Hip-hoppreneurs.

IT'S THE TWILIGHT OF SUMMER IN LOS ANGELES AND RUSSELL Simmons is in cruise control. Motoring down Wilshire Boulevard in a coal black convertible Benz, the 40-year-old CEO of Rush Communications lets it casually slip that he just recently learned to drive. But that doesn't discourage him from furiously working the car cell phone with one hand while gingerly grasping the steering wheel in the other.

Simmons is coordinating last-minute celebrity contributions to his annual Rush Philanthropic Arts Foundation celebrity auction, which focuses primarily on the needs of inner city youth. So far, the donated items include an auto-graphed poster and watch from the Will Smith movie Men in Black, a pair of size 22 Reeboks signed by Shaquille O'Neal, and an autographed copy of the Sidney Poitier film To Sir with Love. Now Simmons is after his next target.

"I need Maria's number," Simmons barks into the phone. "Not the office--the number at home. Did we get anything back from her or Arnold for the auction? The least we should be able to get is a signed Terminator poster." These days, the BE 100s CEO can not only make such demands on Hollywood's elite but also expect a prompt response. (Schwarzenegger ultimately donates a leather Planet Hollywood jacket autographed by himself and wife Maria Shriver.) If nothing else, it is a testament to the prestige Simmons wields among Hollywood's upper echelon.

If Simmons is considered influential by those within the urban music industry, it's not only because of these accomplishments; it is also because he is the forerunner of the "Hip-Hopprenuer." Many in the industry credit Simmons for setting the standard for rap artists and executives who've risen through the urban music ranks to realize that the key to sustained success and wealth doesn't end after making a few hit singles. Far from your stereotypical Brooks Brothers-wearing corporate executives, a swelling group of artists, including such top selling acts as The Wu-Tang Clan and Spindarella of Salt N' Pepa, are leveraging their celebrity in the music industry to spin into different business enterprises. Their concerns run the gamut from down-low street fashion to high-comfort spas. These Gen Xers have propelled themselves onto a different stage by realizing that name branding and business ownership is the real secret to success.

Although a corporate executive and not an artist, Simmons is the perennial example of a true player in the hip-hop industry. Since founding Def Jam Recordings in 1985--the largest subsidiary of Rush Communications--Simmons has methodically spread his reach from hip-hop across the entertainment arena into fashion, film and advertising. In 1997, Phat Farm--Rush Communications' wholesale and retail clothing company--is projected to gross sales of $10 million. With the success of films like the late Tupac Shakur's Gridlock'd and Def Jam s How To Be a Player (starring Bill Bellamy), Def Pictures will tout gross box office sales of over $25 million this year. And, with prized accounts from Coca-Cola and other clients, newly formed Rush Media projects gross billings of over $1 million in this, its first full year.

Second only to BET Holdings Inc., Rush Communications (No. 54 on the BE INDUSTRIAL/SERVICE 100 list) is now the second largest black-owned entertainment company in the United States. But there's a host of young, hungry hip-hoppers eager to follow in Simmons' entrepreneurial tracks. Whether they succeed will not depend on how well they rap or rhyme, but how well they manage the bottom line.

WU-TANG TREKS THE ENTREPRENEURIAL PATH

The midtown Manhattan office of Razor Sharp Records is used to a frenetic pace. It's where the Wu-Tang Clan work. Earlier this year, the multi-platinum-selling act released their sophomore album, Wu-Tang Forever. Despite weak radio airplay, album sales had topped $4 million by late September.

This particular evening the group will introduce several acts at Radio City Music Hall for the MTV Music Awards. Various members of the nine-member Clan are rushing in and out of Razor Sharp getting their artist credentials for the evening and going over last-minute routines. In the midst of the confusion, Clan member Lamont Hawkins, a.k.a. U-God, says while Wu-Tang may be the flavor of the moment among rap music fans, each member is very aware of the need to think beyond the moment.

"Everyone here is concerned with getting into something more than rhyming because we realize that what we have here is a vehicle that gets you from one step to the next," says Hawkins. "This is a business where one day you might be in and the next day you're out. So it's up to you to take it to the next level."

