Milestones, Mistakes and Millions
On January 16, 2008, UIUC College of Business graduates Al Goldstein and Steve Joung showed twenty-somethings and non-twenty-somethings alike how they grew a small business into a large and very profitable entity. The Twenty-Something Leaders in Business Roundtable, sponsored by PricewaterhouseCoopers, featured speakers Goldstein and Joung, President and Chief Operating Officer, respectively, at CashNetUSA.
Goldstein and Joung's presentation, called "Milestones, Mistakes and Millions," chronicled the founding and expansion of CashNetUSA, currently the leading internet payday lender, servicing clients across the US and in the UK. A payday loan is a quick cash loan of between $100 and $1,500, which usually does not require a credit check. The reasons clients take out such a loan include paying for unexpected medical bills or transportation expenses, paying off other creditors, or keeping up with household bills.
What started in June 2004 as a company with two employees, two interns and no revenue has become an enterprise with over 500 employees and $200 million in revenue. And 2008 should bring new products and geographies, as well as continued growth, to CashNetUSA.
"Like a lot of people, I had often thought while working for others that I would like to run my own business and work for myself," says Goldstein. "But I didn't pursue it because I thought I needed a new idea." Goldstein notes this thinking was in error, as so many of today's successful companies are those that didn't create new markets but rather improved products already in the marketplace. Goldstein and partner David Shorr saw a growth opportunity in payday loans. Shorr invested his own money, which attracted even more investors, and he sought to put Goldstein in a position where Goldstein could benefit from his own hard work. The company, of course, has thrived. However, it wasn't easy and it involved some mistakes since the company's inception.
An initial mistake was assuming that a "bricks and mortar" presence, i.e., storefront locations, would be a large part of their success. This was not the case, as they had trouble getting good locations for their two storefronts and customers were already sending loan applications via CashNet's web site anyway. Therefore, they now spend no money at all on physical loan dispersement locations.
Another early mistake was to outsource marketing and software R&D. Too much time was spent regulating offshore operations, which made this a bad plan that had to be altered.
Goldstein's and Joung's philosophy is that it's okay to make mistakes as long as you learn from them and don't repeat them. Joung states, "Fail early and often, then adjust."
While starting and running the business, CashNet USA's management team sought advice from various sources. They found the most fitting advice came from those with the same equity interest as themselves, and the less helpful kind was from the people they paid by the hour. Goldstein notes the lesson learned here was to "understand people's motivations and align your interests."
What about the current mortgage lending crisis? Has this affected their business? Fortunately, because it is an unsecured lending source, CashNetUSA and its clients have not experienced the stormy weather that the mortgage and housing markets are currently under.
When asked if he ever felt like giving up on the business, Goldstein admits that after about six months, he felt like pulling the plug. However, he believed CashNetUSA had the right management team, which would allow him and his partners to persevere. He also says that from the beginning CashNetUSA was structured to eventually be bought out, as management knew they didn't want to run a small business forever. However, their purchase by CashAmerica occurred much sooner than expected. It worked out well, though, as CashAmerica has allowed Goldstein and Joung to stay on in their chosen roles and to share their insights with us.
If you would like to learn more about CashNetUSA, please visit its website at www.cashnetusa.com.
Roundtable Series in Chicago, Sponsored by The College of Business & PriceWaterhouseCoopers