The Power of Broke: How Empty Pockets, a Tight Budget, and a Hunger for Success Can Become Your Greatest Competitive Advantage

by Daymond John

In the clothing business, the only way to get a real read on the market is to put those items on a rack with a whole bunch of other stuff and let total strangers—who don’t care about you, who have to dig into their pockets and pay for these items with their hard-earned money, who have a million distractions and a dozen other manufacturers lining up to catch their attention—weigh in on your designs.

What she was doing, really, was market research. This was Gigi’s proof of concept, because after a while she developed a good feel for what her customers liked, what they didn’t like.

That was in February 2008—five months after that game-changing phone call from her brother, and in that short time Gigi had managed to read a bunch of books on starting your own business, research the cupcake industry, learn a bunch of new recipes, negotiate a lease, build out her first store, hire staff…and she did most of these things on her own.

And now, six years later, there are almost 100 Gigi’s Cupcakes stores, spread across twenty-four states, generating over $35 million in annual sales.

And when you only eat if you earn, when your kids only eat if you earn, you figure out very quickly what works and what doesn’t, what works better and what doesn’t. And that was the beginning of my marketing education.”

His great asset, he came to realize, was that he was able to see things no one else could see. He could spot value in opportunities that other folks were likely to ignore. It’s a skill he was able to develop when he had nothing else to go on, and one of the first times he put it to use, it paid off—in a big way. It came, of all places, in the eight-track tape business.

It’s something I learned early on—that your problem is the solution to somebody’s bigger problem, so here my problem was, I had no money, right?

He tried to anticipate the objections of the convenience store owner and found a way to address them before they came up.

One of the great takeaways from Jay’s books is his definition of OPM—which most people use as a shorthand for “other people’s money.”

Jay found a way to grow that concept and call upon other people’s manpower, other people’s marketing, other people’s mind-set.

Soon he’d built up enough of a stake to buy a small company out of bankruptcy—a tiny company with about $20,000 in annual revenues that mostly came from a mail-order arthritis cream designed to help people with arthritis.

“We had to go to radio stations, television stations, magazines, newspapers, and persuade them to run our ads on the come. We couldn’t pay them, so we offered all the revenue on our first sale instead, but even that was a hard challenge. What I didn’t realize at the time was I had no credibility with these people. You had all these other companies out there hustling, same as me, thinking they could trade for that unsold ad time, that unsold ad space.”

Or the product wouldn’t deliver on the promise, and customers would want their money back. To counter that, Jay offered to give each station owner and publisher a chance to sample his product firsthand. He sent each of them a dozen jars of his arthritis cream and encouraged them to share them with any friends, family members, or employees who happened to have arthritis or joint pain. Next, he offered an additional 15 percent on each sale—meaning, on a $3 jar of cream, the station owner or publisher would keep the purchase price plus another 45 cents. And finally, he came up with a bunch of other incentives and promotional items to fold into his pitch.

It was such a crazy deal, and on the face of it there seemed to be nothing in it for Jay and his little company. With these terms, he wasn’t just losing out on each $3 sale, but he was also out the 45-cent sweetener and the 45 cents it cost to actually produce and package his product. That’s 90 cents out of pocket, on top of the $3 he’d never see from each sale. But he believed in his product.

But there was another concept in play here—lifetime value. Jay knew that until somebody came up with a cure for arthritis, bursitis, rheumatism, joint pain, and every other ache and pain that afflicts folks of all ages, there’d always be a market for his product.

“There was a recurring need,” he says. “It’s consumptive. It could only grow and grow.”

It was a desperation move, but it paid off in a big way, because out of every ten people who bought a jar of Jay’s arthritis cream, eight repurchased the same product within a month—and most of those eight continued to make the same purchase every month going forward. (Also, half of them went on to purchase

least two additional products from the company.) Of course, Jay didn’t have to give away the proceeds on those second and subsequent sales, so out of that initial 90 cent loss, he wound up making about $40 each year, on each repeat customer.

That product? Icy Hot—which is now the top-selling topical pain reliever in the country. You’ve probably heard of it. I’m betting there’s even a tube or a jar of the stuff somewhere...

Then that number doubled—then it doubled again. Before long, they were filling 500,000 orders—all on the back of this power of broke–type strategy that Jay and his partners only pursued because he had no other options. (Oh, and by the way—he eventually sold the brand for $60 million. Not all of that money went to Jay, of course, but his cut was enough to stake him in

For example, I used to go to store owners and say, “Look, do you want to buy these shirts?” I’d take their order. Then I’d go to the screen printer, who wanted to charge me, say, $1.25 per shirt. I’d go back to them and tell them to charge me $2.00 instead, and in exchange I asked them to ship the items directly to the store and arrange for the store owner to pay them directly as well. This way, I could offer assurances to the store owner that the shirts were being made by a reputable company, and in turn I could convince the screen printer that my order was backed by this reputable store, leaving me free to take my cut and essentially finance these orders straight out of the gate—let’s call it “street-level leveraging,” for lack of a better term.

