Brian Scudamore’s flagship business was once 3 days from going bankrupt. Now 1-800-GOT-JUNK? is worth $400m+.
14 Minute Read
Brian Scudamore is a man who believes in human connection before technology, so it’s no wonder he founded a company that has a heavy dose of both.
After the success of 1-800-GOT-JUNK?, the Canadian-born entrepreneur doubled down on his big idea by replicating the business model for new industries.
But not before almost losing everything. Scudamore has made a name for himself on the entrepreneurial circuit, using his story as a cautionary tale for up-and-comers. Among his big moments:
- Though the company started in 1989, it took almost a decade and a half for 1-800-GOT-JUNK? to catch some wind in its sails, all thanks to wild determination and killer press opportunities.
- Once his company took off, Scudamore knew he had a unique formula on his hands. Now he’s the CEO of O2E Brands, the parent company of 1-800-GOT-JUNK?, WOW 1 DAY PAINTING, You Move Me, and Shack Shine.
What makes Scudamore’s story unusual is that it almost didn’t happen.
He was on his way to failing in incredible fashion when he did the unthinkable to turn it around: Fire 52 people, including the COO who just happened to be the former president of Starbucks’ U.S. operations.
In this interview, we dig deep with Scudamore to learn just how close he came to packing it in and why he believes every great business model involves a big smile.KEY TAKEAWAYS
It took 8 years for 1-800-GOT-JUNK? to make its first million
Scudamore had to haggle with AT&T to keep the phone number moniker when he couldn’t pay the bills
If he had to start over today, he just might be mowing your lawn
01 From borrowing a dollar to earning millions
What was 1-800-GOT-JUNK? going through right before your big break?
Bad things. I remember one time I had a big meeting and I ran into the room to ask, “Guys, does anybody have a buck? I need it for parking.” My credit card got declined and I didn’t have any cash. I was literally cash broke and still trying with all my might to grow this business.
I kept thinking to myself, “It’s got to take off.” I was too deep in it to go backward.
And that’s exactly where you make your own luck. Then we got our big hit: A feature article in Fortune Magazine in 2002. Instantly, the phones started lighting up. Everyone wanted to get in and start a franchise. By that time, I thankfully already had four franchises up and running. Those four franchises are the only reason people were buying more than just hope.
I look back and think I was lucky that it took 13 years for the business to take off. I needed that time to build up the business, create the systems, and work through the kinks that come with franchising. It was great to have that out of the way before the magical moment where Fortune wrote a story on us. Because then, boom. Everything blew up, in a good way.
But you were still personally broke. What were you going through?
I was so broke. I literally didn’t have a dollar. I didn’t have a quarter. I had no money in the bank. I remember I had a stack of about a dozen paychecks that were due to me with a rubber band around them on my desk, just waiting for a time when we had enough money that I could go ahead and cash my own paychecks.
It was interesting because people on the outside are looking in saying, “Oh look, this company is growing so quickly.” They didn’t know what was actually going on.
I think that’s a trend. I think North Americans are so highly leveraged in everything we do. We have subscription fees, monthly payments on things we buy, car leases, mortgages on homes.
I was certainly one of those guys at that time. Everything was leveraged. We’re in such a leveraged world, which does have its benefits. It’s great that we have that freedom, but it can be scary. The economy can crash, and it probably will again at some point. It’s rare that you find someone that’s really got their shit together where they’re just like, “Oh yeah, I own this stuff.”
How were you financing the business at that time?
In very creative ways. Obviously, the credit cards were maxed out. And we owed vendors money. AT&T was our phone company at the time. For 1-800-GOT-JUNK?, our phone number is at the core of our business model. If people can’t reach us at that phone number, we’re done.
And we owed AT&T several years worth of phone bills, adding up to $36k. I called them and said, “Please work with me during this time. Please don’t shut us down. I’m going to give you a post-dated check for the entire bill we owe, but I need a bit of time.”
They stretched things out for 18 months. That was financing—I learned that from a friend. He told me to never stop paying your bills or you risk getting shut down. Instead, call their credit department and tell them you will send post-dated checks. I made sure to tell them that we were going to figure out how to make this business survive, but please be patient and work with us. It worked. Being open and honest worked.
Did you try looking for an investor?
Of course I tried, but I was declined. In Canada, we have the Business Development Bank of Canada. They were all about supporting young entrepreneurs. I would’ve been their poster child, but they said no because they thought it was too risky and I was too leveraged. I didn’t have any capital behind me.
Now I’m thankful that it worked out without any financing. But at the time, nobody would give me money. I couldn’t get anything from anybody. I remember even going to my dad. He reminded me of this a couple of weeks ago, “Do you remember the time you came to me and said, ‘Hey, Dad. Can I borrow $50k?'”
02 Working through anxiety
How were you dealing with the pressure?
