Meet Kendra Scott, Homemade Millionaire

For the last time, she flipped over the sign in the window of her failed retail hat store that read, “Sorry, We’re Closed.” Then she shut the door and locked it.

It was 1998. She had lost her life’s savings—and those of her stepfather, whose battle with cancer had inspired her to start the Austin, Texas, business.

As if on cue, it started raining. “I just sat there and cried like a baby on the steps,” Scott says, “feeling like I was the biggest failure on the planet. I had let everybody down.”

Related: Why Failure Is Good for Success

Then something amazing happened. “I heard steps behind me,” and when she looked up, the sign was flipped over and read, “Yes, We’re Open.”

“It was a literal sign.” She laughs. “It was a sign! I looked and I just started laughing because I’m like, Is this some kind of joke? But all of a sudden, it was almost like God talking to me: ‘You have to be open.’ ”

Looking back, Scott—42 in late March—believes that amazing moment happened for a reason.

“If you look at the struggles in your life, they have all happened because there’s something amazing waiting for you. There is an open window. This moment is going to make you stronger in the future.”

Soon, Scott picked herself up and moved forward.

“OK, I had to wallow for a minute,” she admits. But then Scott regained her determination. Over the next few years, she held onto the idea that her failure was a moment of impact that would alter her life for the better.

“And it did. That store was the greatest gift that ever happened to me. I’ve been able to run a business so much differently and so much smarter because I had that tough experience. It was an MBA in the school of hard knocks. It’s an incredible university.”

Fail First

In 2002 Scott founded Kendra Scott Designs in her spare bedroom. Today it’s a multimillion-dollar company with 39 retail locations, nearly 1,000 employees and $150 million in annual revenue—that’s up from $1.7 million in 2010. Scott has plans for international expansion, new accessory lines and additional retail locations set to open soon. Her leadership has been recognized by some of the biggest names in business, earning her the 2014 regional Entrepreneur of the Year for Central Texas by Ernst & Young and membership on the prestigious Council of Fashion Designers of America.

She’s quick to credit her team for the company’s rapid rise. In 2011 she gave up her salary to hire Starbucks alum Lon Weingart as chief operating officer. She understands the value of surrounding herself with talented people.

Related: Why You Need to Surround Yourself With Like-Valued People

After spending a day with Scott and a few of her key staffers, I can tell you this isn’t false modesty. You’d expect Scott to be hard to approach—she’s pretty, self-styled to the point of inciting jealousy and firmly installed in what is usually a boys’ club of uber-successful entrepreneurs. But as I stand in the creamy pastel kitchen of her Austin home, she reaches out her hand, beams a wide grin and says, “Hi, I’m Kendra!” She jokes about the highchair folded nearby and the toys in the corner of the living room, evidence of the nonstop action as mother to three sons.

Later that afternoon, we move to a chic Austin hotel overlooking South Congress Avenue and sit down for lunch and a chat.

Scott tells me she believes the failure of her first business was instrumental in the success of her second one: “Experience is something that you can’t teach. That feeling of how are you going to make payroll? How are you going to pay your rent? How are you spacing out paying your vendors? Those are things you can never learn in a book. That knot in your stomach that wakes you up in the middle of the night is something that, unless you’ve lived it, you don’t understand how to navigate through. And when you get yourself in a business—a business that is growing as fast as we’re growing right now—I think having that basis and remembering that knot, remembering what it feels like, has made me be so thoughtful and so careful about how we’ve grown and what we’ve done.”

Scott says failure also gives you a determination that you can get through anything. “No matter what comes at you, you can get through it. You will overcome. There is a reason this is happening, and the sun will shine again.” She says it’s crucial to focus on how you can move forward in a positive way.

 

“I’m putting all my chips on the table, and it’s go big or go home.”

 

For Scott that meant focusing on how she could make life better for her soon-to-be-born first child in 2002. She was working full time at a magazine when she found out she was pregnant, and her jewelry-making hobby became a source of much-needed entertainment during the weeks when her doctor told her to stay off her feet.

