FRANK GREGORSKY: When we made the 1996 tape, you had "an extreme motivation" to get your SBA loan paid off.

SUE HAWKINSON: I did. I beat that by about 15 months. And amazingly enough, as of December [2004], I am completely debt-free. No credit cards, no [company] car payment, no anything. The company owed me money that I had put in, and I paid myself back. I've paid [smiling] everybody that I've ever owed anything to, business-wise. There's no risk here anymore [laughter]. They can't come and take anything away from me.

GREGORSKY: Referring to the deteriorating partnership with “Donna,” you described the scene mid-1991: "The business was worth nothing, we were at a negative net worth. Unlike my husband and his partners, we didn't have a buy-sell agreement. We'd each put in $30,000 of cash, so we used that as the number." In effect, each of you told the other: "You give me my $30,000 back, you can take over my half." Donna had first shot, she tried to get to get the money, couldn't -- "and essentially [you] got the business by default."

Now here's the dramatic part: "But I was willing to walk away. It got real ugly, like the worst bad movie..." Had she obtained the money, and bought you out, everything would have been different from then on. Nor does it sound like the "ready to walk away" was an act of bluff on your part.

HAWKINSON: No, it really wasn't. Her family has money, her brother had money, her dad has a lot of money -- but they didn't think it was a good investment. She had [no retirement funds to dip into]. And what banker in the world will give you more money on an already bad situation? We had already borrowed something like $150,000. And yes, I was so willing to walk away from it. I believe in what I can do, and I wasn't afraid to say "this didn't work out." I knew I could recover somehow.

GREGORSKY: Would you have gone back into a large company?

HAWKINSON: The security factor was tempting, but I'm just not a corporate person. Once you've been in it, you learn whether you fit or you don't, and I didn't. Since I was a young person, my dream was to have my own store -- but not at the sacrifice of health. So, getting it by default [back in '91] -- I wasn't bluffing about being willing to walk away.

You know, without all of that difficulty – the initial debt, all the issues with the buyout, and more debt from accounting and attorney fees -- this would've been a great business 10 years ago. We would now have a full decade of pretty good results. I held back on my own payroll, for the benefit of the business. I mean, it's taken 15 years -- that's how long it took to dig out of that hole. Our equity position will be positive for '04.

GREGORSKY: How does that feel?

HAWKINSON: It's like I get to start over now. Everything is behind me. If I want to do this for another 15 years, I can. Maybe I could sell it. Or change the scope of the business. If I need financing, it can be gotten. I get to start over.

Discussion of staffing over the whole 15+ years. Debbie Merkel was full-time for 11 years, then started a family in 2002; she’s now a "stay-at-home mom." Lisa worked 30 hours a week at J. Hawkinson for almost five years. Sue is the whole staff since. Marketing is what's not getting done. Government reporting, accounting functions being done "all on my own… So, I'm looking for somebody right now." Discussion of various marketing strategies...

GREGORSKY: Making time for [marketing] is tough when you're tied down by operations. I know self-employed people who think marketing is the worst part of the week; you seem neutral or even positive on it.

HAWKINSON: Oh yeah! Take the December marketing campaign to the men. I go through all the receipts from the year and find a woman who has come in my store and bought $800 to $1,000 worth of stuff. I'll try to find out where her husband works, and write to him there: "Dear John, I know your wife Anita, she likes to shop at my store; I have a really good handle on her taste and sizes, and would love to help you select something for her for Christmas." That's "cold-call marketing.” It's soft, because I wrote them a letter, rather than phone. If they don't want to respond, it's okay; they aren't being hammered over the head. Every year, I get two or three of those that come in, and it's like this is so cool. So no, I don't fear marketing, I embrace it.

GREGORSKY: Do you have a printed letter and then scrawl a personal note on it?

HAWKINSON: I hand-write everyone. For December this year I probably did more than a hundred. Came in on Sundays, and kept [writing them] right up to the 15th of December -- because most men are very late shoppers.

