Key Idea #1: Spot A Niche

HATTIE: Hi. I'm Hattie Bryant. Running a business is alot like climbing a mountain which is why I think we can learn so much from Paula and Margaret Quenemoen. The professors in our MasterClass today started their business because they couldn't afford the clothes to stay warm while trekking the highest places of the world. Learn from these veterans how to start run and grow a company. Step into our MasterClass.

(Voice Over) "Cold Mountain is full of weird sights.
People who try to climb it always get scared.
At a touch of rain, the whole mountain shimmers,
but only in good weather can you make the climb."

- Sixth-century Chinese poet Han Shan,

whose name means Cold Mountain, serves as a spiritual mentor to the founders of Jagged Edge Mountain Gear.

They make clothing for mountain sport enthusiasts.

MARGARET QUENEMOEN (Jagged Edge Mountain Gear): This is our mountain vest. We set the zippers in a way that you won't have any raw edges to rub against your face.

Shopper: Oh, yeah. Very nice.

MARGARET: These are great. These become our uniform of life, because you can wear them anywhere.

HATTIE: (Voiceover) To find Jagged Edge, we drove to the end of the road, Telluride, Colorado, which sits at the base of one cold mountain.

Margaret and Paula Quenemoen are twins who separately fell in love with cold mountains. Together they are building a business, as so many of us have, on dreams.

MARGARET: I moved to climbers' paradise here in Telluride, Colorado, and I needed outerwear. And so I started sketching up ideas of things I wanted to make.

HATTIE: Wait a minute. Are you saying in this beautiful place that has thousands of tourists every day walking through, you couldn't find anything to wear?

MARGARET: I couldn't afford anything to wear. It's a very expensive town, and outerwear is tremendously expensive.

And so part of my idea was to make headbands.

There's a lot of different ways they can be worn. They can be worn high, or they can be pulled down over the ears. The beauty of a headband is, it can cure a bad hair day. You're so much warmer with a headband on, it's a fashion piece, and if you have a ponytail or long hair, it keeps your hair out of your eyes.

I didn't have oil in my crankcase, I was out of gas, I was torn between the oil and the gas, and food. And so I sewed up thirteen headbands and I took them into a restaurant, and thought, `Well, here goes.' And I asked if anyone would like to buy a headband, and it was really fortunate that all thirteen of them sold. So then I had $130, and I realized I could make money doing this, and that was my start.

I wanted to create something. I never knew this was going to become a business. It's funny, because I almost feel like there's a destiny in it. I had made statements: some day maybe I'll have a full line, maybe some day I'll have a store. But I never really thought they were going to become reality.

PAULA QUENEMOEN: I spent five years in China and Tibet, and I spent a year and a half in a Chinese university learning Mandarin. Margaret and I, we were both doing the sports outside.

I was doing extreme solo long-distance trekking in Asia. Margaret was climbing. But we couldn't afford the gear that we needed.

The first time I walked into Everest base camp, the climbers were absolutely blown away. I was wearing a skirt and a Tibetan yak jacket. I didn't have a Gore-Tex jacket or a down jacket.

HATTIE: Were you freezing?

PAULA: Yes, but that was the nature of Margaret's and my existence. We were always cold. But we continued to do our sports and our dreams and adventures and excel regardless.

For instance, Margaret was invited on a photo shoot with a very well-known professional climber, and in the climbing magazine shots, she's been cropped from the pictures, because after they did this approach that took two hours, the photographer looked at her and her outerwear and said, `My God, is that duct tape keeping your pants together?'

HATTIE: And the answer was `Yes.'

MARGARET: And he was very angry.

Key Idea #2: Recruit Family

HATTIE: When did you come back and the partnership began to develop?

PAULA: I would receive these desperate letters in Asia, with Margaret telling me that she's started to sew these headbands and these vests, and it's going to be good, it's going to be as good as Eddie Bauer. She was trying to put across to me that this was not some rinky-dink thing, this was going to be first-class from the beginning.

HATTIE: So you were trying to sell Paula on coming back to help you.

MARGARET: Mm-hmm.

HATTIE: Subtly.

PAULA: It wasn't subtle. It was overt -- "Help. Please!"

MARGARET: In the meantime, I was living in my car, and...

HATTIE: I want to understand this. You were living in your car.

MARGARET: Yes.

HATTIE: You're in Telluride and you're living in your car.

MARGARET: I was still doing the poverty thing. You know, I just didn't have any money, to be honest. At this point, it was summer, and I couldn't sell the headbands in the summer because it was a winter market.

