In retrospect, we were lucky. In the early days of Better World Books, we hit upon the kind of elegant business model that every entrepreneur--social or otherwise--dreams of. That model pushed our revenue to $16 million from just $1 million in three years (annualized growth: 250%) without external investment.
Not that it was all smooth sailing. The stress of that hyper-growth nearly bankrupted the company, and more than once.
As social ventures go, our initial business model was very simple: We ran college-book drives in partnership with literacy programs. We helped the programs sell donated books online and we split the revenue. Any books that couldn't be sold were used by the programs, donated or recycled as a last resort.
The whole business started with one successful book drive at the University of Notre Dame. We figured if it worked on one campus, it ought to work on all of them. So far, it has.
Our growth recipe contained three main ingredients: custom software, strong partnerships and expense flexibility. Some thoughts on each:
Custom Software
At the time we launched, Half.com and Amazon Marketplace were still relatively new Web sites. They had created the huge opportunity that made our business possible by bringing millions of book buyers to a virtual shop window. We just needed to fill that window with affordable used books and pay a commission when they sold. This arrangement saved us a tremendous amount of money. Like many social start-ups, we didn't have a marketing staff or budget for the first five years.
One problem: Nobody had written software that could efficiently price and sell large numbers of books on these sites. We needed smart software to scale up the business, and we needed it soon, so we set out to write our own software before we could truly afford it. Indeed, we had contracted programmers in Russia before we hired our first full-time employees.
We also needed a way to track all those campus book drives. We kept outlays in check by adapting off-the-shelf code from Salesforce.com ( CRM - news - people ); the result--called "Bookforce"--remains at our core today. (Note to other social entrepreneurs: Salesforce.com gives discounts to social enterprises bearing the stamp of a B Corporation--signifying their commitment to finding business solutions to social and environmental problems--as well as to nonprofit organizations.)
Strong Partnerships
When we started, we rented Penske trucks to pick up books. As business grew, we switched to UPS ( UPS - news - people ). For a huge company it still managed to act like a partner, providing the resources we needed at a fair price. Three years later, we were one of UPS's largest customers in Indiana.
College campuses also yielded a bevy of strong partners, including organizations like Phi Theta Kappa and Circle K. We offered them an opportunity to fulfill their service mission; they introduced to us a network of enthusiastic supporters.
Expense Flexibility
You will barely recognize your young company in two or three years--how can you commit to that timeframe, let along beyond it? That's why the greater your variable expenses vs. the fixed variety, generally the faster you can grow. Every long-term contract or lease can unexpectedly become a ball and chain.
With millions of books to manage, warehouse space was a big expense. We chose not to sign a long-term lease simply because the sweet spot for that space would have been fleeting. Initially it would have been more than we could use, but soon enough we would have outgrown it. Instead we hunted for creative deals in which we could expand as we needed and pay only for the square footage we used.
We kept labor costs variable, too. We hired contractors for marketing, programming and design work, and filled in gaps with part-time students where we could. We paid low base salaries to our full-time staff, supplementing them with generous paid time off, attractive bonuses and the opportunity to advance--not to mention change the world.
Next month I'll share the other half of the story: How we surfed that crazy growth--and what I would do differently if I could do it again.
http://www.forbes.com/2010/03/10/triple-digit-growth-entrepreneurs-management-helgesen_2.html
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