kind of a plan?

I was at a loss. I decided I needed advice from someone who'd been through the previous transit strike, in 1966, and could perhaps tell me what to expect. As it happened, one of our clients was a major accounting firm called Oppenheim, Appel, Dixon & Company. The head of the mailroom there was a guy named Sam Revson, who'd been around forever and whom I held in high regard. Because the strike was scheduled for the busiest part of the tax season, I figured Sam might have made some contingency plans, and I wanted to know what they were.

I dropped by his office one day in the middle of March. "Sam," I asked, "what are you doing for the strike?"

"Why?" he said. "Are you thinking of transporting people during the strike?"

The thought hadn't occurred to me, but it sounded like a reasonable possibility. "Yeah," I said.

"That's a great idea," he said. "We could really use you. It makes sense, because you have vehicles already."

"Yeah," I said. "They're ready to go."

"Particularly being located next to Penn Station, like you are," he said. "Assuming the Long Island Railroad doesn't go out, people could just walk across the street, and you could take them downtown. But how are you going to handle the pickup at the end of the day? Have everybody meet somewhere?"

"Yeah," I said. "That's what I'm thinking."

"It's probably the way to go," Sam said. "What are you going to charge?"

"I figure $20 a person," I said, picking a number out of the air.

"Each way or round trip?" he asked. He didn't seem to have any problem with the price.

"Each way," I said. "So, $40 round trip."

"How are you going to know which people are coming back with you?" he asked.

"Once we take them downtown, we assume they're coming back, and so you have to pay for the round trip."