The first sign that Wu-Tang wasn't your run-of-the-mill rap group came in the innovative way the Clan structured its individual projects on separate music labels. Spearheaded by group member Robert Diggs/RZA, most members have distinct solo deals including Clifford Smith/Method Man (Def Jam), Russell Jones/Ol' Dirty Bastard (Elektra), Corey Woods/Raekwon (Loud Records), Gary Grice/GZA (Geffen) and Dennis Coles/Ghostface Killah (Razor Sharp/ Epic). Each has a 50% partnership deal with Wu-Tang Productions, and a solo deal also contributes 20% of their earnings to Wu-Tang Productions. Their arrangement is a feat nearly unprecedented because it gives the group ties to nearly every major label in the music industry.

But that was just a start. The Clan's first vehicle to extend their brand name beyond hip-hop has been the apparel industry. As with Simmons' Phat Farm, the Clan sees a synergy between hip-hop music and clothing. With start-up costs of $50,000 for a storefront and merchandise, the group launched its apparel line, Wu-Wear, and opened its first Wu-Wear clothing store in Staten Island, New York, in 1995. The clothing, produced abroad in China and domestically in Massachusetts, is made at Wu Manufacturing L. L. C.

The Clan is targeting urban teens and college students ages 12-28. Wu-Wear apparel includes sweatshirts, headwear, socks, underwear, bags, wallets and mugs. After the designs for Wu-Wear are approved for different clothing, product samples are made. Following the Clan's approval of the actual product, inventory is ordered for the flagship store in Staten Island. Samples are sent to wholesale and mail order reps, and catalog sheets are prepared.

By all indications, the line is thriving. The flagship store had sales in excess of $1 million its first year. Now with two additional stores in Norfolk, Virginia, and Atlanta, and a thriving mail order operation, Wu-Wear president and CEO Oli Grant is projecting year-end sales for all three outlets to exceed $5 million. Approximately 40% of 1997 revenues will come from the three retail outlets. Fifty percent comes from Wu-Wear's wholesale operation. Last spring, the group Inked a deal with retail giant Federated Department Stores, owners of Macy's, Bloomingdale's, Bon Marche and Rich's. The clothing is also found in smaller retail chains such as Dr. Jays and Gadzooks. The final 10% comes from the group's mail order operation.

"At Federated, we're always interested in the newest product for our stores," says Allen Zwerner, group senior vice president for men's, young men's and kids' merchandise. "It certainly doesn't hurt if there is additional exposure to the customer through their music. However, the product must be right for the fashion market. Currently, our stores are carrying their T-shirts, and as we move into spring 1998, they will be expanding their line into a full-blown sportswear line, and we feel good about giving them a shot," adds Zwerner.

Illustrating the synergy between their music and clothing, Wu-Tang provides mail order information for its apparel inside each CD jacket. In a moment of marketing inspiration, the group released the single and video "Wu-Wear," featuring RZA, Method Man and Cappadonna. The song urged listeners to abandon their current clothing in favor of--what else--Wu-Wear.

Mitchell Diggs, CEO of Wu-Tang Productions, is responsible for managing all of the separate and group projects for the Clan. He says once the group attracted mass attention and various offers for projects or investments came along, the decision was made to cut out the middleman and explore business opportunities for themselves. "You start listening to these deals and hearing what they're trying to offer and you start thinking, 'Hey I have access to that same type of money. Why not look and see what we can do for ourselves?' A lot of artists might get caught up in the hype of it. But we can't be rappers all of our lives and the show doesn't pay the rent forever," he adds. So Diggs says he and members of the Clan decided to make their own deals. "Now we explore all avenues. Instead of always giving the deal to someone else and making them rich, why not keep it for ourselves?"

What's next for the Wu? Grant says a fourth Clan store is under construction in Philadelphia and plans for a Wu-Mega store in the Melrose area of Los Angeles are in the works for next year.

But can Wu-Tang sustain its momentum? A hot name alone isn't enough. The inherent dangers in both music and fashion are the relative youth and fickleness of these industry's consumers. And the transition from music to fashion, say insiders, is a difficult one since the audience for both is often looking for the next fad or trend.

