Shawn Nelson: profitability in the bag.

• Author: Winn, Heather
• Position: People

ON THAT SUMMER DAY IN 1994, as he stuffed a vinyl sack with shredded pieces of foam, the farthest thing from U. of U. student Shawn Nelson's mind was generating a business with his giant beanbag chair idea. Little did he know it would become a company with more than 70 corporate employees and 21 retail stores across the West.

With Nelson's $25 business license in tow, LoveSac entered the business world. But starting a business is grueling, especially as a college student. Nelson gathered a few friends to help him and became the CEO of a small company. He had little capital and had to borrow money to begin the undertaking.

Their office space was a basement and their production line a hired seamstress and a few college kids who stuffed sewed upholstery bags between classes. Nelson handled the bookkeeping and other responsibilities.

In the beginning, the company profited little. Enough money was made from the sale of one bag to buy supplies for the next. Neither Nelson, nor the few who helped him, made any money, Customers were constantly upset because production was often behind schedule.

"It was an everyday thing. It was kind of hard to motivate ourselves when we weren't making any money, but quitting just seemed like a shame," says Nelson. "What are you going to do, just stop? People still wanted them, so we kept making them."

Eventually, Nelson became exasperated with the unprofitable business and moved to China as a consultant, where he gained vital leadership skills. "When I came back from China, we basically decided either we would try something bigger or we would quit," Nelson recalls.

Paying their way with a credit card, they went to a Chicago trade show and landed a deal with the Limited Corp. for 10,000 LoveSacs. The...