Living On The Edge On the verge of bankruptcy . . . on the verge of freezing . . . on the verge of multimillion-dollar success--take your pick.

Graham McFarland put the finishing touches on his resignationletter and settled back in his seat. Soon, he would land in NewJersey, give his final sales pitch for Express Digital, fly back toDenver, submit his letter, and then he would be done with thecompany he'd created. All the then 29-year-old husband andfather of two small children could look forward to was trying toavoid bankruptcy. He was $30,000 in credit card debt after threeyears 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 withthree people: his boss, Steve Hiratsuka; mutual friend Dave Hurd;and a pal of Hiratsuka and Hurd's. The pal made a passingcomment about baseball cards that evolved into an animateddiscussion about Little League baseball and soccer teams. They allwondered:"Why couldn't there be collector cards for kidswho play sports at the elementary school level?"

"Well, you'd think with the new digital technology, itwould be possible," someone said.

And the idea percolated until they decided McFarland would dosome research on the subject.

Geoff Williams is a feature reporter at The CincinnatiPost. He frequently contributes to Entrepreneur and haswritten articles for many other publications, including LIFEand 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. Butthe mammoth enterprise treated McFarland as an actual giant might agnat--they brushed him aside. "They were veryunreceptive," says McFarland, who ultimately went to KevinMcFarland, his brother and a Windows software programmer, and askedif there was a way to make software that would allow a person tosnap a digital picture and print it on the spot.

There was a way. Kevin created it. And so Graham partnered upwith Hiratsuka and Hurd, and they jointly ponied up $20,000 to buythe camera and computer needed to run the software. Then Graham,who was quickly becoming the CEO of what would ultimately evolveinto Express Digital Graphics Inc., started showing up at localbaseball and soccer tournaments, offering parents and kids thechance to create personalized sports trading cards.

"They loved it," recalls Graham. "We had lineslike crazy. They had no idea anybody could do that. We caught the`wow' factor, because that's literally what people wouldsay." On the front of each of Express Digital's LittleLeague baseball or soccer cards was a photo of the child. On theback were the child's sports statistics, both pretend scoresand real ones. "We went to great lengths to mimic realcollector cards," says Graham, who had carefully measured thethickness of sports cards to make sure his were identical to thoseon the market. "I probably bought $1,000 in gum."

Look, ma--no cavities, and lots of revenue. Soon, ExpressDigital was manufacturing trading cards for Nike sports camps, theColorado Avalanche and the Denver Nuggets. The product then becamethe official personalized trading card for major league soccer. ButExpress Digital's three partners didn't have any desire tobe in the business of manufacturing sports trading cards, or evenin the business of taking photos--a skill Graham says he isn'tvery good at. They had proved a point: a company could make moneywith this software ($475,000 in about 18 months). Now they wantedto manufacture the digital photography equipment and sell it tophoto-savvy entrepreneurs.

Picture Un-Perfect

Shortly before Graham quit his job as a CPA to devote himself toExpress Digital full time, he received an unexpected telephonecall. Kodak wanted Graham to check out their own digitalphotography workspace station. Like Graham's equipment,Kodak's would allow entrepreneurs to take pictures on thespot.

Graham figured he was finished--Kodak would cream them withtheir size and marketing power. Beleaguered, he agreed to visitKodak and see what they had to offer. "I was scared to deathwhen I went up there," he says.

But he was in for a pleasant surprise. "They were trying tosell me their equipment, not knowing what our own grand planwas," he says. "They showed me every nook and cranny.Coming back on the plane, I was just thrilled. It was obvious thatthey had never done an event--[their product] wasn't going tomake any money."

Kodak's equipment was as immense as the company; there wasno way, Graham felt, that anybody would want to lug it from eventto event. Express Digital, on the other hand, had photography thatwas quite portable. The computer, the camera, the scanners--it allfit very nicely in a three-foot case on wheels. Now all Graham hadto do was sell it.

It seemed simple enough, but Graham and his investing partnershad decided to get out of the photography business altogether. Theycompletely stopped taking photos and making cards for Nike, theNuggets, soccer and the like, so not surprisingly, income came toan abrupt halt. Graham was pretty much on his own, save for hiswife's paycheck--and benefits. "Without that, itwouldn'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'sunfinished, unheated basement. When he worked there in the latemonths of 1996, his breath was as visible as the coat and gloves hewore. But Graham made his telephone calls. And he kept making them.And kept making them.

Graham sold a few digital photography systems--one Oklahomaentrepreneur who had no photography experience and was on the vergeof bankruptcy purchased a system from Express Digital and savedhimself from financial doom. But by the time the spring of 1997crept in, with just a few sales behind him, Graham was facing hisown economic nightmare. Every month, he had watched his personalcredit card bills mount up, going higher and higher. He and hiswife were paying up to $1,000 a month in interest alone.

"We really had no money," recalls Graham, speaking ofboth his family and the company. "We didn't have a budgetfor advertising, so we were existing by word-of-mouth, which iskind of hard to do when nobody's heard of you."

One day, the telephone rang. It was a call from a giant, if notas recognizable a name as Kodak: Cherry Hill Photo, the largestseasonal photography studio in North America. They were interestedin meeting with Graham to discuss purchasing some equipment.

Graham accepted Cherry Hill's invitation, although he washardly optimistic. "I figured it was probably a waste of mytime," he says. "They were a big company, and weweren't."

Photo Finish

It was on the flight to meet Cherry Hill that Graham decided tocall it quits. His credit cards were maxed out, and he didn'teven have enough money on him to pay for a rental car. Hewasn't sure how he was going to get to the meeting with hislast potential client.

But when Graham disembarked, he quickly learned that Cherry Hillhad arranged for a rental car to pick him up. What a stroke ofluck, he thought, and his morale was boosted. But would they likewhat 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 paythe cost to have it sent," says Graham. Cherry Hill wanted totest Express Digital's equipment at the local mall during theupcoming Easter season. Suddenly, Graham's instincts told himthat everything would work out.

His instincts were right. This year, Cherry Hill pumped $2.5million into Express Digital, which now has 32 employees. Overall,Express Digital's 1999 revenues hit $5.6 million, which is morethan double what they made in 1998. And 2000 promises to be an evenbetter year financially; Graham recently clinched a deal with Sonyto jointly market a low-cost digital imaging system (priced under$13,000). And what's next? Who knows? Graham admits he and hiscrew may someday sell their business to their competitors, Kodakand Polaroid.

"They've always been our competitors," saysGraham, nonplused. "I've just become numb to the fact thatthey're [out there]. I think it's almost easier for us thatthey're bigger. They can't react very fast, and when theymake a decision, if it's a stupid decision, they can'trecover from it for a while, so beating the big corporate giantsisn't hard to do."

And Express Digital has beaten out their competitors in somehigh-profile places. More than 350 systems are currently installedin places like the Mall of America, the Grand Canyon, Guam'sUnderwater World Aquarium and Bermuda's Dolphin Quest. AndGraham's list of triumphs goes on and on and on.

Not bad for a guy whose own camera only cost $300.

Contact Source

Express Digital Graphics Inc., (888) 584-0089, http://www.expressdigital.com