I was stressed. I’m not ashamed of it, but it was a very difficult time and I was plagued by panic attacks. My brain was just filled with stress and fear. It got so bad, when it was time for me to get on a plane, I couldn’t because of the anxiety. I’d cancel my trip. I was just plagued with mental anguish. It was a tough time.
There were days when I couldn’t even get out of bed. I couldn’t bring myself to grips with what to do next. I would think “This isn’t working. I’m not good enough.” I felt bad.
Nobody knew what was going on except my COO, Cameron Herold. I would confide in him, but he had to keep it secret. You don’t want people to go, “Whoa, the founder’s freaking out. What are we going to do?”
I couldn’t even bring myself to get medication. A couple of years later, I bought some anti-anxiety medication. I reached out to some entrepreneurs and said: “Guys, I’m having a mental breakdown and I don’t know what to do.” I was introduced to other entrepreneurs who were suffering from the same thing and I realized that half of entrepreneurs are dealing with some form of depression and anxiety.
Most people don’t realize just how much pressure entrepreneurs put on themselves. I stuck with it so hard because I really believed that we would ultimately prevail.
What did great press mean for your business?
When we got that big break in Fortune Magazine, and then The Oprah Winfrey Show, we doubled down, created our own luck, and got some serious momentum. Business started booming. In 2003, things started skyrocketing. We were selling 100 franchises a year. We got more press, including The New York Times and The Wall Street Journal. We were everywhere.People say, “Press doesn’t work anymore. In today’s world, things have changed.” Nope—it just takes time for a new brand to shine.
What effect did the upswing have on your revenues?
In 2001, we were at $9m. That was when we only had four franchises. The Vancouver one was doing a couple of million and Toronto one was doing a couple of million. It wasn’t a lot of people. We needed more franchise owners and that was the challenge.
We were trying to sell an opportunity. Prospects would learn about it and say, “I’ll just get a truck and go do it myself.” People would come visit us in Vancouver to look at buying a franchise. You’d get a guy saying, “My wife thinks I’m crazy. Garbage removal? What’s up with this?”
It was that trust and hope factor. We were creating an industry. It’s just like FedEx must’ve been in the 1970s where people were like, “Overnight shipping? Nobody needs that.” We had to educate.
In 2002, we were starting to build on all that great momentum from the press and we reached $16m. It just grew from there. In 2003, we were at $34m. 2004, we hit $54m. In 2005, we were at $70m. By 2006, we hit $106m in revenue. That was the first year that we had topped 100 million. It was finally working.
And now we’re at $370m with just 1-800-GOT-JUNK?. Combine that with the other brands, WOW 1 Day Painting, You Move Me, and Shack Shine, and O2E is at $444m.
From 2001 to 2006, you went from $9m to $100m. Were you still self-financing?
We stopped-self financing in 2003. That was the tipping point where cash was flowing in really quickly. We were selling enough franchises and our franchise owners were paying. When you sell 100 franchises in a year at $50k, that’s $5m. We could take that, go build more infrastructure, do more marketing, and really drive the engine forward.
I started paying myself a decent salary and felt a little loose in the collar now that things were working.
03 On keeping 100% of 1-800-GOT-JUNK?
Did you take on any loans, traditional equity investment, or debt?
No. It just started to seem like a bad move. I kept holding off. To this day, I own 100% of 1-800-GOT-JUNK?.
Cameron Herold, who was my COO from $2m to $106m, kept saying, “I deserve equity. I’m like an owner here.” I said, “I know you do, but I’m not willing to give equity.” It was a tough conversation to have, but in hindsight, I’m glad I did it. Then when I had to fire my best friend and get him out of the business, I didn’t have to cut him a massive check. We’re great buddies and it all worked out. But I had to hold tight because I needed control of some of the tough moments we went through.
No one would give us money until 2002, 2003 when things started to shift. We did that slow organic growth. Then all this cash started to come in and we were able to pay off any vendors we owed money to and pay myself and things started to work out. I don’t know if it’s tenacity, luck, a bit of both.
I’ve got equity owners on some of the other O2E brands, from people who helped start those companies. But with 1-800-GOT-JUNK?, I held onto equity because every time I saw people give equity away, it didn’t work out for them.
As of last year, WOW 1 Day Painting, just made money for the first time. My other two brands are still a ways away from making money, but I think it’s just because the entrepreneurial journey is a long one. With tech companies, you could hear about people out raising money for years before they’re even talking about making a profit. That’s just not sustainable. So I chose not to go that route, but to try and make money most years so that we can have a lasting, healthy business.
04 Getting everyone on board with drastic changes
Before you broke through, how close was the business to going bankrupt?
I was literally three days away from bankrupting the company or giving away more than 50% ownership. I would’ve ultimately been out of the business and who knows what my future would have been.
We had no cash. I was so close to signing papers for me to give away more than half of my company for $5m. It was supposed to be enough private equity to get ourselves out of a hole and start growing again. After 20 years there, I was about to give away more than half of my company. I was going to lose control.
