Credit Card Small Business Practices: How one startup grew successfully
By Stephen Milioti | Published: June 1, 2007
Following your dreams may be life-affirming, but it can also be murder on your wallet—unless you have a sound financial plan. Nick Iovacchini, now 28, had given this a lot of thought when he (along with friend and business partner Frank Cerullo) launched GameWear (http://www.wearthegame.com/) in 2003. An interesting twist sets the Hoboken, N.J.–based company apart from typical sports-apparel makers: All the items—mostly jewelry and accessories like key chains and wristbands—are made from the actual balls that are used in the respective sports. Iovacchini believes that using the exact same material that goes into, say, baseballs or footballs, makes the product feel more real and makes fans feel much closer to it.
After graduating from Rice University, Iovacchini got an M.A. in international economics from George Washington University, playing on national baseball teams both in school and afterward. He then found inspiration by combining his interests in sports and finance. He also had a plan, a positive attitude and a great credit line, all of which he used when starting and growing the business. Success has been palpable, with 300 percent growth each of the past three years, and official licensing deals with the NFL, NBA, NCAA and NHL. GameWear now has a dozen employees. But, as with almost any business, the initial startup wasn’t easy.
How did the idea for your company come about?
Well, when I played baseball in college, my teammates and I literally started cutting up balls and making necklaces and wristbands out of them. It wasn’t long until we were like, “This could be a business.”
Where were you working when you decided to launch the company?
It’s sort of a long story. After I finished my master’s degree, I went to Italy to play baseball for two seasons. Then I came back to the United States and started working in a venture-capital firm, a job I really didn’t enjoy. I contacted my good friend Frank Cerullo, who played baseball with me in college. He has a degree in computer science and was working at a hospital as a network administrator, which he liked. I asked if he wanted to be my business partner, and he agreed.
So you both quit your jobs?
No, at first we worked nights and weekends developing the business. We started by getting patent protection on our ideas and exploring how to get licensed by the sports associations. I quit my job a few months after we officially launched, and Frank quit his job about a year or so after.
Sounds like you were getting zero sleep. Where did you find inspiration to keep pushing onward?
We have the hard-work philosophy to the Nth degree. And we took a calculated risk. As long as I could eat, I was OK. It was a good time to take that risk. And we both made ends meet: I learned how to bartend and did that at night. Frank sold computers on the side.
What’s your take on young entrepreneurs and credit card use? What did you observe others doing in the same situation?
Well, for us there were two possible ways of starting the business: credit cards or finding an investor. We didn’t want an investor because then if the company got successful, they would own it. And we didn’t want to deal with investor input, because we were so passionate about our idea and wanted to have control over it. I’ve seen a lot of bad things happen when meddling investors get involved and mess up the company’s initial focus. So I’d say to small-business owners who don’t want to deal with investors and can responsibly choose credit cards instead—go with the credit cards. You might have some debt at first, but at least the company is yours—which really pays off if the company becomes successful.
What percentage of your initial startup cost was funded with credit cards? And which cards did you use?
About 30 percent of the infancy startup phase was funded with credit cards. I wasn’t scared to use them. I primarily used a Chase Platinum MasterCard I had and also got an MBNA MasterCard. Both were personal cards—it wasn’t until our business was up and running that we were able to get a business card. So basically we had to go out on our own and secure those cards individually, which was a challenge because we were young guys without extensive work history. But we did it. And the credit lines were adequate for what we needed—except for one card from Capital One which wouldn’t raise our $500 limit! We had to get rid of that card pretty fast. It didn’t seem reasonable that they never raised our limit, considering we always paid on time.
You say you weren’t scared to use credit cards—can you elaborate? Some people get nervous about it.
I wasn’t scared to use them because I was passionate about the business. Plus, I’m clear about my approach to credit cards—they’re great as a short-term financing solution, which I needed, and which helped me. And I’d do it again if I had the choice. Of course, at the same time, relying mainly or only on credit cards isn’t an ideal long-term solution, as it’s not the cheapest money you can borrow. But I wasn’t scared because I knew I was taking a risk, but a calculated risk, and we didn’t get in over our heads. You just have to be responsible. It comes back to your relationship with credit cards, and also what you’ve learned from your family and peers about debt and money management.
How were your interest rates?
I got an excellent promotional rate on the MBNA card—less than 2 percent for nine months. We paid as much as we could during those times but couldn’t pay it all. But we always paid attention to where we were financially at any given moment and made sure not to go too far. Yes, we did accrue a good amount of debt, but we kept a close eye on it. Cash-flow management is essential when you’re starting a business, and it’s something to consider when deciding how much to charge on the credit lines you’ve established. For some reason, credit cards have a stigma. And it’s true—if you let them get away from you, they can bite you. But then if that happens, that’s sort of your fault. If you stay on top of credit cards, and manage them right, and know when to stop charging, they can be a useful tool.
Do you still use the same credit cards that you used during your startup?
Those are paid off now. I don’t use them as much because a positive cash-flow situation means I can finally use revenue to pay off debt and pay for expenses! But I still use them; I didn’t cancel them. My credit situation now is good—I get new-card offers in the mail all the time.
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