Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
While we generally focus on public companies here, every so often it’s good to delve into the private corporation side of things and see how the other 80% live. I’ve seen Sara Blakely on TV quite a bit the past 3-4 years, and remember her on the Fox reality TV show with Richard Branson cited in the article below, but had no idea her company Spanx was a success story to this level of degree. Forbes has a fantastic cover story on the youngest female billionaire* in the country. Quite an inspiring story when you consider she started out with $5000 and an idea. Another takeaway – vanity sells!
*not due to marriage or inheritance.
Some excerpts:
- Today Spanx is to slimming undergarments what Kleenex is to tissues: a brand that stands for the category. It nets an estimated 20% on revenue just south of $250 million. In recent months four Wall Street investment banks separately valued Spanx at an average $1 billion, a sum Forbes corroborated with the help of industry analysts. Blakely owns 100% of the private company, has zero debt, has never taken outside investment and hasn’t spent a nickel on advertising.
- At 41 she’s the youngest woman to join this year’s World’s Billionaires list without help from a husband or an inheritance. She is part of a tiny, elite club of American women worth ten figures on their own, including Oprah Winfrey and Meg Whitman.
- Spanx started as a one-woman show. In her first year Blakely shilled her new invention from a folding table in the foyer of Neiman Marcus, with a giant before-and-after photo of her derriere in cream slacks and bikini briefs underneath in one shot (an embarrassingly obvious Maginot Line) and $30 Spanx Power Panties (et voilà! no more line) in the other. Over the last couple of years Spanx has depended less on Blakely’s face—and other body parts—to shift its shapers and stay ahead of a handful of copycats. The company is now run by a team of 125, only 16 of them men. It sells 200 products in 11,500 department stores, boutiques and online shops in 40 countries.
- Like many startups, Spanx began life as an answer to an irritating problem. The panty hose Blakely was forced to wear at both Disney and Danka were uncomfortable and old-fashioned. “It’s Florida, it’s hot, I was carrying fax machines,” she says. She hated the way the seamed foot stuck out of an open-toe sandal or kitten heel. But she noticed that the control-top eliminated panty lines and made her tiny body look even firmer. She’d bought a new pair of cream slacks for $78 at Arden B and was keen to wear them to a party. “I cut the feet off my pantyhose and wore them underneath,” she says. “But they rolled up my legs all night. I remember thinking, ‘I’ve got to figure out how to make this.’ I’d never worked in fashion or retail. I just needed an undergarment that didn’t exist.”
- Blakely, then 27, moved to Atlanta, set aside her entire $5,000 savings and spent the next two years meticulously planning the launch of her product while working nine to five at Danka. She spent seven nights straight at the Georgia Tech library researching every hosiery patent ever filed. She visited craft stores like Michaels to find the right fabrics. She sought out hosiery mills in the Yellow Pages and started cold calling, only to be told no repeatedly. Immune to rejection thanks to years selling door-to-door, she decided just to show up. At the Acme-McCrary hosiery factory in Asheboro, N.C., she was turned away, only to receive a call from the manager two weeks later. He had daughters, he told her, who wouldn’t let him pass up her invention. (Today the Spanx line is manufactured in 15 countries, including Thailand, Israel and Honduras; the cotton crotches are still hand-sewn in North Carolina.)
- To save $3,000 in legal fees she wrote her own patent from a Barnes & Noble textbook, setting aside $150 to incorporate her company, but couldn’t decide on a name. After a succession of terrible ideas she settled on Spanks, substituting an “x” at the last minute after reading that made-up names sold better. “The word ‘Spanx’ was funny,” she says. “It made people laugh. No one ever forgot it.”
- Blakely flew to Dallas that fall to meet with buyers from Neiman Marcus. Current CEO Karen Katz was president of all the upscale chain’s stores at the time and remembers seeing Blakely in a conference room, pitching. “Sara’s effort was to solve an age-old problem for women in a modern way,” Katz says. She adds that Blakely’s obvious charisma and unusual backstory didn’t hurt. “We were smitten from the beginning.” With Neiman in the bag, Blakely convinced Bloomingdale’s, Saks and Bergdorf Goodman to give her a shot.
- Blakely was still working her day job at Danka, keeping her side business top secret, sitting up all night shoving Spanx orders into white padded envelopes from Office Depot. She was 24/7 customer service, answering phone calls from her bathtub or bed. Her then boyfriend quit his job and took care of shipping and handling.
- Unable to shell out for advertising, Blakely took on marketing and p.r. She tore out journalists’ bylines from magazines and called them. She took over morning staff meetings at department stores to show sales associates why Spanx shouldn’t languish in the beige hinterland of the hosiery floor but be sold alongside womenswear and shoes. If that didn’t work, she improvised, once sneaking some red Spanx packages onto a rack she bought at Target and placing them by a cash register in Neiman. “All the staff assumed someone else had approved it, until they caught me on CCTV,” she laughs.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