But the fashion industry is attractive to hip-hop artists wanting to branch out because it can be a gold mine, says Alan Millstein, editor and publisher of the Fashion Network Report. According to Millstein, the average life span of most clothing lines is five years or less, but "if you hit, there's a ton of money to be made." Designers such as Tommy Hilfiger, Calvin Klein and BE 100s CEO Karl Kani have long embraced and financially benefited from hip-hop's influence on fashion. Touted in rap lyrics for the past decade, these designers have reaped millions off the urban hip-hop market. According to a recent report in Forbes magazine, Tommy Hilfiger reported a 40% jump in sales to $491 million as of its current fiscal year with earnings climbing 47% to $64 million. How much of that increase can be directly attributed to the hip-hop market is unclear, but many black artists believe the time is overdue to start going after that market for themselves.

Carl Williams, CEO of Karl Kani Infinity Inc., believes Wu-Wear has found the right niche to hit by attacking the urban market. "The fact that groups like Wu-Tang have the ability to sell a million albums means something. There are people out there listening to them, watching them. And a lot of the kids who see their videos are going to want to dress like them," says Williams. "Marketing their clothing through their music and CDs is creative and unique. And it won't hurt the sales of their next album to have everyone walking around with a big Wu symbol on their backs," he adds.

Diggs says the group is simply trying to take control of their own image and marketability. "It's really just understanding what makes money from you," he says. "You have to understand how your product makes the larger industry so successful and make sure that you get more than just a penny of the proceeds."

CAN MUSIC SUCCESS TRANSLATE INTO BUSINESS ENTERPRISES?

The main problem is most artists' general lack of knowledge about the fashion industry. "Most musicians are simply naive about the production cycles and complexities of design," says Millstein. "Apparel is a totally different world from being in the production studio and making a CD."

But not all rappers with outside business interests are into apparel. Percy Miller, a New Orleans native who goes by the handle "Master P," purchased a Tenneco Gas Station and signed on as an Athlete's Foot franchisee earlier this year. Miller, who's also owner and president of No Limit Records, says the start-up costs for both of his Baton Rouge-based concerns ($500,000 for Tenneco and $250,000 for the Athlete's Foot) are expenses well spent, as he plans to branch out into the business arena. "When you get in this business, you have to think ahead if you want to stay around. You don't want to just get a few dollars, and next year there's nothing happening," Miller says.

"With Tenneco, I look at it as a great investment because it's obviously something everybody needs," says Miller. "We're right off the interstate ar a rest area, 50 it's accessible. There's less manual work involved because we have computerized pumps installed. And it's a 24-hour operation, so it's always making money." Miller is projecting revenues at his Temleco station of $1.5 million by year's end.

The Athlete's Foot outlet, which will be located in a mall current INT under construction, is expected to be open early next year. Among the other shoes and clothing the store carries will be--you guessed it'--Bout It apparel, Miller's own clothing line. "I feel like if you're really an entrepreneur, you should buy a business every chance or opportunity you get," he says. "Not to the point where you spread yourself thin, but where you can control all of your interests. That's what helps you grow."

Nelson George, a former Billboard editor and longtime music critic, notes the growing number of artists trying their hand at entrepreneurship. He says the movement really dates back to figures like Simmons and filmmaker Spike Lee. "They became very big entrepreneurial role models with the success of businesses like Def Jam and 40 Acres, and they both became multi-media. Spike had his books and clothing store. Russell had Def Comedy Jam and his own clothing line," says George. "These are the people who originally took the idea of having success in one particular medium and then flowing into different arenas."

With the storied successes, it's still an arena laden with pitfalls. And the challenge is even greater for artists with little or no business experience. James Walker, an attorney with the Hartford, Connecticut-based entertainment law firm Robinson & Cole, says the hazard most artists face is entrusting family or friends with little business expertise to manage their affairs. "These ventures typically fail because artists often have a friend they grew up with or someone in their inner circle running things," he says. "The key is to surround yourself with professionals who understand how business works and not entertainment groupies.

Miami-based rapper/entrepreneur Luther Campbell knows all about that mistake. He gained a fortune and worldwide notoriety in the late '80s as the lead bad boy of 2 Live Crew. His risque 1989 album, As Nasty As They Wanna Be, sparked a national debate over censorship while lining Campbell's pockets with millions. With his wealth, Campbell created his own production company, Luke Records, and opened several nightclubs in Hialeah and Miami Beach. He also had a construction company, Luke Development. Published reports placed Campbell's assets at $11 million in 1989.

