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Small business owners learn how vision and flexibility are win-win combo

By Linda Segall

Only the future will tell if the 27-year-old casually attired keynote speaker at the 17th Annual Small Business Week

Tom Szaky

Tom Szaky

Celebration will be the next Bill Gates. But the audience of about 350 small business owners left the luncheon presentation acknowledging that Tom Szaky, CEO of TerraCycle, Inc., had a great thing going. The concept he virtually invented—upcycling—could revolutionize waste management as his company, which has no direct competitors, continues to grow.

 

 

 

 

His success can be attributed to creative problem solving, discipline to remaining true to his cause, and flexibility to grow in new but related directions.

Szaky, an entrepreneur who started his first company in Web design when he was only 14, was born in Hungary and immigrated to the United States via Holland and Canada. As a freshman at Princeton University, as  many young people do, he took an interest in what could be described as “basement agriculture.” He observed that plants grown by his friends in Montreal thrived when the soil was enriched with worm castings, something he calls “worm poop.”

terracyleThe effect of the natural fertilizer—a waste product— was no surprise to Szaky or to any other gardener, because worm castings are a natural fertilizer. But their use caused him to ponder a bigger question, “What is garbage?” He concluded that in nature, garbage does not exist. Waste from one animal is the most important input to another animal’s well being,” he said. That conclusion ultimately led to founding his company and a revolutionary new way to manage waste.

Szaky and his college friend wrote a business plan on how to take waste, process it, and turn it into a useful product—in this case, liquid fertilizer made from worm castings. They had no money, so to they entered a business-plan contest that had a cash prize. They won the contest.

They entered another contest—one with $1 million prize. Szaky said they won, but turned the prize down. “They wanted us to change what we wanted to do,” he said. The prize was actually seed money from a venture capitalist, who thought their idea was too narrow. Szaky stayed true to his vision, without the prize money.

They then “begged and borrowed” $20,000 to acquire a “worm poop” machine so they could start their venture. They confronted their next problem: Where to get raw materials (garbage) to manufacture the product how to bottle the product. They only had $500 in their pockets, so buying raw materials and packaging was out of the question.

Their solution: They begged the Princeton dining services to give them leftover garbage to use in their prototype “worm gin.” “That was more difficult than you would think,” Szaky told the audience.

To bottle the product, they went dumpster-diving to salvage soda bottles. “One of us ended up in jail,” he confessed. “Who would have thought there was a law against that?” But, they managed to get the used plastic bottles, and the end result was a manufactured product made entirely with raw and recycled materials, except for the labels.

Szaky said they started to sell the product, and he wanted to economy of scale, so he targeted Walmart as a distributor. Accepting the difficulty of getting a meeting with Walmart purchasers, he decided they would call the Bentonville, Ark., headquarters every hour on the hour (when people would be out of meetings), for 30 days. “We even used different telephones and cell phones so they wouldn’t recognize who was calling,” he said.

Their persistence paid off. They finally landed the opportunity to present their product, and they received an order for 100,000 bottles of the liquid fertilizer.

Getting the order created their next problem: how to fill it. They had only a prototype machine with no automation, so they recruited friends and relatives to work night and day to hand-fill the bottles, using hair dryers to attach labels. They fulfilled the order with one day to spare.

Of course, manufacturing created yet another problem—and opportunity. They were left them with mounds of dried waste from the used garbage. The solution? They used the waste to make and market biodegradable seed trays.

That is not the end to the TerraCycle story. The executives of a major brand contacted the company and asked if they could collaborate with TerraCycle in collecting waste and reusing it to manufacture other products. “This wasn’t what we had in mind when we started the company,” said Szaky. But, he decided they could be flexible, as long as they remained true to their vision.

The collaboration with one company has led to many more, and now TerraCycle has formed a “bottle brigade,” “drink pouch brigade,” “cookie wrapper brigade” and others to collect and reuse trash.

The collaboration is win-win for everyone, from consumers, to brand manufacturers, to TerraCycle.

• Consumers win, because they are not putting waste into landfills. They can dispose of certain trash in bins located in big-box stores, or if they collect for a nonprofit group, the nonprofit is paid a specified amount per trash item collected.

• Manufacturers win, because they are sponsoring a responsible way for consumers to dispose of branded trash. And, in many instances, the reused products actually continue to advertise their brands.

• TerraCycle wins, because they get raw materials for their products, free or for little cost.  

The result of these insightful collaborations and creative problem solving is that TerraCycle has become the model of eco-capitalism: It consumes waste as the raw material to create finished products.

Szaky believes every problem is an opportunity, and there is no such thing as waste. His company, which has experienced more than 100% growth per year, is living proof of his beliefs. His advice is simple: Find your idea, stay true to your vision, and be flexible.

Linda Segall is editor of Advantage: the handbook for small business. She can be reached at Linda@advantagebizmag.com.


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