lessons from the top.

Three of 11 Titans of the B.E. 100s share their trials and triumphs on the climb up

WHO RUNS THE NATION'S LARGEST BLACK-OWNED companies? Bootstrap entrepreneurs. Master dealmakers. Innovative inventors. High-risk venturers. This self-made group of African Americans has been the vanguard of an entrepreneurial revolution.

Achieving despite lack of capital, diminished access and outright racism, they used imagination and drive to seize opportunities and break barriers. All stand among black America's wealthiest and most powerful players.

The ascension of the BE 100s--the companies that BLACK ENTERPRISE magazine has ranked and chronicled for more than 25 years--represents the economic evolution of African Americans since World War II. Black businesses have shown significant growth over the past quarter of a century. The original Top 100, which included industrial, service and professional businesses, had total annual sales of $473.4 million and employed a total of 9,267 people. Today, these companies have revenues exceeding $14 billion and more than 55, 000 employees on their payrolls.

Whether they are bootstrappers, innovators or financial engineers, there are common traits shared by these business titans:

* VISION. All envisioned products and services that filled a void in the consumer market and, in turn, revolutionized and advanced whole industries.

* ORDER. All know their sectors intimately and have tightly structured their organizations. These chief executives find talented employees and advisers to lift their concern to the next level.

* FOCUS. Many have built their companies from the ground up and have been relentless in doing so.

* PASSION. These CEOs love the companies that they run and become energized by new ventures--and adventures.

In the course of 25 years, this new breed of entrepreneur has become rich, prominent and powerful. They were able to do so because they kept their enterprises in step with--and, in some cases, ahead of--the times.

JOHN H. JOHNSON 

Johnson Publishing Co. Inc.

The end of World War II brought veterans, black and white, home to find jobs and start families. Their return signaled the promise of affluence. In 1945, John H. Johnson, all of 27, was being drawn into exploring new frontiers.

Through informal research, the young publisher [of The Negro Digest] found that large numbers of blacks were buying Life, the popular pictorial magazine, from newsstands on Chicago's South Side. These readers would be far more interested in a similar publication that revealed the positive aspects of black life.

Ebony hit newsstands on November 1, 1945. Black readers scooped up the Life-sized publication, chock-full of articles and striking black-and-white photos chronicling black achievement. Johnson set high standards for himself, announcing that he would not accept one page of advertising until he guaranteed a circulation of 100,000. With virtually no competition, the magazine surpassed its circulation goal in one year. The Audit Bureau of Circulations revealed that Ebony's paid sales of more than 300,000 by the end of 1946 made it the most widely circulated black publication in the world.

But, in pushing Ebony, Johnson broke one of his cardinal rules: he grew too fast. Ebony was draining the company's coffers. As a result, from 1945 to 1947, Johnson was forced to do everything he could to keep his fledgling company from sinking. He postponed the payment of bills, stalled creditors and pounded the pavement in search of advertisers.

Ironically, Ebony became too successful. Its meager advertising base could not support the expense of printing and shipping 400,000 copies a month. It was a Catch-22, though: if Johnson cut back on circulation, then he wouldn't be able to entice future advertisers. To make matters worse, local banks would still not loan him the funds for working capital because they wouldn't take a chance on a black businessman, despite his solid three-year track record. As he tried to cure his cash-flow crunch, he reminded himself that a businessman must always keep his options open. What if he could develop other businesses to generate additional revenues and support the magazine? With his network of distributors and a magazine that could promote products to thousands of black consumers, it could work. In fact, the crisis spawned Johnson's lifelong business strategy of using publications to promote his other business ventures.

"I've never let the inability to get capital keep me from growing and surviving. I thought of all kinds of unique ways to survive. I sold lifetime subscriptions for $100 each. Since white advertisers would not advertise with Ebony, I started a group of mail-order magazines and advertised in my own magazine. The company was called Beauty Star. I sold vitamins, wigs, dresses and haircare products. I sold anything that I could sell in order to get enough capital to keep Ebony going."

