Time to replace yourself (cont.)
Hire a CEO with deep pockets
Like most successful entrepreneurs, Seth Lippert and Sergio Fernandez de Cordova saw an opportunity where others didn't - this time in the crowded, $6-billion-a-year outdoor-advertising market. As they walked around New York City, they noticed empty or underutilized space on the sides of buildings, scaffolds and billboards. Why not fill that space with ads?
After founding Fuel Outdoor (fueloutdoor.com) in 2003, the duo went door-to-door pitching clients to advertise in those spaces, working relentlessly and even sleeping in their office. The New York City-based business exploded in its first year, going from owning the rights to sell advertising on six properties to owning the rights to 35. Because they had to pay for each new spot before they received any money from advertisers, the young entrepreneurs found themselves in a constant cash-flow crunch. Neither took a salary, and Lippert eventually moved into his parents' basement in New Jersey. Worse, by growing so quickly - and tying up an ever-increasing amount of capital - they were driving Fuel into bankruptcy.
Luckily Lippert, 30, and Fernandez de Cordova, 32, had put together a formal board of directors in 2004 (they paid them in phantom stock options) - made up of experienced industry executives, a real estate attorney and a venture capitalist - who could flag problems early and suggest fixes. The board also introduced the founders to Michael Freedman, a seasoned outdoor-advertising executive with financial experience, who invested in the company and later was chosen by the founders and the board to step in as CEO.
"Energy does one thing, but nothing can replace years of experience," says Lippert, who previously had the CEO title. "We needed someone we could get advice from at midnight - not just money," adds Fernandez de Cordova.
Freedman did answer calls at midnight - and found Fuel money too. He had brought in Och Ziff Capital, a large hedge fund, as an outside investor. Bolstered by new capital and experienced management, Fuel made several acquisitions (five outdoor-advertising firms and additional New York City properties), bringing its portfolio to 3,000 ad displays. Now one of the top outdoor-advertising companies, Fuel, which is reinvesting all its profits, booked $20 million in revenue in 2006 (up from $3.5 million in 2005, pre-Freedman. (And Lippert moved out of his parents' place).
While the founders say the decision to hand over the company was unpleasant at best, they have no regrets. "It was the best thing we ever did," says Lippert. "It made our dreams come true - our company wouldn't be around without it."
Date before you marry
David Wasilewski, the then COO of Spanx (spanx.com), a hosiery maker, was at a Saks Fifth Avenue in Atlanta checking out a display of the company's slimming intimate wear, when he overheard a customer complaining about the dearth of Spanx size A nude fishnets. Wasilewski knew the customer had a point. Sales of Spanx had taken off after Oprah had promoted it as one of her favorite products, and keeping the hose in stock was always a challenge. The COO swapped contact info with the disappointed customer, Laurie Ann Goldman, formerly the head of licensing at Coca-Cola, and then encouraged Spanx founder Sara Blakely, to call her for advice.
Although Blakely, who had launched Spanx in 2000 with a pair of cut-up pantyhose and $5,000, wasn't looking to cede day-to-day control, she was eager to hire someone with big-business experience. ("We were flying by the seat of our pants," she admits.)
Two years later Blakely brought Goldman on as a consultant to the Atlanta-based company, paid her hourly to start, and then switched to a flat rate six months later. After a year and a half of working side by side, Blakely made Goldman CEO. Under her leadership Spanx has increased its product line, expanded into Europe and bagged new accounts such as Target (Charts, Fortune 500).
Goldman also helped launch new categories, including Hide & Sleek and Slim-Cognito, which Goldman peddled to her clients' intimate-apparel departments rather than their hosiery sections - a smart decision, since the stockings sections are shrinking in most stores.
Blakely - who retained 100 percent equity in her company - turned her focus to creating products, marketing and schmoozing with customers. "The person who starts a company from nothing," says Blakely, 36, "is not always the best person to grow it. Realizing that has been liberating."
Not only does Blakely enjoy her renewed focus on the creative part of the business but she's grateful for the chance to pursue other opportunities. She appeared on Fox's reality TV show "The Rebel Billionaire," featuring her business hero, Richard Branson. As first runner-up, she won $750,000 and Branson's help to launch the Sara Blakely Foundation, which is focused on helping women globally through education and entrepreneurship.
Now Spanx, which has more than 100 products and recorded about $150 million in retail sales in 2006, up from $85 million in 2005, is growing wisely (you can find your size at Saks). Blakely is back to what she does best: starting something from scratch and eliciting expert advice to help it grow.