He’s become known for his concept of “risk reversal”—a strategy that encourages businesses to focus on a lifelong value relationship with their customers and look to make small changes to gain maximum

He’s committed to adding value in every interaction—whether he’s consulting with a client, mentoring a young entrepreneur, or speaking to a group of small business leaders and offering them strategies on how to sidestep the worst of a recession.

And here it is: most people think that when they acquire wealth, success, getting the biggest house, starting the fastest-growing company, marrying the prettiest wife, making the Forbes list, whatever, they think that’s going to transform them. They think the heavens are going to open, the angels are going to sing, euphoria’s going to

happen, and all their worries will just disappear. But that’s not how it goes. It’s anticlimactic. All of that, it doesn’t change anything. The meaning of life is the process.

The meaning of life is in conversations like we’re having right now, and you can have the same conversation with a waiter or a janitor or an executive at a top company. It’s all in the process, and in my case it’s in my commitment to add value anytime I interact with anybody. If you can get that in alignment, fi...

hit a reset button, so making himself whole became his primary objective. The same goes each time he signs on for a consulting gig—he sets out a bunch of goals and puts the right plan in place, the right people in place, to make sure they’re met. So tell me—what goals are YOU going to set for yourself and your business…today?

My buddy Kevin Plank was a football

idea? He wanted a more practical, performance-type T-shirt to wear beneath his jersey and pads. That’s all it was at first—a way to make his own life a little better, a little easier. Middle of a game, middle of practice, he’d have to pull off his pads, peel off his soaking wet,

He recognized a need in his immediate community, and he moved to fill it. At the time, for American football players, the focus on equipment was limited to things

Kevin knew he could do better, so he started looking at lighter-weight, stretchy, synthetic materials that would fit the body snugly, like a second skin. And you have to realize, this was a guy with no background in fashion or design. He didn’t know the first thing about these synthetic, performance-type materials, but he was out there chasing, hustling…all in service of

Kevin was still a full-time student-athlete, which didn’t leave him a whole lot of free time to pursue this idea. But like all the other scrappy

“No matter what, they will make their business happen.”

Kevin’s tailor was able to make seven prototype shirts. Kevin drove back to Maryland and handed them out to his teammates, who were just starting their spring season. Looking for that proof of concept, he convinced a lot of them to try out his shirt during practice.

shirts and handed them out to seven different guys. Day after that, same thing. More and more, people started asking Kevin for a chance to check out one of his shirts, telling him what they liked about it, what they didn’t like about it, what worked, what didn’t.

“What I’d realized with those first seven shirts was that it wasn’t just for football players,” he says.

lacrosse players, baseball players. One of the girlfriends of one of the lacrosse players, she wanted one, too. So it wasn’t just this great football undershirt I’d built. There was this whole category I could create, for people who needed a better shirt to wear while they worked out.”

In its first five years, the company went to $5 million in sales. Over the next five years, they got close to $300 million—and then, five years later, they went public

With each new run, with each new product line, Kevin adapted his designs to the responses he was getting from his first customers, so he collected his proof of concept along the way—together with a bunch of ideas on how to improve his products each time out.

“We became famous for making the world’s greatest T-shirt for when it’s warm outside,” he says.

Be famous for something. We were famous for our performance T-shirt, which was unlike anything on the market at the time. After that,

we set out to make the world’s greatest T-shirt for when it’s cold outside, so then we became known for that too. It doesn’t matter if you’re playing football, or bow-hunting, or playing tennis, or skiing, we’ve got you covered.”

As I write this, Under Armour has posted its twentieth consecutive quarter of 20 percent growth or more—one of only two companies in the S&P 500 that can make this claim—and Kev...

“Being the tallest short guy in the room can still be a pretty good thing.”

He tells people looking to start their own business to be prepared to change, adapt, grow.

What do you really want out of life? That’s the question that drives Kevin—and for him, just to use a football metaphor since he used to play, the goal line keeps moving. First, it was starting a business.

A disability of any kind forces you to compensate—if you’re blind, you develop a better sense of smell, that sort of thing. In my case, reading was always difficult for me. I struggled in school—not because I wasn’t smart, but because I took in information in a different way, at a different speed. After a while, I figured out all these ways to compensate, different ways to learn. I had to work harder, smarter, more efficiently, more

One way we did that at FUBU was to get our shirts on the backs of some of the background dancers as music videos really started to pop. (Sometimes, if we played it right and got lucky, we’d get the artists themselves to wear

Any Given Sunday, directed by Oliver Stone and starring Al Pacino, Cameron Diaz, and a dynamite cast of others. My boy LL was in that movie, it was one of his first big starring roles, and he decided

a call from Oliver Stone’s office, wanting to see some samples. They loved Under Armour’s futuristic, modern look—it fit with the tone and tempo of the piece.