But he couldn't sell enough subscriptions or novelty items to finance the publication long term. However, the tactic bought him what he desperately needed--time. Ebony's survival depended on bagging major advertisers. Johnson resolved to snare them, telling himself, "If I can't sell Ebony better than anyone else, I don't deserve to be president."

First, he needed to get the attention of major ad agencies. To reach top execs, he would woo the gatekeepers. "I cultivated secretaries. I would find out their birthday and send flowers to them. They appreciated my persistence and patience. This approach helped me when I tried to get a meeting with Fairfax Cone, the head of Foot, Cone & Belding advertising agency."

Once an appointment was booked, Johnson used guerrilla-style selling techniques, which called for him to learn as much detail as possible about the CEO he planned to pitch. He would uncover the concerns, desires and idiosyncrasies of his intended target, and use them as tools to build a relationship. For instance, when he tried to sell advertising to Zenith, the leading manufacturer of radios, he learned that the head of the company, Commander Eugene McDonald, had explored the North Pole. Noting McDonald's obsession with polar expeditions, Johnson tracked down Matthew Henson, the African American who beat Commodore Robert Peary to the Pole. He obtained Henson's inscription on a copy of his autobiography.

After receiving the book from Johnson as a gift, McDonald asserted, "Young man, if you were putting out any kind of magazine, you would have something on Matt Henson." As if on cue, Johnson pulled out an issue of Ebony that contained a four-page article on the explorer. In response, not only did McDonald place Zenith ads in Ebony, he proceeded to call the chairmen of such companies as the Armour Food Co., Swift Packing Co. and Elgin Watch Co.--while Johnson sat in the room--and advised them to do the same.

After two years of being on life support, Ebony and JPC were out of intensive care. In 1948, the magazine became profitable as it gained such major advertisers as PepsiCo, Colgate, Beechnut and Seagram. While JPC strengthened its revenue base, Johnson increased his knowledge of the magazine publishing business. He even persuaded executives of Time Inc., the largest magazine publisher in the country, to teach him and his staff more about the advertising and circulation process.

Time Inc. sharing proprietary secrets? Sure, because they didn't consider Ebony or this black upstart to be competition. If they had only known....

RUSSELL SIMMONS 

Rush Communications 

Russell Simmons is a perpetual B-Boy. At 41, he still wears baseball caps and sneakers to business meetings. The bald, baggy-jeans-wearing CEO of Rush Communications has taken hip-hop's music and style, and crafted a diversified media conglomerate that includes a record company, four music publishing subsidiaries, a motion picture production company, a fashion house, a television division and an advertising agency. Simmons stitched together these entities--mostly through joint ventures--to create "dynamic and urban-based entertainment that captures the energy of the American youth culture." Methodically, he has catapulted his company ahead by consistently following three main strategies: finding mentors in new industries, developing a strong network of contacts and the best talent possible, and establishing partnerships to expand his business.

In the 1980s, Simmons found his first mentor at one of his concerts: Roger Ford, a record producer who scouted for talent. Simmons peppered him with questions about the industry. Ford shared the basic principles of artist management. Among them, find a distinctive trait to make artists marketable, and when booking an act, hire an entertainment attorney to review the contracts.

"He taught me that I should have a full understanding of any business before I pursue it. Every time I go into a new venture, I find a rabbi who has the business acumen to help me understand the mechanics of that industry, the costs involved in developing a product and what you need to do in order to make a profit."

In 1984, Simmons was in the process of developing his own music label when he got the brainstorm of teaming with Rick Rubin, a rich white college student from Long Island and a huge fan of rap music. Rubin had started his own record label, Def Jam (which, in street parlance, means "cool music"), and operated it out of his dorm room at New York University. The two clicked. Russell had the acts and Rubin had a company that was already up and running. They became partners, investing $2,500 apiece. Simmons' mentor, Ford, helped them produce the records.

Selling more than 50,000 records, Kurtis Blow's single ("Christmas Rap") was a hit. It became the first step in transforming Def Jam from a mom-and-pop label to an independent record company. By 1985, Def Jam was selling close to 500,000 records, and Simmons was about to have one of the biggest meetings of his life.

