Credit cards helped launch 'Apprentice' star's early career
Loans were hard to come by, but Randal Pinkett found a way
By Karen Bruno
Though most know him as the first African-American winner of “The Apprentice,” Randal Pinkett would rather be known as the founder of five businesses and holder of nearly as many academic degrees. A Rhodes Scholar, he also has a doctoral degree in philosophy and an master's in business administration from M.I.T.
But he started the first of his businesses in 1993 while still an undergraduate at Rutgers University. His latest venture is BCT Partners, a multimillion-dollar management, technology and policy consulting firm based in Newark, N.J. And, of course, he recently oversaw an information-technology project for Trump Entertainment Resorts in Atlantic City, N.J. -- his prize for being hired by Donald Trump in season four.
Pinkett, who graduated from Rutgers debt-free, wants to help others do the same. He added author to his resume in 2007 with the publication of "Campus CEO: The Student Entrepreneur's Guide to Launching a Multimillion-Dollar Business."
Were any of the five businesses you’ve started funded with credit cards?
All of the businesses were funded with credit cards, mostly business cards, so you could say I'm an advocate of using them. For me, it was a matter of necessity. I would have loved to have used someone else's money. Clearly, it boils down to one's access to capital and the rate you pay to access the capital. But credit cards are a very viable option and worked relatively well for us.
You say "relatively." What is the downside of credit card financing?
My partner and I had the idea of selling music CDs when we were freshmen in college. A downside for me when I was launching Mind, Body & Soul Enterprises was that the APRs on our credit cards ranged from the mid-20s to the low 30s, which is a little out of control! At the end of the day, that was what was available to us, so we played the hand we had.
What were sales of this first business?
MBS did about $20,000, which is pretty good for an 18-year-old. Then we launched an education and training division that provided mentoring and seminars for students in addition to corporate internships. We grew that to a nearly $500,000-a-year business. I was only 21 or 22 at the time. I did party in college, but not a whole lot!
What percentage of your financing was on credit cards generally?
In that first business, 100 percent. Today, our credit card debt is probably down to zero. However, at the beginning of 2006, for BCT Partners, it was still about 10 percent of my total financing.
Why did you still need credit card financing for BCT Partners, your fifth and latest business venture, started in 2001? You had a good track record from your four other businesses.
The percentage of financing from credit cards has gone down with each of my ventures. However, in my experience as an entrepreneur, the way banks calculate the amount of working capital they are willing to give to a company often lags behind the current needs of the company. For example, the formula I've often been told is they look at your company's last three years of revenue, average it, take 20 percent, and that's the line of credit they'll give you. Let's say your company did $20 million this year and $5 million the two previous years, but is projected to do $50 million the following year. A bank will generally lend you 20 percent of $30 million, so you're really in trouble. The banks are looking historically, not at the projected revenues. So, yeah, you've done great for the past three years, but you are forced to go back to using credit cards and whatever cash you have on hand.
What's your take on minorities and credit card use? Are they targeted more aggressively by banks than other groups?
Any demographic group that has historically had difficulty getting access to capital -- young people and minorities, for example -- bears a higher likelihood of looking to credit cards as a way to alleviate the problem. In the very early stages of a startup, the seed stage, you are looking at getting capital from friends and family to get the venture off the ground. Unless you have a wealthy relative, one with disposable cash, then your options are government loans, microloans, credit cards or some combination of those.
In addition to brain power, to what do you attribute your success?
Faith has been a big part of it. It is the foundation. I've also had a really great team. There is strength in numbers. Getting back to the discussion of how someone creatively cobbles together enough money to get a venture off the ground: I have three business partners, and we've all sacrificed to make the venture work. To have four of us working together for very little money when we could all be making six figures, that's half a million dollars a year of energy that we didn’t have to pay for.
What is the future of BCT Partners?
We have our hands in a lot of different areas right now as a consulting firm. Most of our clients are governments and foundations. We’re doing the city of Newark’s website. And we've launched our first software product through a joint venture. It's called the Visual Performance Suite. It allows policymakers to aggregate the disparate data that exist in various databases for cities and generate intra-operating reports. You can ask questions like, "Are there certain areas of the city where crime is going up?" and you get the answer. The program makes it easy to visualize a lot of data.
It's the book I wish I had when I was starting out as an entrepreneur. I spend a chunk of time in the book talking about bootstrapping a company, which is what I did with sweat equity and credit cards while still a student. The majority of companies are started this way. If you're an entrepreneur and you want to get a company off the ground, that's how it's going down. It's where the action is.
Published: May 16, 2007
- How 'microresolutions' can transform your finances – 'Small Move, Big Change' author Caroline Arnold was tired of failing her New Year's resolutions, so she took a bold step to break them down in achievable actions ...
- Q&A 'Future Crimes' author Marc Goodman – Technology is rapidly evolving and so is cybercrime. Marc Goodman, author of "Future Crimes: Everything Is Connected, Everyone Is Vulnerable, and What We Can Do About It," explains ...
- Q&A with Ron Lieber: How to raise unspoiled kids – New York Times personal finance columnist and "The Opposite of Spoiled" author Ron Lieber touts the benefits of teaching financial decision-making at an early age ...