Editor’s Note: This article is the first in a three-part series on scaling up women-owned businesses. Next up: articles on using debt and equity.
Laura Zander has built her $9 million specialty yarn business, Jimmy Beans Wool, without a stitch of debt or dollar from an investor.
In a somewhat unusual feat for a sizable company, Zander and her husband and co-founder Doug, both software engineers, have relied solely on cash on hand to make their Reno, Nev., retail business go. Their seed money was their $30,000 life savings, and later they reinvested profits to scale up. The couple has had a simple, conservative philosophy: “If we can’t afford to buy it with cash, we don’t buy it,” she says.
But don’t be mistaken, Zander has always had an ambitious growth agenda. In fact, she predicts revenue will rise 15 percent to 20 percent in 2017 — and aims to double the size of her business over the next few years. But she has no plans to change to her approach to financing, a stand rooted in a personal aversion to debt and preference for bootstrapping that’s common among women entrepreneurs. She also says self-funding works for the type of business she operates — and that achieving scale for her is less a function of money and more of organization-building.
Jimmy Beans Wool focuses on selling yarn and wool — and everything else a knitter needs — plus fun products and gifts related to knitting, crocheting and sewing. It seeks a competitive edge in great products and customer service, strong relationships with partners and employees, and speedy 24-hour order fulfillment. Zander says it does not need to raise money, because it’s not planning capital-intensive moves to, say, open a chain of retail stores, build a factory, stock up on large amounts of product or develop cutting-edge technology.
“We’re not trying to buy customers,” Zander says. “We are trying to befriend customers, and you can’t buy that.”
An Uncommon Cash-Only Growth Story
Zander, who The Story Exchange first profiled in a 2013 video, is part of an elite group of American women running multimillion dollar businesses. Only 1.8 percent of women’s businesses surpassed the $1 million revenue mark in 2012, compared to 6.3 percent for men’s businesses, according to the U.S. Small Business Administration’s most recent Survey of Business Owners.
One reason women lag is they are less likely than men to secure bank loans or investor deals — and when they do raise money, they raise less. That’s important because insufficient funding, known as undercapitalization, that keeps owners from seizing business opportunities is a key reason women’s business fail or don’t grow.
While it’s true that most businesses finance expansion with savings and profits, Zander is somewhat unusual among truly growth-minded businesses in shunning outside capital. And she has admitted that choosing not to be beholden to a bank or equity investor has probably cost her. “We could have grown a lot faster,” she said during a recent panel discussion hosted by the National Women’s Business Council, which recently launched a resources platform to help women scale up. “We also could have also crashed faster.”
In fact, Zander is about to make a second run at surpassing $10 million, following an unsuccessful first attempt. Back in 2011, she began what turned out to be a failed Silicon Valley-style push to become a $100 million company that involved costly marketing mistakes and an ill-fated expansion into fabric. But as Zander spent more time outside the office working to make Jimmy Beans Wool a national name — and less time on operations — sales flattened and then fell.
Since 2014, it has been back to basics for her and the company, and that has worked. “Six months ago we started to experience rapid growth again,” Zander says. And the success of some of her initiatives — foremost funky gifts like “yarn bouquets” and new $10-a-month “yarn tasting” subscriptions — have revealed a new path she believes will double the size of the business.
Controlled Change, Planned Growth
But that’s a few years off. The recent growth spurt caused strain, and Zander decided to hit pause to work on organizational basics. Aware that she struggles to delegate, Zander created a leadership team, reworked the compensation plan and shifted more accountability to her approximately 40 employees.
“It’s all the stuff we were supposed to do like 10 years ago,” she laughs.
Until recently, the weight of the business primarily fell on her, with help from Doug. “It wasn’t working, we need a team,” Zander says. She forged a leadership team entirely by promoting from within and established six core values for employees, made fun with corresponding emojis including a heart symbolizing caring and detective for rooting out problems. “I’m passionate about growing the business and the people,” she says. “That’s why those core emojis have been so important.”
She met with each person to talk about how they measured up against the core values and gave laggards the option of a buyout or improvement in 7 days. Six people left, and five stepped up. “Everybody now knows that the people who are there are the people who want to be there,” she says. “They know that we are all in this together, so the [shift in] mood is palpable.”
She also redefined how employees work. Inspired by the business book “Traction” by Gino Wickman, she created a system whereby employees get 90-day assignments they are accountable for, an approach she says helps the company embrace rapid change.
“I don’t like titles, I don’t like hierarchy,” she says. “Everybody is here to make the business better.” However, the short-term marching orders communicate to employees that, right now, “this is how we need you to make the business better.” And she gets the flexibility to make workflow changes quickly, based on what the business needs at the moment.
Zander says she now has the system and structure in place to build a bigger company. “It’s been life changing,” she says.
So when will Zander step on the gas? “I am hoping this January,” she says. That’s when she expects to pursue partnerships in earnest and kick marketing efforts into high gear. “2017 is going to be the year of fantastic growth.”