HATTIE: There you go, that's the reason; OK, it makes sense now. You started with the headband. What was the next item, and what led to it? Did people ask `I want a matching vest to go with my headband'?

MARGARET: Mm-hmm. I was really trying to work out a vest. A store in Aspen said, `If you make vests, we'll take 12 of them.' So I had this goal, I was going to make a vest. And I wanted help with the vest, because my version was just too homemade. And I called the different sewing plants in Salt Lake City, and everybody said `No, we have no interest.' And I accidentally called one back, and the guy said, `I already told you No, and you called me back again,' and he was really annoyed, and he said, `Just hold a minute.' So he put me on hold and came back and he said `OK, I'll see you.' And I went down to this sewing plant and there was pictures of climbers all over in the lobby. I thought `Wow, this is perfect, I belong here.' So...

HATTIE: So they took you in...

MARGARET: Uh-huh.

HATTIE: ...and they took you in and made your 12 vests. Did you make the 12 vests and sell them to the store that said...

MARGARET: We did, and we ended up selling hundreds and hundreds of them. I took the vest and then some other pieces; then I had added to the line with their help at a trade show. And, it was a success. We had an $80,000 order from a Japanese customer, and it seemed it was just taking off.

HATTIE: So you were interning, you were apprenticing. You were doing your homework.

MARGARET: I was. We have a real Asian influence, as Paula was saying, from her background. This is the symbol of the Tao, and we're celebrating the experience and the path, the journey, the way versus the summit, and we've incorporated this into our hang tags, our garments, and our point of purchase displays for other retailers that carry our goods, and it's been really powerful. People like the idea of a spiritual element into the clothing.

PAULA: We were looking for something to add some depth to our philosophy. We found that we were bored with the outerwear industry. Everything was extreme, and emphasis on the summit. But it's the whole process that goes on inside your heart and your mind, and the process of getting to the summit. You might spend months getting to that final goal only to spend 10 minutes on top, and maybe it's a raging storm and you don't get to see anything anyway. Or maybe you don't even make it to the summit. So you've got to enjoy the journey.

Key Idea #3: Recruit Customers

PAULA: (Excerpt from climbing lesson) All right, nice move.

Brad: Thanks.

PAULA: All right, good job.

HATTIE: (Voiceover) The journey from selling headbands on the streets of Telluride in 1991 to manufacturing a full line of outerwear has taken Margaret and Paula tramping and trekking through the world of design, cutting, sewing, shipping, leasing, hiring, managing and leading.

ERIC GILMORE (Designer): No, that's basically what I do ...

HATTIE: (Voiceover) Eric Gilmore is new, and has taken over the design work once done by Margaret.

All right. Are you a climber?

ERIC: Yep. Climber, biker, everything. It's fun.

HATTIE: So do you see yourself in these products when you're creating them?

ERIC: Yep.

HATTIE: (Voiceover) The employees are customers, and often customers become employees. And some came in on a Saturday to talk to me.

HATTIE: Oh! And, Brad, you're the brand-new kid on the block . . . in the organization, right?

BRAD: Yes.

HATTIE: So you're the rock climber. Any other rock climbers? OK, all right. So then who are the skiers?

Unidentified Employee #1: We are all people who play in the moutains. If Jagged Edge wasn't here in the mountains, I wouldn't be working for Jagged Edge.

MARGARET: It is a real team work; we're going to do this. We're going to accomplish this together. It's our life style. We are able to work in an area that is also our passion. We love what we do. When we come to work, we're not just coming to a job. We are coming to see our friends; I would call this a family. We work well together; we bike together, hike, climb, we go out together at night. There is always someone to call. It is really just a nice place to be.

Unidentified Employee #2: The people who we have working with us you wouldn't probably find in other places. A lot of us were drawn here originally by the environment, the mountains. And Jagged Edge was a kind of vehicle to let us stay here and enjoy these mountains. And that brings it over into the business. It brings the people who really use the equipment into our design room.

Unidentified Employee #3: OK now, we reversed the zipper. That's so when you're wearing a harness, for the guys. We can still get to our zipper. HATTIE: OK! Employee: Saves you from taking everything off.

HATTIE: Did a customer tell you to do that?

Employee: Well, just climbers in general.

(Voiceover) Today, find their products in over 150 shops around the country, in their own three retail store locations, from this slick catalog, and at jagged-edge.com.

Key Idea #4: Sell the Mission

PAULA: (From graphic on screen) `The Journey teaches us, makes us strong, lets us touch enlightenment -- if even for a moment.'