It’s a good thing I trusted my gut because something didn’t feel right. I went to meet with the banker who was helping us get this raise. His advice was to hunker down and rebuild the business. He told me to cut costs and people rather than take the $5m.
I have a lot of gratitude for that guy because he tipped me off to my COO not being the right COO. She used to be the President at Starbucks, but she wasn’t the COO for me. Instead of signing those papers, I said “We’re not going to raise money” and got that COO out of my business. I fired her entire leadership team because I couldn’t afford them any longer and I didn’t know if I could trust them.
She and I had worked together for 14 months. That relationship ended and I started cutting costs. We elevated the mid-level managers to the leadership team and I told them, “You probably think I’m crazy for firing them, but I’m hoping that we can build this together.”
What was that transition like?
I ended up firing 52 people. There were tears all around the room and ultimately, it made me cry because I felt so bad for all these people losing friends from the organization. But as a leader, I had to take responsibility. I got us there.
It took from 2008 until 2011 to get stable enough to make money. We actually made money in 2008, ’09 and ’10 because we really cut costs and we needed that cash flow to get out of the hole we were in. But in 2011, I hired a new COO, Eric Church, who’s still with us today and hopefully will be with us forever because he’s amazing.
We were at $88m in revenue when Eric came in. To think that since 2011, we’ve grown to $444m, a big turn around that really wouldn’t have happened if there wasn’t that hunkering down for those three years in between COOs.
What do you think makes this business model work?
I think it’s obvious that the internet has to go hand-in-hand with every business. But it’s rare to find a business that is 100% internet-based. Look at Amazon. Yes, you can one-click order from Amazon Prime, but there are still people driving trucks from warehouse to warehouse, and people delivering to your home.
My business is no different. People can order 1-800-GOT-JUNK? on our online booking engine and a truck is dispatched to them without any human interaction. But then our team members show up with a big smile to do the job.
People are forgetting that life is about human interactions. My kids spend a lot of time on their phones, but they also value time with their friends and real-life connections. I think too many people are focused only on technology. They’re forgetting about the human connection and how much value it can add to the customer experience.
Look at Starbucks. They’ve done a great job of automating their order process with the mobile app. You order before you get in the car, and by the time you get to Starbucks, it’s ready for you. I did that this morning, I do that most mornings. But when they give me my drink, I get a ‘Thank you’. There are always big smiles. They say ‘Hello’ and ‘Goodbye’ when the door opens. The baristas are always friendly, clean cut, and professional.
That’s a great example of valuing both technology and people. It’s a balancing act. I would never get into a space that required just technology. We want smiley, friendly people delivering that final mile service to the customer. And that’s also how we work internally. Our office has 500 people, all in an open office space. No one has a private office, including Eric and myself. We believe in human interaction.
I could be wrong, but my feeling is that there’s going to be some backlash with technology and how connected we are.
05 Never stop being human
What are some ways businesses can balance the tech and human components?
Don’t automate everything. Try and remember that there needs to be some human-to-human connection. I think one day, people are going to look at Amazon and feel less connected to them. If there isn’t a big enough human element, that could make people more likely to switch brands and latch onto someone else who does a better job at the tech.
People do business with people. People want to connect with others. We crave interaction; it’s part of our DNA. You just can’t replicate that experience through technology. I think that’s why Instagram does so well—you’re looking at smiling, happy people doing cool things all day long. Sure, it’s just a portion of their reality. But it’s still a way to satisfy your craving for human connection.
When we have friendly, smiley people show up at someone’s door, they trust us to come into their home. They feel good about the fact that we’ve helped them freshen up their space, whether it’s junk removal or painting.
What do you focus on in the day-to-day?
My COO and I work on this two-in-the-box model where there really isn’t just one head of the company—it’s two of us. Not co-COOs because we have separate responsibilities. But we’re in it together. I’m the visionary and the culture guy. He’s focused on strategy and execution. While there’s overlap between us, you rarely have a visionary and an implementer in the same person.
So I’m focused on vision, storytelling, culture, PR, and building the personality of our brands. I’m always thinking “How can we grow them and attract more people?”. Things like doing interviews and podcasts. Getting out there and trying to share our story to help inspire others, whether they do it with or without us. I believe in entrepreneurship. I believe in people growing opportunities.
If you had to start all over today, where would you focus your business?
If I had to create something new today, 100% I would find a fragmented mom and pop space that I could consolidate. I would find something that would be low cost to get into. Like irrigation along with landscape lighting. You just need a vehicle. It doesn’t need to be anything fancy. You start driving around and getting business through the neighborhood, telling people what you can do.
It’s very unlike these internet businesses where you have to create new technology. It’s just a grassroots. Go sell a job, go do a job, and make money from day one.
I always tell young entrepreneurs to take something that’s right in front of you that you know you can do better and go build that.