A Startup Forever on the Brink (Image Credits: Img-cdn.inc.com)
Beaverton, Oregon – A single phone call from a banker nearly pushed the fledgling athletic shoe company into oblivion during its turbulent early years.
A Startup Forever on the Brink
Phil Knight launched Blue Ribbon Sports in 1964 as a distributor for Japanese running shoes, laying the groundwork for what became Nike.[1][2]
The business model created relentless cash shortages. Knight ordered inventory on 60-day credit terms from suppliers, while retailers paid on 90-day schedules. This gap left the company perpetually stretched.
Banks provided revolving credit lines, but Nike maxed them out repeatedly. Knight later recounted in his memoir Shoe Dog the constant dread of overdrafts and lender scrutiny.[3]
Executives juggled payments, sometimes emptying accounts to cover supplier invoices. Survival hinged on precise timing and unyielding grit.
The Call That Tested Everything
One evening brought the crisis to a head. Banker Holland phoned Knight directly. He revealed that the bank suspected fraud and had alerted the FBI after spotting irregularities in the accounts.[4]
Knight rushed to explain the legitimate cash float operations. The company operated on razor-thin margins, but accusations threatened everything. Tensions peaked again in April 1975 when the Bank of California severed ties over an overdraft.[5]
These moments underscored Nike’s fragility. One adverse decision from lenders could have triggered collapse.
Yet Knight refused to yield. He navigated the fallout through personal appeals and relentless follow-ups.
Strategies That Secured Survival
Nike pivoted to new partnerships for stability. In 1972, the company secured financing from Japanese trading firm Nissho Iwai, easing supplier payment pressures.[6]
Knight tapped family support early on, including loans from his father. The team expanded distribution and innovated products like the waffle trainer sole.
By 1980, Nike went public, raising capital that ended the cycle of desperation. Revenue surged as the brand gained traction with athletes and consumers.
- Persistent relationship-building with lenders
- Diversifying suppliers beyond Onitsuka Tiger
- Product innovation to boost sales velocity
- Strategic IPO timing
- Unyielding founder resolve
Enduring Lessons for Businesses Today
The saga highlighted cash flow as the silent killer of startups. Even visionary ideas falter without liquidity management.[3]
Knight’s experience showed that transparency with banks builds trust during stress. Founders must anticipate gaps and secure buffers proactively.
Nike’s rise from near-ruin to global dominance proves resilience pays off. The company now boasts billions in revenue, but those early scares forged its toughness.
Key Takeaways
- Monitor cash flow daily; delays compound quickly.
- Cultivate banker relationships as lifelines.
- Pivot suppliers and funding sources ruthlessly.
Nike emerged stronger, a testament to bold risks and quick recoveries. What near-misses shaped your business journey? Share in the comments.