HATTIE: (Voiceover) So, Paula, how are you using the Internet?

PAULA: (Voiceover) Well, we use it every day to communicate with some companies. In the past, we did a mitten production with China, using the Internet fully. We would communicate on the Internet, and it saved a terrific amount of expenses (speaking Chinese).

HATTIE: (Voiceover) Jagged Edge is already doing business globally. But they are positioned perfectly for expansion into Asia because of Paula's command of Mandarin and her understanding of the culture.

PAULA: ... That's me. Confucius White Lotus.

HATTIE: (Voiceover) Currently, they purchase trim from Asia, and some garments are sewn in Taiwan. Doing business is easier now because of the Internet, faxing and global priority mail moves payments back and forth quickly. When no English translators are available to read documents sent through cyberspace, Paula writes by hand and uses fax and mail.

PAULA: (writing Chinese) I said `Thank you very much, again, for all the help you have given us.'

Lightbulb HATTIE: (In the Studio) Jagged Edge is a tiny company compared to the giants. Although Margaret and Paula continuously work to add features that are distinctive, outerwear products are more alike than different. What is distinctive about Jagged Edge is its mission. That mission is part of what the customer buys. Although the mission comes from an ancient tradition that Paula experienced personally during her five years in China, it seems unique in this industry dominated by symbols of accomplishment, achievement and reaching the summit.

Paula told me, `Our competition sells the summit. We sell the journey.' Jagged Edge is teaching its customers how to think about life, and in the meantime, that same customer buys Jagged Edge outerwear to experience the journey.

Key Idea #5: Put Plans In Writing

In their pursuit of investors, Margaret and Paula have written what they call `The Book,' a detailed business plan.

PAULA: (Voiceover) Every investor or bankers or the people that deal with us, it's their dream. It has everything about our company they need to know. I can hand it to a PR firm, I can hand it to somebody that's writing an article on us, everything you need to know about Jagged Edge is in that business plan. Even new employees that come on board.

TRICIA MAXON (Banker): My baby has Jagged Edge clothes, my husband has Jagged Edge clothes. I skied in my Jagged Edge bibs today.

HATTIE: (Voiceover) Tricia Maxon is not only their banker, she's their customer, too.

TRICIA: ...because they were the typical business that started in a garage, they'd financed their business through credit cards, begged, borrowing and stealing from family and relatives. They got some investors to come in and invest in the company; they weren't loan sharks, but they were getting over 20 percent interest rate.

HATTIE: Oooh.

TRICIA: And so they came in with this passioned plea for money and this amazing business plan of where they were gonna go. I played with the numbers a bit and said if they could stop borrowing money on their credit cards at 18 percent to finance the business, and 20 percent, and they actually cut their interest expense, they could really actually start making some money and make a go of it.

And we put together this enormous package for the SBA, and didn't really know where it was gonna go, but we worked really hard at it, and they came back and they said, `Yeah, we'll do it.' So we made them the loan, and they were just the hardest-working girls and great people, and like I said, a good reputation in town. So it was a lot of fun to work with them and it just grew from there.

They were growing so fast, I think from--I was looking at the numbers this morning to refresh my memory--but their sales grew 50 percent the next year.

HATTIE: So the lesson to others is...

TRICIA: I would say the lesson to others is that financing a business on credit cards and 20 percent interest rates isn't the way to go, because you spend all of your time trying to make enough money to pay back the debt service, kind of like our government does, you know.

HATTIE: Right.

TRICIA: "... and to come and talk to a banker, and come in with a business plan and say `This is my vision, and this is where I want to go. We have the experience, and look what we're doing and look where we've come, from making headbands in the garage, and we can do it.'

You've got to find a banker who says `Wow, that's a really neat project, and I believe in you.'

Key Idea #6: Clear Your Name First

PAULA: This business has been an exercise of jumping over one problem after another after another. After a while, they don't even bother you anymore. You can sleep at night just fine, because you're so used to the big problems. When we first started out, one day I recognized, `Hey, we don't have Workmen's Comp'; and that's scary, and we need to get everything on board.

And within about the first year of the business, we made the decisions that no matter what it took, we never wanted to have some horrible thing put us out of business, like having an employee fall off of a ladder and not have workmen's comp in place, or have a disgruntled employee come back and say, `Hey, you don't have unemployment insurance.'

We couldn't afford that. So we do everything orthodox. We never break the rules.

MARGARET: Another thing we initiated is we buy an accident policy for everybody that works here, because as active as everybody is, I don't want anybody to not have any insurance.

