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The Contrarian: Spending with a Vengeance

An antibootstrapper discusses why, rather than pinch pennies, he went on a spending spree to give his clients a much higher caliber of service than he could otherwise provide.

Great Companies Started for $1,000 or Less

Bootstrappers cut corners, right? Not always. In April 1996, David Cowen launched Fanning Technical Search, a New York City recruiter for information-technology professionals. He had $5,000 in the bank. Rather than pinching pennies in the usual bootstrapping way, he went on a technological spending spree. No used computers for him. Instead, he plunked down his scarce money for a brand-new $2,800 Dell com- puter, plus $1,500 in software, for everyone he hired.

Within six months he had hired 10 people. Within eight months he had spent $16,000 on a phone system and hired a $45,000-a-year Webmaster who doubled as a network administrator, to guarantee, he says, that his recruiters were "never, ever down." By year's end he had bought two servers and soon thereafter subscribed to a T1 line.

"One of the key strategies that I've always believed in is reinvesting in your company and spending money in all the right places and absolutely buying the best, because it will serve you well," Cowen says.

Call it "Gucci-strapping." Fine. But why buy top-of-the-line technology when you're just starting out with scarce capital?

Cowen, 40, who had spent 10 years in the placement industry, knew that paper was clogging up the gears of the average head-hunting agency. If computers could free his recruiters from constantly fumbling through piles of résumés, he reasoned, the recruiters could spend more time making placements.

"If you were a candidate calling an agency in 1996, chances are that you would have been put on hold between three and seven minutes while someone found your résumé so they could figure out who you were and whether they wanted to talk to you," he says. "We put in a computer system so that when you typed in candidates' names, their records came up, their résumés came up, all of the notes came up, and you could give them a much higher caliber of service."

Nor did Cowen scrimp on training. Since his first year in business, he has been sending batches of newly hired recruiters to Kansas City for a two-day training session with nationally known consultant Peter Leffkowitz. It's not cheap. Although it costs Cowen about $15,000 to send 10 people to each session, he says that the expense is worth it. "To my mind, if 10 people over the course of six months did three extra deals," he says, "it was a breakeven."

Having committed to topflight training and technology, Cowen concluded that he could save money by hiring talented rookies rather than established superstars. He explains, "I could hire people with basic core skill sets and give them the tools that would enable them to work faster and more efficiently, and therefore make more money."

Of course, generating healthy cash flow has preoccupied Cowen from day one. He says that he worked like a maniac that first year, putting in 16-hour days and taking only one day off a week. Still, he says, he relied heavily on his five credit cards, each with a $10,000 limit and an introductory interest rate, ranging from 5% to 7%, to finance the start-up. The company's growth was remarkable. In the first year it grossed $1 million; by 1999 its revenues had shot up to $7 million.

By bootstrapping standards, Cowen indulged himself in another respect. Even in his business's first, frantic year, he took two weeks off for vacation -- and the number has increased in later years. "I'm a firm believer in four or five weeks of vacation," he says. "That's where I get my best ideas."

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Last updated: Jul 1, 2000

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