GREGORSKY: No! [in mock horror]

HAWKINSON: In order to avoid the disappointment factor, I don't write to the ones I’m likely to be wrong about. Go for [guys married to customers where] I recall what they look like, what they bought -- I can focus on hair color, all those kinds of things. I want the guy to come in and have a successful experience. That's the reward so many big-company people miss: They don't get to touch the customer personally. When they've got a product or marketing idea, they don't get to find out how that person feels about it.

GREGORSKY: Instead they've got to go up to the sixth floor and have a couple of committee meetings, and hopefully they can sell it to --

HAWKINSON: That's so truly how it is.

GREGORSKY: Neither of us used the Web in 1996. But -- does it play a role here?

HAWKINSON: In a couple of ways. I did a side business within the store for handmade Italian leather golf shoes -- made in Italy, 400 to a thousand dollars per pair, and I had a website made specifically for that product. Sold probably $15,000 worth of golf shoes in about 12 months time. So I had some success with it, but have not kept up on it.

GREGORSKY: Does the site still exist?

HAWKINSON: It does, but I haven't been in it or on it for a really long time. Constant updating, keeping it in front of people – really not worth it. I need to stick to what I know.

GREGORSKY: The $15,000 figure for the golf shoes, that was revenues as opposed to profit?

HAWKINSON: Revenues. I'm sure I made half of that [in profit]. The site cost about a thousand bucks -- to get it up and running.

But some of the companies I carry are very on to the Web. Tommy Bahama is a brand that I carry. People call for product because they've gone to [that company's] website and I'm listed as the top retailer in the area.

That would also be true for the Brighton jewelry/handbag line -- I get a ton of referrals for that. Brighton is affordable for just about everyone – their items run from $15 to $400: Jewelry, earrings, bracelets, sunglasses, necklaces, watches, [regular] handbags, small leather handbags. All these items are very gift-able.

I'm listed as the top retailer for Brighton in this area, with the largest selection of anyone north of Milwaukee (except Minneapolis, where Brighton has a huge presence). My business in that brand has grown dramatically. They set up the site; I don't have to do anything except carry the product.

Follow Your Bliss While Continuing to Count

GREGORSKY: In the '96 transcript, I made a negative comment about management essentials being so much more important than "follow your bliss." You know that general theme from the latter 1980s: “Do What You Love, the Money Will Follow.” But -- it could be argued that follow-your-bliss was never the culprit in your situation.

HAWKINSON: What do you mean?

GREGORSKY: Well, here’s where we get into the "lessons of the saga" part. You had the college training, those desires as a kid -- it's all here, meaning how you got to the 1989 launch of J. Hawkinson Clothiers. Not some sort of a "hey, let's take a risk, we can be our own bosses." There was a lot more training and character-development.

HAWKINSON: Um-hmm.

GREGORSKY: So it might be that "follow your bliss" is valid, but you need some subsidiary behaviors. The three that I got [from rereading our ’96 transcript] -- and feel free to amend these or add some new ones -- are: (1) Keep your fixed costs down; (2) watch out for the business cycle, (3) track your financials rigorously. And so if you also do those sorts of things, "follow your bliss" can be the foundation for a business life. Comments?

HAWKINSON: Ohhhhh boy [pause]. If you are doing something you love, but it just isn't making any sense -- like for you, when you lost two years in this [generational consulting and analysis] project you tried, and you're that much older, and "yeah I kinda like what I'm doing and I'm kinda good at it, but -- "

GREGORSKY: The market does not confirm the endeavor, and that's a wake-up call.

HAWKINSON: Follow your bliss, but don't be stupid about it. You know what I'm saying?

GREGORSKY: Right, yeah. Don't follow it over a financial cliff.

HAWKINSON: No, that doesn't make sense. For me, I really felt early on -- when you and I talked [in August of ‘96] -- I hadn't even had a chance to find out whether I liked what I was doing. I was in such a crisis: Get up, keep going, try to work yourself out of this situation.

GREGORSKY: But you loved the first year of the store -- rapturous memories of that early phase [come across] in the [first] transcript.

HAWKINSON: Yeah, yeah -- but [laughter] that changed quickly! And it became more machine-like.