Scott’s passion for design and fashion ran deep, but on her salary, she couldn’t afford to express her taste the way she truly wanted. “I wanted beautiful semiprecious stones. I love colored gemstones, and I couldn’t find any that I could afford. It was just out of my reach. I thought, Gosh, if there were a way that I could design a collection and use these beautiful natural stones, but do them at an attainable price point and also in unique shapes….” Her eyes widen with excitement as she remembers her original idea.

At the time, Scott says every jewelry designer was merely changing up the settings around the same stone shapes. She set to work on a collection of handcrafted, unique forms that would be immediately recognizable as her own.

After the birth of her son, she put him in a BabyBjörn sling and went store to store to sell her designs in Austin. She wrote orders the first day.

“I always joke that I don’t know if the stores felt sorry for me [with the baby] or if they just loved the jewelry,” Scott says with a laugh.

At the last store, she sold all of her samples to pay for the supplies she would need to fulfill all of the orders. In one back-aching, multi-diaper-changing day, she had started a business—and although she didn’t know it yet, a fashion design phenomenon.

With help from family and friends, Scott handmade every piece in the spare bedroom of her house, packed every shipment in her dining room, and UPS made daily pickups. Her jewelry was selling out within a few days of delivery, and in her first season, she sold to Nordstrom, a partnership that continues today.

As her small business grew, she began to order custom-cut stones, and her first copyright design, the Danielle earring, was born. Celebrities soon wore the distinctive bauble on the red carpet and in magazine photo shoots.

“That was really a tipping point for us,” Scott says. Having a product that was just different enough to be easily attributable to her brand was the root of her collection’s popularity, she realized. “Now every single stone in our collection is cut exclusively for my line. We actually design the wax molds in Austin.

“I’m so thankful that I started here. This is such a supportive community of local businesses.”

Work Harder

Scott was raised in a place that’s too cold for most Texans: Kenosha, Wisconsin. “My mom’s family was farmers and coal miners. They were very hardworking folks. My dad was an attorney and ran his own firm. He was an entrepreneur.”

She shared a fun-filled, creative childhood with three sisters and two brothers. The family’s work ethic rubbed off on Scott. “She has always been very driven and determined to accomplish whatever she was attempting to do,” says her mother, Janet, who describes the secret of success as “hard work, honesty and determination.”

Scott’s aunt was a fashion director at what was then Gimbels department store in Milwaukee. “She was this dynamic, beautiful, incredible woman who was a single mom and traveled the world as fashion director, going to Milan and Paris,” Scott says. “She would bring back—it was in the ’80s—slides from all the shows and she would go through them with me. I remember being, you know, 7, 8 years old, and she was showing me how to trend-forecast. She would explain to me that her job as fashion director was taking these couture styles and making them relatable for every woman. And it was magical to me. Fashion was magical. It transformed the ordinary into something extraordinary.”

Despite her passion and constant sketching and creating, the practicality of making a living persuaded Scott to focus on business and marketing when she attended Texas A&M University for a year.

Then, when she was 19 years old, Scott learned her stepfather, Ron, was diagnosed with brain cancer. “I spent a lot of time with my family in MD Anderson [Cancer Center in Houston] while he was undergoing treatment. I’d met a lot of women during that time who were going through chemotherapy and had gone through hair loss.”

Scott loved hats, and she loved the idea of doing something good with her passion even more. So she created a line of comfortable, fashionable headwear for women experiencing hair loss and founded her first company, The Hat Box.

She sold all sorts of hats, not just her own, through her Austin shop and online. She dropped out of school to run her business and help her mother with Ron’s care.

“My family was the most important thing to me. I couldn’t save his life, but I could do something good with what I loved.” Through her business, Scott raised money for cancer research and partnered with other charities. She spent five years running a business that would ultimately close its doors on that sad rainy day. But in the process, Scott laid a foundation for a business model that valued more than profits. She would soon open a storefront for making a difference.

