In 1992, Daymond John's one-year-old clothing company, FUBU, had scored what initially felt like a major victory. John had returned from FUBU's first display at a major retail trade show in Las Vegas, where the company had secured $300,000 in preorders. But there was a problem: John didn't have the cash necessary to get those orders to customers.
He tried to apply for a loan, but having never applied for one before, he didn't understand how to fill out the paperwork. After being rejected by 27 banks, John realized he needed to come up with another solution--quickly. He turned to his mom, who came up with the cash by mortgaging the family's house (where FUBU also manufactured its clothes) for $100,000.
That maternal leap of faith paid off for John: FUBU went on to generate more than $350 million in annual revenue by 1998, a success that helped land its founder a role as a judge on ABC's Shark Tank. But at the time, John says now, getting into that situation was an "act of stupidity."
"I didn't have any financial intelligence," John says. "I knew that I had limited knowledge of manufacturing and production, and I knew that I didn't want to trust my money with people I didn't know. This was a way for me to control my own destiny."
Inc. recently asked John about the best piece of financial advice he ever received. During the conversation, excerpted and edited below, he also described how his financial intelligence developed as his business evolved from a homegrown operation to a global brand.
The three people who gave him the best financial advice
"I got the first piece of advice when I was 22 years old, from a guy who owned a little bodega in my neighborhood. He told me, 'If you really want to start a company, you better dig under your couch for a couple of extra dollars; you've got to stop going out to dinner four times month; you've got to trade in your car for a cheaper one, and raise that $40,000 or $30,000 dollars, if you can, by yourself.'
The second piece of advice came from Joe Nakash, who created the brand Jordache. Most of the super wealthy people that I know, every time they find out ways to save money on their taxes, they do it--without cheating, or trying to cheat. He told me, 'Think about it. If you make $100--and it was so hard to make that $100--and then you give away $50 of that in taxes, now you have to go and make another $100, to come back with that same $100 you initially made. Wouldn't it be smarter to make $100 and give away $30 of it, or $35 of it?' People are so busy, they say, 'Let me just get my taxes out of the way and pay those,' instead of trying to retain the most, legally, that you can. But that way you can invest it back into philanthropies and other businesses.
The third piece of advice came from an older gentleman I met in the garment industry, named Hal, after FUBU had landed a large partnership. He said, 'Kid, look around at all of the people who are coming up around the same time as you. Trust me, don't spend it all--because it will disappear.' That was very profound to a kid who was 28 years old and thinks that the money will be around forever."
One purchase he would make differently
"When FUBU started to turn a little bit, instead of improving the product, or finding a new market to sell it to, we ended up spending and buying more ads. It was costly--those were $10 million, $20 million, $30 million spends. This was around 2003, when business started to slow down in America, but it was picking up in Asia, Africa, and Europe.
In hindsight, knowing that fashion has its ups and downs, what we should have done is taken the $20 million or whatever and built more pipelines in countries [in those continents], instead of thinking that just taking out these ads was going to change everything in the United States."
On the moment he first thought of himself as rich
"I was 30 years old, and I bought myself for my birthday a Rolls-Royce, and moved into my 15,000-square-foot house. But I was still extremely paranoid, because fashion is so fickle, so I just kept thinking, 'What should my next steps be?'"