PAULA: And we had a trademark issue...

HATTIE: Oh, you did.

PAULA: We knew about Jagged Edge Hollywood, who makes sequined denim jeans and lingerie. But we tried and tried to contact her, and we were unsuccessful, and we thought that she'd gone out of business, and one day, Jagged Edge Hollywood resurfaced, and it was a very serious blow to our business. We didn't know if we could keep our name, and that was quite a bit of legal action and negotiating, but we've taken it out and come with an agreement.

HATTIE: So you negotiated an agreement with her. And you're paying her--What?--sort of a licensing fee to use the name.

MARGARET: Mm-hmm. It's perpetual.

Key Idea #7: Travel to Form Global Relationships

HATTIE: Do you ever do deals on a handshake? Do you ever, when you're dealing with the Chinese, ordering things or your suppliers, or do you have contracts for everything, and I's dotted, T's crossed.

PAULA: In general, we go I's dotted, T's crossed, but I do have one factory in China that we operate on a handshake, and I've had that relationship for about six years, and they don't know how to do international business. It's just not possible.

HATTIE: Do you ship them cash first? Do they get the letters of credit in hand before they ship anything to you?

PAULA: I've often delivered cash.

HATTIE: Oh. Did you do that early on and that's how the relationship was established, so they know they can trust you. You came with cash, took the stuff. So now at this distance, you're still OK.

PAULA: Yeah, and a lot of Asian partners, once you've established that relationship, it's for life, it's forever. They're not going to do anything to cheat you. It's solid.

HATTIE: Are they saying that we know you, and you will not change?

PAULA: Right. They don't have friendships that come and go. They're for life. Just like their marriages are for life.

Key Idea #8: Go Green with Caution

MARGARET: All of our fleece is made from recycled plastic soda bottles. And they cut it into shards, and then from there, it goes into almost a fiberglass-looking type material. From there, it's spun, actually, into the fleece. And we used to just buy our fabric from wherever we could get it. But once we found out that recycled fabric was available, we had no choice but to use it.

HATTIE: Is it more expensive?

MARGARET: It is; it's about $1.50 more a yard. But with our commitment to being a green company, we felt that it was our moral imperative to use this fabric.

Key Idea #9: Keep Falling in Love

HATTIE: (Voiceover) For fun, Margaret and Jagged Edge staff climb at the Ouray Ice Park they helped to build.

Unidentified Ice Climber: Think the rope will make it? Right now, I'm putting my hands in the leash. That keeps me attached to the ax, which keeps me attached to the ice.

MARGARET: (Voiceover) It's tenacity. In fact, one of the reasons this business made it is because we didn't have the luxury of being able to stop.

PAULA: (Voiceover) Going out of business will never be an option. We don't have anything to fall back on.

HATTIE: How was it?

MARGARET: That was great. It was so much fun.

HATTIE: If someone came to you today and said, `I want to start a business, I've got my idea, I've fallen in love with this concept, what should I do'? What would you tell them?

MARGARET: I would tell them make sure you really love it. Make sure you really want it, because whatever you decide to do, it is going to test you to no end, and if you don't love what you're doing, you're going to go out of business, because you'll just lose your passion for it.

HATTIE: Do you think that most people don't understand how hard it is?

MARGARET: I don't think they understand how hard it is. It has days when it's 14 and 16 hours a day, day after day. It's a tough climb.

PAULA: OK, Hattie, we're gonna put you in one of these...
BRAD: Put your hand right here.
HATTIE: Oh. Oh, that's much better. I know I don't look like Brad.
PAULA: No, you look really good, especially in that vest.
HATTIE: Paula, you are so good at encouraging people.
PAULA: OK.
BRAD: Now stand up on your left foot.
HATTIE: Whoa! Stand up on my left...
PAULA: Very nice!
HATTIE: Whoa! I tagged it! I touched the chain! You know the name of our company is Flying Leap, and now I'm gonna get to really take one. I'm flying! That was a crash ending.
Well, I didn't die.

MARGARET: I think the upside is that we are incredibly driven, and we share that, and together we can move mountains.

PAULA: Some of the things that Margaret's quite strong at, I'm not so strong. Some of the things I'm very strong at, maybe she isn't. But if you put us together, you get the whole egg, since we shared an egg.

Delete for web play...HATTIE: We hope you make us part of your weekly journey.

Willa Cather, one of my favorite authors said, `The end is nothing. The road is all.' See you next week.

The Closing of the Show.