Go Big or Go Home

The first Kendra Scott Designs store opened in 2010, just down the street from where we sit on South Congress Avenue. Until then, Scott had sold exclusively to retailers.

“After The Hat Box, I was terrified to go back and do retail.” The recession forced her to change how she had done business for the past seven years. “I had all my eggs in one basket. The power of my future was in the hands of wholesale vendors and buyers. So if they lost their jobs or stores were shuttering, that business was gone and I had no control. I didn’t have a direct connection to my customer. When the recession hit, I had to make a dramatic change if I wanted to keep my business alive.”

Scott gathered her seven-member staff and said, “I’m putting all my chips on the table, and it’s go big or go home. We’re gonna throw it all on there, and we’re gonna see what happens. If you’re in, let me know. If you’re not, I understand. And they were like, ‘We’re in.’ ”

So as the rest of the marketplace pulled back, Scott pushed forward. She wanted to be the one to talk to the buyers and create relationships with them. Taking advantage of all the available space during the recession, she opened a New York City showroom. And she decided to open her first Kendra Scott Designs retail store.

A lot of shops on South Congress Avenue had gone out of business, so Scott snatched up a location with upstairs office space that became the corporate headquarters.

If she re-entered brick-and-mortar retailing, she had to do it differently than everybody else.

“It was always very intimidating for me to walk into a jewelry store. The cases were locked. You had to ask somebody to see something. So my goal with opening our stores was to take all the scary out of it. I wanted the cases unlocked. I wanted jewelry displayed clearly. I wanted it to be a fun, festive environment where people can just have fun and try things on.”

The signature display called Color Bar arose from this concept. Customers pick the design style they want, select the color stones they like, and then hand them over to Kendra Scott employees who set the stones there, right in front of them. True to Scott’s wish for fun and festivity, the Color Bar is the center of bridal-shower parties, cupcake and champagne evenings, and other partnership events that not only draw foot traffic but also inspire engagement with the brand as a whole.

“We had lines around the block to get in,” says Scott, recalling the shock she felt when she saw people queued up to get into her first store. “That was an aha moment that we had built something very, very special, and it was a place of community as well.… The girls that shop at Kendra Scott, some come in several times a week. Or they come in for girls’ night out and hang out. It’s a place to be together with your friends.”

After that, additional retail locations quickly followed, and so did skyrocketing revenue.

Scott invested money in her online presence, too, allowing customers to shop Color Bar virtually and to give feedback via a highly engaged social media presence and blog. The team started connecting with the Kendra Scott customer on a personal level, asking that customer what she liked and what she wanted.

“Once we started talking to her ourselves,” Scott says, “that’s when everything changed. It was lightning in a bottle.”

Give to Get

Despite the fact that her first venture failed, The Hat Box had led to some meaningful successes that now impact how Kendra Scott Designs interacts with the community.

“We give back,” Scott says. “We give back at every level.”

This is not just a percentage of profits donated to a national charity or a holiday toy drive at the office. This is a companywide, never-say-no policy of giving back that requires buy-in from every employee.

When I ask Scott what inspired this giving mentality, she says it’s just part of who she is and how she was raised. Her mother says that as a child, Scott watched her family demonstrate unconditional love and affection for her severely handicapped uncle.

“I think that helped make her so considerate of the less fortunate,” Janet says. “Several of her teachers told me that Kendra would befriend a child in her class who was shunned by other students. Kendra would sit with that person at lunch and make that child feel accepted. She has always had such a kind and generous heart. It is no surprise to me that she puts such focus on giving back to the community today.”

That focus has led to the company’s giving over $1 million and nearly 50,000 pieces of jewelry to more than 1,500 organizations in 2015. These donations go to large, national charities such as Susan G. Komen, the National Art Education Association and MD Anderson Cancer Center, as well as hometown organizations and disaster relief funds.