I remember my father saying to me "every month you keep going, you will continue to pay down a little bit of debt." And he was right. "And maybe you won't ever get it all paid off, and you might not want to do this [type of work] forever. But, every month you keep going, fewer bad things can happen to you," he would say. The SBA loan situation, for example -- they could've done bad things. Quitting wasn't an option.

GREGORSKY: And filing bankruptcy wasn't either?

HAWKINSON: No, not for me; it wasn't an option. I'm not put together that way. People who are able to walk away from thousands and thousands and thousands of dollars worth of debt -- I don't believe in that.

GREGORSKY: Donald Trump did. Mr. apprentice-trainer, Mr. "let's learn the life of business" and national role-model shafts his common-shareholders. The [$1.8 billion] bankruptcy filing – and this was his second time! -- gets three stories and he's renewed for another season by NBC.

HAWKINSON: I know. That kind of stuff is just wrong, and I wouldn't ever go there. So -- I guess "bliss" is okay, as long as it kinda makes sense. I didn't feel I had a choice but to keep going, after the split-up with Donna.

You were talking about fixed costs. If you recall, Donna was the finance person, I was the --

GREGORSKY: Product and people person.

HAWKINSON: Yeah, for the most part. So I got some really quick lessons. If I ever choose to go work for somebody again, I know what it takes to keep the lights on, do some frugal things, make all kinds of adjustments. It's the sacrifice of an entrepreneur who knows that "I created this, my reputation is on the line, my name is on the door. And I'm going to do this in a way that lets me feel good when I go to sleep at night" -- every night. Nothing residual should be there that would cause a funny feeling.

Learning about the fixed costs, and how much overhead you can handle, and all those things are so critical. Had I continued to get buried, further and further and further, instead of starting to see myself climbing out, maybe I would've said: "Not worth it. Time to get a job and pay back all this debt." Fortunately, things did start to turn around.

Sue’s Story is Both Inspiration and Antidote

GREGORSKY: Your experience is the needed offset to many cover stories in Success and Money magazine. Someone is lounging on the beach and the caption reads: "Be your own boss and retire at age 50..." That type of story is infuriating. I guess [the good scenario] happens from time to time: Somebody has a patent, hits a hot product, invests at the right time -- okay, so everything has gone great, and they're at the beach three years after starting the business. But -- what have they learned? Mostly, they got lucky -- but [less favorable] stuff will happen down the road, and it’ll be nasty surprise.

HAWKINSON: I will never have my moment of fame, and it doesn't matter. I'm a very low-profile person. Not a self-promoter, which has probably been a detriment. I'm not out there trying to be in the newspaper or get published. They wanted to nominate me for a Chamber award, and I declined.

GREGORSKY: Too many speeches and receptions to go to, or what?

HAWKINSON: Their greatest compliment was how well I have managed the business financially, which isn't even my strength -- that's just so funny! But I don't want to draw attention; I want to be sort of an unknown -- as odd as that must sound. Why be the Donald Trump of Appleton? [Laughter]

GREGORSKY: Well, being on ExactingEditor.com won't be the equivalent of being on the Chamber's site [grins]. But we will educate a few people. Some of my 50ish friends make big money as lobbyists or in trade associations, and they still fantasize about quitting and becoming their own boss. They have no idea [what that usually means] -- no idea. They are comfortable with the SUVs and corporate self-identification. To risk those things for independence?

But they do have sons and daughters who might take a crack at it. So your story is an inspiration and an antidote all in one. It's almost like a 10-act play.

HAWKINSON: Lot of drama – and amazing that I'm still at it. In general, I'm a very short-term person. Instant gratification -- I prefer to work hard and get paid now. Sell now, get the feedback now -- so what has kept me going? Because -- it has been a haul. A really long, long haul.

GREGORSKY: Health update. From the March '90 surgery, permanent damage. How's now versus when we last met?

HAWKINSON: Everything seems normal. The type of tumor I had is a one-in-one-million chance -- they are always benign yet have a greater tendency to regrow, which usually happens in the first five to 10 years. It’s over 13 years post-op, and the chances [of a relapse] decrease the longer we go.

GREGORSKY: Has more of the feeling come back on that side [of your face]?

