Niki Okuk started her business RCO Tires to collect and recycle waste tires that were coming out of the Port of Long Beach, the biggest waste tire market in the world. As the business has grown, it’s evolved to focus on upcycling by manufacturing new products out of the tires it collects. With product lines for the building, agriculture, and marine industries, RCO Tires has a goal of eliminating tire waste, thereby keeping the materials and petroleum out of landfills.
Why did you start your business?
I was working in finance. When the market crashed in 2008, I thought, “Maybe this is the time to look at building a tangible brick-and-mortar business that has more of a positive impact on the environment and our community.”
I knew nothing about manufacturing or about tires. But, I knew what my end goal was, which was to form a business that created real jobs and had a real impact. So, that’s what took me on this course toward recycling.
How did you get the funds to get going?
In the beginning, we just sort of winged it, because our business model wasn’t really trendy or something that would attract venture capitalists. We didn’t have a ton of experience in our industry, so we weren’t able to find other people who were interested in manufacturing and recycling to look at us like a desirable investment.
It was an exciting ride. In retrospect, it’s fun to tell the story, but at the time, it was really, really awful. I maxed out my credit cards. I borrowed money from my parents. My partner and I went without salaries for the first two years, which was really hard personally. Some of our customers leased equipment to us. We just came up with a lot of creative ways to finance our equipment and get it done. We were definitely undercapitalized in the beginning.
Even as we grew, we knew we were never going to be on the radar for an SBA loan or a standard loan from a bank. I met with our business banker maybe a dozen times. I wrote up business plans and executive profiles with all of our financials and pro formas. But, people would always say we were too young, we were a startup. We knew we would just never fit into typical lending criteria. So, our only option was to turn to alternative lenders who would look at our accounts receivable and our growth history and potential. We found lenders who based their decisions off our real cash flow and bank statements as opposed to whether or not we’d been in business for five years.
Have you heard of business credit?
In the beginning, using business credit was just not an option. It all had to be my personal credit, which has been a little bit hard on me. I started out with a really good credit score. Now, it’s not so great. Not because of derogatory marks, but because I’m maxed out. I’ve financed forklifts, I’ve financed trucks, I’ve financed manufacturing equipment. I am the personal guarantor on our lease.
The only way I see out of that is building credit for the company, but you have to be thinking of that along the way. You really have to be sure that when you can, you’re getting credit cards and leases done in the company’s name so you can start building credit for the company. Unfortunately, they don’t give you a class when you’re earning your M.B.A. on how to build small business credit. You just have to figure it out along the way.
Managing the Business
What’s most challenging about running your business?
HR. We run a manufacturing facility, which is labor-intensive. We have to onboard and offboard people depending on how busy we are in a given season. Planning for that is hard. Payroll is our biggest expense. It is heartbreaking to lay people off when work’s down or work’s slow.
How do you finance your business to manage cash flow or growth?
We try to have ideas at least 60-90 days out about where money is coming and going, and then we plan for future capital allocations. We haven’t had to do it of late, but in the beginning, we did have to take out some emergency loans as we came up on months where there were unexpected expenses, like repairs and maintenance. Now, we can focus more on long-term planning, like what we need to borrow for growth, not just what we need to borrow to cover cash flow shortages.
Do you use trade credit from your vendors or suppliers?
I don’t know if this is true because we’re young or if it’s a signal of the way businesses are moving in general, but it just doesn’t seem like there’s a lot of trade credit available from our vendors and suppliers. Almost everybody’s moved to a system where they want to be paid within 30 days or on the spot. I still offer credit to a few of my customers, but it feels like that’s an old-school way of doing business, since it’s so easy to collect on credit cards right at the point of sale.
What’s the biggest mistake you made early on?
Being undercapitalized in the beginning was a big mistake. We just grabbed our credit cards and our bootstraps and threw it all in. It was a scary thing to do. In retrospect, I would have had six months of cash flow on hand before embarking on this journey.
What’s the smartest thing you did in your first year?
Having good credit. That was the key to the city. Without that, nothing else would have been possible. I wouldn’t have been able to finance anything that we needed to grow.
What’s the most rewarding thing about owning a business?
The people. I started the business with this big environmental dream, and it was all about achieving those metrics, like recycling 14 million gallons of oil from landfills. But, after doing it for a few years, it’s been very satisfying creating working-class jobs in my community. I know the guys who work for us and I know their families. It’s not just about money and how many accounts we collect on. There are people actually benefitting from it in a very material way that you can witness every day.
What does the future look like for your business?
We’ve grown almost 40 percent a year every year we’ve been in business. This next year, we’re probably going to more than double. We’re getting new permits and contracts with the state, so we’re going to be able to expand into the greater Southern California market. It’s exciting, but also terrifying!
What advice do you have for someone starting a business?
Don’t be scared to ask for help. I read a quote the other day that said something like, “If you can’t ask for help without judging yourself, then you can’t offer anyone else help because you’ll secretly be judging them.” I remember thinking in the beginning that I’m not a successful entrepreneur if I’m not blowing it out of the water, doing it all on my own. You’d be surprised, actually, how many people will help you if you ask, even your competition.