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In the entrepreneurial zone Featured

12:13pm EDT August 17, 2005
If things had held to form, IN ZONE Brands Inc. would simply be another company on the list of those co-founded by Jim Scott.

But something happened along the way, and after an attempt to step away, Scott finds himself back at the helm of the $54 million company that manufactures Bellywashers and Tummy Ticklers. Not familiar with those names? You can bet your pre-teen kids know about these juices packaged in cartoon-themed containers.

“In 1982, I dropped out of college and I built two companies,” says Scott, IN ZONE’s CEO. “One was a moving company called Bulldog Movers. The other was a plastics company called Alpha Products. Alpha was the genesis of what currently is IN ZONE. Alpha grew to become the largest manufacturer of promotional beverage ware in the country.”

Alpha was then sold to Aladdin Industries because of an internal stockholder issue, but Scott admits he got lucky on another front.

“The sale of that company was a blessing because what I’d already noticed were some trends going on in the housewares industry,” he says. “One of them was a lot of the businesses's manufacturing moving to Asia. In Asia, the tooling is much less expensive than it is here in America. Your up-front capital costs are less, which, in turn, shrunk the product lifecycles of everything in the industry.”

Scott turned that luck into a new business, and IN ZONE Brands was formed.

Smart Business spoke with Scott about how he turned cartoon-themed containers filled with juice into one of the top-selling noncarbonated beverages in the country and why he decided to stay as the company’s top exec.

What did you learn from your experiences at Alpha Products?

Alpha Products was a domestic manufacturer. What we (Richard Williams, his former business partner) did was go back and drafted a new business model called The Family Jewels. It was centered on owning and controlling intellectual property, speed to market, product development and owning and controlling the routes to market. It was a low-asset-intensive model.

There were some internal reasons why we sold Alpha. Honestly, I wish I could tell you I was a genius and I had seen a vision of the future of the industry coming. That wasn’t the reason; it was an internal stockholder reason that Alpha was sold. Richard and I discovered it was a blessing in disguise. That’s what stimulated the start of IN ZONE. We thought that we understood the future of the industry after already being in it and out of it. We could come back and create something that was much more nimble and capable of competing in today’s marketplace.

What advantage did that give you?

You see big companies in this field like Rubbermaid — you can’t get out from under the bricks and mortar fast enough — struggling. We were fortunate to have sold the bricks and mortar and start a new company with a clean slate.

Why did you start IN ZONE?

I needed to get out of the house. I’ve been an entrepreneur all my life. I started with $300. I’m a guy that’s never had a job.

Can you build IN ZONE past the entrepreneurial phase?

I’ve already reached the level and I’m still here. For me, it’s important to get up and enjoy what I’m doing every day. I’ll be honest. There are times when it just doesn’t work like that. I started with a great business model when I restarted IN ZONE in ‘97, and it worked for a couple of years. I told my wife I was going to have this small, nimble company that could grow rapidly with very little stress and overhead. That didn’t last. The small, nimble growth worked, but the company became large. It created its own set of issues.

We grew 100 percent a year for five years beginning in 1997. It created a huge amount of internal control problems.

How did you keep things moving?

We really had to buckle down. We had to redevelop our management to gain the accountability and controls to move the company to the next level.

I brought in a CEO in order to do two things. The business had burned me out. I had five years — it was tough. And we needed a more disciplined management approach. I needed a break; the company needed more discipline and management.

But you came back.

I did feel refreshed. Any time an entrepreneur brings in a CEO, there’s trouble in paradise. It’s easier said than done. There are a lot of conflicts involved in it.

I’m committed now to going to the next level. I did not, when I first came in here, intend on taking the company as far as it’s already gone. But now I’m committed for several more years.

How can you make sure the company won’t run into similar problems again?

I live in fear every day of my life — of failure. My biggest fears occur when things are going great. I’ve repeated this cycle so many times. You become what I am going to term bulletproof. When you think you’re bulletproof, you’d better watch out — all hell’s fixing to break loose.

I’ve done the cycle three or four different times. We’ve had some runs where not only have we grown, we’ve made tremendous amounts of money. You tend to get lazy; you tend to rest on your laurels and you tend to lose focus and take your eyes off the ball. That’s when you’re going to get creamed. It’s happened so many times to me, I hope I’ve got the ability to see it coming and not rest and not kick back. It’s an issue. I can’t tell you that I’ve got it resolved because my track record says I haven’t.

The biggest secret to the whole thing on growth is getting the fog off the windshield. You’ve got to have the tools, and it’s really got to be a focus on information reporting. You’ve got to have your business analyzed correctly, and you’ve got to have accurate data to manage the growth.

When you can’t understand what the key drivers are of your success, you really can’t manage the growth. The fog got so thick on our windshield we didn’t know where we were going. We just knew we were going fast. We couldn’t tell which direction we were moving in.

What was the moment you knew the business was going to be a success?

We were at a Target store. I remember one of our initial first runs of the (Bellywashers) product — I remember putting them up on shelves in a Target store and children just flocking to the thing. I knew we were on the right track.

It was such a phenomenal success; (with) that one item we re-established a sector of the beverage industry that we term interactive children’s beverages.

That one product, it went from zero to $37 million in revenue in 24 months. It was a huge, huge success.

How did your management of the company change with that rapid growth?

I stripped out the management, started over. It’s kind of sad, but it’s just the truth. A lot of people that can work in an entrepreneurial environment don’t work well in a mid-sized organization. And I’m an entrepreneur, so that’s a tough thing for me to say.

I had to get the right management team for two reasons. No. 1, to manage the company, and No. 2, to manage the interpersonal relationship between myself and the organization. As an entrepreneur, you are your company’s biggest asset. And you also can be your company’s worst enemy. Is the right team in place now?

I think I’ve got a management team that can buffer me and buffer the ideas and put them into a logical, orderly progression. That’s a key component if you’re going to have entrepreneurial leadership in the organization.

What did you look for in the new management team?

Discipline is a word that comes to mind. I was looking for people that were more seasoned. One thing you can’t afford in growth is for people to learn on the fly. They’ve got to come in ready to hit the ground running.

I’m really looking for people that are different from me. What this thing doesn’t need is a lot more creativity; what it needs is process and people that can work in a process-driven environment. One thing I’m very adamant about keeping in here is the entrepreneurial spirit, because, although I’m looking for people who are process-oriented, I’m also looking for someone who wants to be in this type of environment that can thrive making independent decisions. We do some crazy things that are a little off the norm here. Today I’m sitting here in Birkenstocks, shorts and a collared shirt, and I’m out cooking on a big (grill); I’m barbecuing ribs out in front of the building. We want to have fun. We’re very committed to having an environment where I see smiles on people’s faces.

What is the toughest challenge that you’ve faced in business?

One of them is managing the financing of your growth. In 23 years, 24 years of being an entrepreneur, there’s been two or three times, without a little luck in the ability to fund the growth, I could have gotten blown off the map. It’s something that you always are concerned about as an entrepreneur.

I walk around here a lot of times writing on the walls, “Cash is king” because it’s just as important to me as profitability. Cash flow can kill a high-growth company.

The toughest issue I ever faced as an entrepreneur was the departure of my business partner last year. Richard and I had been partners in four ventures — just learning to operate without Richard. There were a lot of qualities that Richard was here for me for — in the way of trust, in the way of discipline — things of that nature. It was probably the toughest thing I faced in my business career. HOW TO REACH: IN ZONE Brands Inc., (877) 875-8443 or http://www.inzonebrands.com