HAWKINSON: No, and that's just the way it's gonna be. Some people who have the kind of surgery I had can't swallow on their own, or they lose an eye; they can't eat normally, they have to be tube-fed. All kinds of bad things can happen because the nerves in your face control so much of what you do. So the loss that I have is very manageable.

The biggest problem is needing to be in a large group, and being totally deaf on the one side. So, in a large group in a large room, with noise all around, if I'm not standing this close to the person I'm trying to talk with, and my good ear turned that way, I cannot hear them. And that's actually a defense mechanism for not going to a lot of these Chamber events.

GREGORSKY: Right, okay. You might appear to look oblivious, or out of it.

HAWKINSON: And it's not worth it. I know [such events] would be a struggle. Other than that, I think I'm doing really well for 48. Take care of myself, eat right. You get back out of your body what you give to it.

GREGORSKY: Is your father still president of Environ-Testing?

HAWKINSON: My dad died in March 1998. He died of cancer; worked right up until he died. We all took it really hard. It's a hole that will never be filled. He was such a part of me -- and I miss him every day. But I know that he would be so happy for me. And he's still --

GREGORSKY: His spirit is somewhere around this shop.

HAWKINSON: Yeah, and I know I'll see him again, because I very much believe that he's in Heaven, and I know I'm going there, because I have a relationship with the Lord. But I'll never forget what he said to me. I was in the hospital right before he died. I said to him, "Dad, what am I gonna do without you? The store is not gonna make it, without your help." And he took my hand and said: "Oh Susie, it's gonna be just fine." [Laughter] You were right, Dad. I struggled on without him. And he would be really happy that I'm back to Square One, and I get to start over [smiling]. I made it.

Survive Your First Big Idea -- and There’s Hope!

GREGORSKY: If you were invited to give a talk to college kids studying business -- and these days one out of three claim to want to start their own enterprise -- what are some points you would leave them with?

HAWKINSON: To be sure to pick the right business. It needs to be lucrative enough to be worthwhile for the time and effort they'll put in. To be sure that their family -- girlfriend, boyfriend, spouse, whatever -- is 100% behind them.

And to probably not be afraid to fail at their first attempt. A lot of entrepreneurs didn't make it with their first big idea, and that pattern goes on and on and on. First shot wasn't very good, and then they came up with Cracker Jack, and it was great.

GREGORSKY: Reminds me of a fabulous book called Getting It Right the Second Time [by Michael Gershman -- Addison-Wesley 1990, 270 pages, ISBN 0201550822]. Out of print last time I looked for it. Superb business profiles -- a snappy history of dozens of products we take for granted today, from BirdsEye frozen food to Kleenex, and how their developers blew it the first time. Often the inventor kept trying to sell the right product to the wrong group of customers!

HAWKINSON: Right. Yeah, that [mistake] more than anything.

GREGORSKY: When you say "not afraid to fail," is that another way of saying it's okay to make tactical mistakes -- in other words, don't let your ego and "being right" get in the way of pragmatism?

HAWKINSON: Um-hmm. I really think it takes a fair amount of humility to be your own boss, long-term. You need a certain amount of I can do this...

GREGORSKY: Self-confidence.

HAWKINSON: Yeah. Whatever you want to call it. For me it has just been pure persistence.

GREGORSKY: Persistence for the goal, sure, but a lot of flexibility in terms of how you get there?

HAWKINSON: You have to. Having a master plan is great. But I'm not a big one on all the "anal" sections of the master plan being just exactly so. Because every day is a new day. You can come to work in the morning aiming to get these 10 things done, arid the whole day will change because people come in, or some people just want to talk. You know what? That's okay! We'll try again tomorrow [to get the list done].

Sometimes that's the fun part. And very few situations here are "I need this by the end of the day" -- except government reporting and tax payments, due on very specific dates. Other than that, the only pressure in my world is the pressure that I put on myself. How much is that worth?

Could I have been financially way better off working for someone else? Ohhhh, so much. Huge. Could I have provided a more secure retirement? Huge. Huge. But will I live a long, happy, healthy life because no one was breathing down my neck? Constant stress, being uptight all the time? Gosh, I hope so -- I hope that's the reward. Because the money has not been there.