Executives at CBS Records noted the growing popularity of rap music and became interested in the upstart company, offering Simmons and Rubin a $600,000 deal. The young partners would produce records, while CBS handled distribution, marketing and promotion. Def Jam would receive royalties on record sales. They went for it, launching 17-year-old LL Cool J and his first single, "I Need a Beat." It sold a million copies. "It was great. I made my first $300,000. I was actually more excited about that milestone than when I made my first million years later."

EMMA C. CHAPPELL

United Bank of Philadelphia

It was Emma Chappell's baby. She conceived the idea, and bore the heavy burden of giving it life. Then, from the day she launched United Bank of Philadelphia, she nurtured it, protected it, expanded it. It took six long, hard years.

The venture got off to a promising start. With her impressive credentials and fat Rolodex of contacts, she organized a group of 12 African American investment bankers and business leaders to plot the founding of the bank.

Building a financial institution from scratch would take loads of capital. First, Chappell and the others ponied up $600,000 to develop a business plan and a feasibility study. To take the next step--establishing United as a state-chartered institution--they needed to raise $3 million.

Chappell put in place a strategy to gain the financing. She would approach insurance companies, corporations and leading financial institutions. Her leverage would be the poor track record of majority banks providing loans to African American customers. Moreover, the institutions held mediocre performance ratings as measured by the Community Reinvestment Act (CRA), the 1977 federal law created to induce banks to provide credit and other services to low- and moderate-income communities.

Chappell's pitch: what better way to improve your CRA performance ratings than to invest in a bank that would fully serve minorities? It worked. Within months, Chappell persuaded such monoliths as Mellon Bank, PNC Bank and Corestates Financial Corp. to shell out more than $1 million. United was on its way. Then Chappell's world fell apart.

On October 19, 1987, the stock market plunged 508 points and wiped out as much as $500 billion in equity value on the New York Stock Exchange. Institutional investors became skittish. United's sources of financing dried up. To make matters worse, the state raised the capital requirements to $5 million.

"We put all this work into trying to start United and our strategy for raising the money from institutional investors just collapsed. But we were not ready to give up. The idea came to us that we should raise the money from the black community. Such a move had not been tried for decades. I believed that if we [African Americans in Philadelphia] truly wanted our own financial institution then we had to put our money where our mouth was."

For the next three years, Chappell mounted a tireless campaign stumping for dollars. Wearing out several pairs of shoes, she canvassed different neighborhoods and pressed the flesh with black Philadelphians--blue-collar workers, professionals and entrepreneurs--anyone who would take a few minutes to listen. At the same time, she continued to push major corporations to buy shares and sought support from city hall.

Sitting in the small office she shared with her secretary, a worn Chappell tried to figure out the best way to accumulate huge sums of cash. Finally, she had a revelation: the best place to spread the gospel was in church. It wasn't exactly a novel idea, but it was all she had. She convinced local ministers to let her address their congregations, from the pulpit on Sundays and from the dais at church functions. The polished banking executive became a financial evangelist, raising the economic consciousness of the black community--and the money she needed to finance her dream.

"In 1989, we set out to raise $6 million in capital--$1 million more than the regulatory requirement. It was a struggle, but the response was overwhelming and gratifying. African Americans and others from all walks of life nearly 3,000 shareholders--purchased stock in United. Some had never owned stock before, but believed in our mission. We held `Black Bank Sunday' in many churches throughout Philadelphia where prospectuses were distributed and discussed and stock was sold to church congregants who clearly saw the need for the bank and wanted to own a piece of history ... a history that would have a lasting economic impact on Philadelphia and our communities. We soon became known as `The People's Bank.'"

By April 1991, United had received $3.3 million from individual investors and another $2.7 million from 14 institutions. The bank the people built had cleared its first major hurdle.

Excerpted from Titans of the Black Enterprise 100s: Black CEOs Who Refined and Conquered American Business Copyright 1999 by Derek T. Dingle Reprinted by permission of the publishers John Wiley & Sons, Inc. To order a copy of the work call 1-800-225-5945 or visit the Wiley website at www.wiley.com