Living On The Edge
Graham McFarland put the finishing touches on his resignation letter and settled back in his seat. Soon, he would land in New Jersey, give his final sales pitch for Express Digital, fly back to Denver, submit his letter, and then he would be done with the company he'd created. All the then 29-year-old husband and father of two small children could look forward to was trying to avoid bankruptcy. He was $30,000 in credit card debt after three years of trying to keep his firm afloat.
It had seemed like a great idea at the time. Back in 1994, McFarland, who is now 32, had been having lunch in Denver with three people: his boss, Steve Hiratsuka; mutual friend Dave Hurd; and a pal of Hiratsuka and Hurd's. The pal made a passing comment about baseball cards that evolved into an animated discussion about Little League baseball and soccer teams. They all wondered:"Why couldn't there be collector cards for kids who play sports at the elementary school level?"
"Well, you'd think with the new digital technology, it would be possible," someone said.
And the idea percolated until they decided McFarland would do some research on the subject.
Geoff Williams is a feature reporter at The Cincinnati Post. He frequently contributes to Entrepreneur and has written articles for many other publications, including LIFE and Entertainment Weekly.
Preparing For Their Close-Up
Graham McFarland telephoned the giant of photography: Kodak. Maybe they would discuss the current state of digital photos. But the mammoth enterprise treated McFarland as an actual giant might a gnat--they brushed him aside. "They were very unreceptive," says McFarland, who ultimately went to Kevin McFarland, his brother and a Windows software programmer, and asked if there was a way to make software that would allow a person to snap a digital picture and print it on the spot.
There was a way. Kevin created it. And so Graham partnered up with Hiratsuka and Hurd, and they jointly ponied up $20,000 to buy the camera and computer needed to run the software. Then Graham, who was quickly becoming the CEO of what would ultimately evolve into Express Digital Graphics Inc., started showing up at local baseball and soccer tournaments, offering parents and kids the chance to create personalized sports trading cards.
"They loved it," recalls Graham. "We had lines like crazy. They had no idea anybody could do that. We caught the `wow' factor, because that's literally what people would say." On the front of each of Express Digital's Little League baseball or soccer cards was a photo of the child. On the back were the child's sports statistics, both pretend scores and real ones. "We went to great lengths to mimic real collector cards," says Graham, who had carefully measured the thickness of sports cards to make sure his were identical to those on the market. "I probably bought $1,000 in gum."
Look, ma--no cavities, and lots of revenue. Soon, Express Digital was manufacturing trading cards for Nike sports camps, the Colorado Avalanche and the Denver Nuggets. The product then became the official personalized trading card for major league soccer. But Express Digital's three partners didn't have any desire to be in the business of manufacturing sports trading cards, or even in the business of taking photos--a skill Graham says he isn't very good at. They had proved a point: a company could make money with this software ($475,000 in about 18 months). Now they wanted to manufacture the digital photography equipment and sell it to photo-savvy entrepreneurs.
Shortly before Graham quit his job as a CPA to devote himself to Express Digital full time, he received an unexpected telephone call. Kodak wanted Graham to check out their own digital photography workspace station. Like Graham's equipment, Kodak's would allow entrepreneurs to take pictures on the spot.
Graham figured he was finished--Kodak would cream them with their size and marketing power. Beleaguered, he agreed to visit Kodak and see what they had to offer. "I was scared to death when I went up there," he says.
But he was in for a pleasant surprise. "They were trying to sell me their equipment, not knowing what our own grand plan was," he says. "They showed me every nook and cranny. Coming back on the plane, I was just thrilled. It was obvious that they had never done an event--[their product] wasn't going to make any money."
Kodak's equipment was as immense as the company; there was no way, Graham felt, that anybody would want to lug it from event to event. Express Digital, on the other hand, had photography that was quite portable. The computer, the camera, the scanners--it all fit very nicely in a three-foot case on wheels. Now all Graham had to do was sell it.
It seemed simple enough, but Graham and his investing partners had decided to get out of the photography business altogether. They completely stopped taking photos and making cards for Nike, the Nuggets, soccer and the like, so not surprisingly, income came to an abrupt halt. Graham was pretty much on his own, save for his wife's paycheck--and benefits. "Without that, it wouldn't have been possible for me to leave," says Graham, who had a baby to think about.
The headquarters for Express Digital began in Graham's unfinished, unheated basement. When he worked there in the late months of 1996, his breath was as visible as the coat and gloves he wore. But Graham made his telephone calls. And he kept making them. And kept making them.
Graham sold a few digital photography systems--one Oklahoma entrepreneur who had no photography experience and was on the verge of bankruptcy purchased a system from Express Digital and saved himself from financial doom. But by the time the spring of 1997 crept in, with just a few sales behind him, Graham was facing his own economic nightmare. Every month, he had watched his personal credit card bills mount up, going higher and higher. He and his wife were paying up to $1,000 a month in interest alone.
"We really had no money," recalls Graham, speaking of both his family and the company. "We didn't have a budget for advertising, so we were existing by word-of-mouth, which is kind of hard to do when nobody's heard of you."
One day, the telephone rang. It was a call from a giant, if not as recognizable a name as Kodak: Cherry Hill Photo, the largest seasonal photography studio in North America. They were interested in meeting with Graham to discuss purchasing some equipment.
Graham accepted Cherry Hill's invitation, although he was hardly optimistic. "I figured it was probably a waste of my time," he says. "They were a big company, and we weren't."
It was on the flight to meet Cherry Hill that Graham decided to call it quits. His credit cards were maxed out, and he didn't even have enough money on him to pay for a rental car. He wasn't sure how he was going to get to the meeting with his last potential client.
But when Graham disembarked, he quickly learned that Cherry Hill had arranged for a rental car to pick him up. What a stroke of luck, he thought, and his morale was boosted. But would they like what he had to say?
They did. "They asked me right there, during our meeting, if we could send one [of our systems] up there--and they would pay the cost to have it sent," says Graham. Cherry Hill wanted to test Express Digital's equipment at the local mall during the upcoming Easter season. Suddenly, Graham's instincts told him that everything would work out.
His instincts were right. This year, Cherry Hill pumped $2.5 million into Express Digital, which now has 32 employees. Overall, Express Digital's 1999 revenues hit $5.6 million, which is more than double what they made in 1998. And 2000 promises to be an even better year financially; Graham recently clinched a deal with Sony to jointly market a low-cost digital imaging system (priced under $13,000). And what's next? Who knows? Graham admits he and his crew may someday sell their business to their competitors, Kodak and Polaroid.
"They've always been our competitors," says Graham, nonplused. "I've just become numb to the fact that they're [out there]. I think it's almost easier for us that they're bigger. They can't react very fast, and when they make a decision, if it's a stupid decision, they can't recover from it for a while, so beating the big corporate giants isn't hard to do."
And Express Digital has beaten out their competitors in some high-profile places. More than 350 systems are currently installed in places like the Mall of America, the Grand Canyon, Guam's Underwater World Aquarium and Bermuda's Dolphin Quest. And Graham's list of triumphs goes on and on and on.
Not bad for a guy whose own camera only cost $300.
Express Digital Graphics Inc., (888) 584-0089, http://www.expressdigital.com
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