"Do what you love, the money will come"? Maybe it's still coming! Maybe that will still happen. I can't [quite see that kind of a future] because I've spent the past 15 years getting out of a huge financial hole. Now that I'm back to where I was, will hard work equal money? I just don't know.

GREGORSKY: Meanwhile, part of the daily routine still has some bliss to it.

HAWKINSON: Oh gosh [laughter]. One little old lady -- she's really a young 78 -- is the sweetest thing. "My friend Roberta -- she told me about you. She said I had to come to see you. I need some new clothes so badly. I lost my husband and I lost all this weight; nothing fits and I don't feel good about myself."

So she starts by telling me all these things in her life that are not right -- and I get to fix them for her. And she's just like: "Oh Sue, I am so glad I found you. Someone I can trust, who knows what I like and can make it fit right."

Is that cool, or what?!? How many times in a day do you get to alter someone's happiness? This is a pat-on-the-back business. I don't have to wait for rewards from a boss or a performance review to hear what I'm doing right. Working with a client like that is my "instant gratification."

Anyway, that's worth a lot of money to me.

The Chico's, Talbot's and Coldwater Creeks

GREGORSKY: All right, Sue, you and I are both realists. It wasn’t until the age of 46 that I committed to learn every aspect of marketing and get good at it. And my website will condense your original tape and [those early 1990s] ruptures in a way that makes sense of this new transcript. Point is, we don’t count on happy endings -- so perhaps we shouldn’t end this tape on an upbeat note.

HAWKINSON: What are you getting at there?

GREGORSKY: Didn’t you have some points you wanted to make about the Big Boxification of American retail?

HAWKINSON: Oh, yes. Let’s hope that, 10 years from now, small specialty stores are still around. The Wal-Martization of the world is continuing in just about every aspect of our lives. It's the "safety in numbers" thing. Even the publicly traded homebuilder companies that are moving into neighborhoods and setting up gated communities -- you know, one house and you get six plans to choose from.

GREGORSKY: Where I live, that extends to cheapo mansions jammed into lots made for houses half as big -- the new properties are nicknamed "McMansions." When you see six of them on the same side of the street, they are less impressive.

HAWKINSON: We're putting everybody in boxes of one kind or another. The Wal-Mart thing has changed the scope of how people think. Everything's gotta be the best price, and soon price is the only thing that matters.

Financially, the small business owner is pressed. I pay 7 1/2 [percent] as the employee and 7 1/2 as the employer. So, as a self-employed person, I pay twice as much FICA taxes as another average person working for someone else.

My hope is we won't lose what we were made of; that we will still want some uniqueness; that we'll still want to have a different look or live in a different home -- something that shows some craftsmanship or some specialty.

GREGORSKY: Um-hmm, Um-hmm.

HAWKINSON: I continue to see and hear this feeling of, "Well, she has one and it's okay with her, so that's okay with me too." The majors, the Chico's and Talbot's and Ann Taylors and Coldwater Creeks -- we now have all of those out at the mall. It's an upscale professional demographic market, and those big guns continue to eat away at the small retailer. I hope that, [if we do a tape] seven years from now, my business still exists, and my market share hasn't been so cut that it doesn't make sense to continue.

We keep hoping and thinking that things are going to turn, and come back around -- but [the social and economic trends we're talking about here will make that] very tough. It's so far gone that people are just not willing to pay for something unique and different. The niche [I pay attention to] is getting smaller and smaller. The group of people that financially appreciates “upscale, unique, different” and are willing to pay for it -- unfortunately for us in retail -- are also very mobile. They might live in this market, but they shop in Chicago; they have a second home in Scottsdale; they have a third home in Florida. So they don't need me to satisfy their needs; they can go to bigger markets for even better selection.

I hope for integrity. I hope for basic values.

GREGORSKY: And individualism.

HAWKINSON: Individualism. I just would love to see that come back into play. It's gone so far the other way, for such a long time.

http://www.fastcompany.com/magazine/77/walmart.html

 

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