As careful as Yonano was in estimating his start-up costs,
entrepreneur Gerald Chamales, 47, was downright careless when it
came to estimating how much money he'd need to launch Omni
Computer Products, a Carson, California, manufacturer and recycler
of computer supplies.
Chamales launched the business without a financial plan and
evaluated his costs through trial-and-error. "I didn't
have a clue [as to] how much money I'd need," he says.
With a meager $7,000 in savings, in 1980, Chamales leased an
office in Santa Monica, California, and started Omni. He rented
office furniture and phones, hired two salespeople, and contracted
with a company to label his products and then drop-ship them to
customers—allowing Chamales to start quickly without
investing in inventory.
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But other expenditures crippled Chamales during that first year
in busines. "I was paying way too much rent," he says.
"Tack on expenses for office equipment and supplies, and I
burned through the $7,000 in just a few months."
Six months after launching Omni, Chamales found himself running
his company out of his apartment in Venice, California. With just
$1,200 left on his credit card, he was forced to rethink his
strategies.
"When I was down to the proverbial wire, I wised up
fast," says Chamales. "I realized I'd better get my
financial act together or I wasn't going to make it."
Fear is a powerful motivator, as Chamales soon learned. "I
lived simply and turned everything I made back into the
business," he explains.
He says the whole experience has taught him many lessons.
"Before you launch a company, [make sure you] have enough
money to cover all your projected expenses for a year,"
Chamales advises.
As for determining accurate cost estimates, Chamales says a good
rule of thumb is to assume everything will cost more than you
expect. "My telephone bill, for example, was three times
higher than I imagined, and the same went for my travel and gas
expenses," he says. "Until you're generating
predictable sales, you'd better be prepared with flexible money
strategies."
After the first six months, Chamales took no financial risks. In
fact, he paid himself only $200 a week for five years.
When Omni had moved into the black, he relocated the business to
a new office and moved into a small studio apartment to lower his
living expenses. "I evaluated every expense," Chamales
says. "I was determined to succeed."
And he did, far exceeding his expectations. Two years after
starting the business, he had 15 salespeople and hefty profits.
Today, Omni employs 275 people and boasts sales of nearly $30
million.
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