But by 1994, Campbell had filed for bankruptcy following a legal suit over royalties due to another artist. Campbell, however, blames most of his financial troubles on trusting the wrong individuals with his money.

"The trap I fell into was hiring all my boys and people I grew up with who I thought I could trust to handle my affairs," Campbell says. "You get into situations where signatures are required and money is being spent and it's hard to keep track of what's going on." At one point, Campbell says, a co-worker embezzled $600,000 from one of his businesses. "If I learned one thing, it's that you never totally trust any one person, no matter how well you think you know them."

Attempting to climb back up from bankruptcy, Campbell is now focusing on his production company and expects to turn a modest six-figure profit this year.

TAKING A DIFFERENT SPIN

Deidra Roper has been a staple of the hip-hop industry for well over the past decade. Better known by the moniker "Spindarella," Roper is the disk jockey for the Grammy Award-winning group Salt N' Pepa, arguably the most popular and longest-lasting female rap group ever to hit the airwaves. And after a dozen years in the industry, Roper is working to complete her first solo album, Spindarella s Ball

But she wanted more. So in January, the East New York native started her own business. The She Things Salon/Day Spa opened its doors in early January in Laurelton, Queens. The two-story enterprise covers 3,200 sq. ft. and employs 18 staffers. Among the services the spa offers are hair care, manicures, pedicures, facials, massages and aromatherapy. The spa also sells Ascend, Roper's new skin care line. The products range in price from $10 to $30 for cleansers, toners, day creams and body gels, and accounted for nearly $25,000 in sales in She-Things' debut year.

Roper says when deciding what type of business to start, she realized it was important not to key in on anything faddish. "The one sure thing in life is that women are always going to want their hair and nails done. That's not a trend," Roper says. "I've been on the road for so many years with the girls, I already knew about hair, nails and what it took to take care of my body and makeup. And I know a lot of women who work very hard every day but aren't introduced to things like aromatherapy, pedicures, facials, wraps or full body massages."

The spa packages run from $129 for "The Eden," which includes a half-hour facial, massage and pedicure, to "The Retreat," which also includes deep tissue aromatherapy, a manicure, champagne and flowers for $236. According to Desiree Roper, manager of She-Things (and Deidra's sister), the salon services about 70-75 clients a day. About 40% come in for hair care, while another 35% come in for the assorted spa services. The rest is made up of walk-in customers purchasing retail items like the skin care line.

"Starting her own business was something I'd been pushing Deidra to do for years," says big sister Desiree. "The music business isn't something you can count on every day. But a business, if it's run right, is something she can pass down to her children."

With start-up costs of approximately $180,000, Desiree is projecting first-year revenues of $300,000 by year-end. With the addition of a wet room and additional spa features, projections of $500,000 are being made for 1998.

"We've been very fortunate with our longevity. And in the rap industry where there's a lot of money, we have the opportunities to open businesses and do things with our money, and not just flash and buy cars," says Deidra. "It should be about putting some money away and starting something of your own, so you won't be dependent on other people."

So what does Russell Simmons think of the movement he's helped to create? Ironically, he's skeptical of artists attempting to move too far away from their core music business to focus heavily on business enterprises. "It's hard for any artist to be more than an artist and be very successful," says Simmons. "If you want to put your artistry on the back seat, that's one thing, but you can find someone better than you to run your clothing company. You can't find someone to do your music."

Says Vernon Slaughter, an entertainment attorney with Atlanta-based Katz, Smith & Cohen: "The number one task for these artists is having a basic understanding of business principles. Although a lot of these kids are often very smart, they are still inexperienced in basic business principles."

Slaughter, whose firm represents a host of hip-hop artists including Bobby Brown and Michael Bivins, TLC's Lisa Lopez and Tionne Watkins, and rappers Too Short and Bone Thugs-N-Harmony, says artists venturing into entrepreneurship should reach out to experienced business figures. "You really have to learn how to build a team around you of qualified individuals. And the qualifications have to be more than they share the same last name as you or because that's your boy," he says. "That's not a dilemma that's specific to hip-hop or even race specific. It's a dilemma all small businesses have to deal with."

Adds Slaughter: "The most successful of these ventures will be the ones that marry the enthusiasm and creativity of hip-hop with the wisdom and experience of those that understand the business sector."