Giving is built into the brand identity and started when Scott was still shipping orders from her home. “I decided then that if someone would call me [for a charitable donation], I’d always have a pair of earrings. I could make a necklace. I wouldn’t say no to you. I would always have something to give. And here we are 13 years later, and we still have that same philosophy. We don’t turn anyone away. We never have, and we never will.”

Today retail stores host Kendra Gives Back events for any cause, donating 20 percent of all sales on that day to a charity. “If you have a friend whose baby is in the hospital, and they need extra support, they can literally contact one of our stores in their local area and ask for a Kendra Gives Back event to benefit that person or any charity. And we do it. We care about you and what matters to you. Let us know what you need, and we’re here for you.”

Of course, all this giving means that customers become extremely loyal brand ambassadors. “All I can say is when you give, you receive a hundred times more in return,” Scott says. “When I was doing this for seven years out of the extra bedroom in my house, I was giving because I just wanted to do it. It was important to me. Then when I opened my first store, and I saw the line around the block, those people, one after another, said, ‘Kendra, for seven years you’ve never said no to me, and I will not wear anyone else’s jewelry.’ ”

With every new store opening, the team reaches out to discover what causes are important in that particular community, creating a small-business feeling at each retail location and a family atmosphere among the team.

“Starting out with an open and giving heart helps build an amazing culture,” Scott says.

The Sister Rule

A few months before our interview, Scott opened a 63,000-square-foot distribution center in Austin. At an all-hands meeting, she stood behind a microphone to welcome the employees to their new facility and to explain why she went to so much trouble to make it a pleasant—even luxurious—place to work.

 

“I’m a girl from Kenosha, Wisconsin, you know? I mean, who would’ve thought I’d be a fashion designer?”

 

With a well-equipped fitness facility, airy café, massage room, wellness room where nursing mothers can pump, and locker room with showers and chandeliers, the vast distribution center feels more like an extension of Scott’s home than a warehouse. Original works by Scott’s favorite artists and the same seafoam-green paint from her kitchen decorate the walls.

“Every single employee, whether you’re an intern, part-time, holiday help, or C-level, should have the same level of love and respect and care,” Scott says. “How you treat people is what you get back.” The design of the distribution center was intended to make each person feel like they’re getting “a warm hug” as they come into work.

During her welcome speech at the new facility, a few employees got teary-eyed, and one woman approached Scott as she walked away from the mic. She asked, “What’s going to happen to our culture as we continue to grow bigger?”

“It will not change,” Scott promised. “There will be a lot of things that change, but that will never change.”

So what’s the big deal about the culture, aside from the luxe office digs? Kendra Scott team members call it “the sister rule.”

Related: 7 Ways to Make Your Company the Best Place to Work

“As a company we have cultural pillars: family, fashion and philanthropy,” says COO Weingart. “Family really is a state of mind.” In a company whose workforce is 95 percent women, the sister rule dictates everything from the hiring process to customer service policy.

“If your sister did this, what would you do?” Weingart asks. “Yes, we have the policies and procedures in place, but let’s use some common sense and treat folks like family. If your sister came in [to the store unhappy about a purchase], what would you do for her? Well, you’d exchange it, or you’d return it, or you’d get her something different. You know what I mean? That’s how you should treat the customer.”

Weingart says the sister rule is instrumental in keeping the team together during such rapid—and sometimes extremely stressful—growth. “We have a large team that works a lot of hours together, so interpersonal relationships, communication, teamwork—all of those things become absolutely critical. You cannot run this fast without having folks who are committed to working through good times, but also working through issues together. Everybody has to have a common purpose and a common goal, similar to a family.”

This approach leads to a lot of promotion from within, which in turn inspires company loyalty among the team. Every person has the chance to become what Scott calls “a shining star.”

“I’m a girl from Kenosha, Wisconsin, you know? I mean, who would’ve thought I’d be a fashion designer?” Scott shakes her head. “I hope that we create a company that gives every single person the feeling that we’re finding their best in them.”

Christine Browning, vice president of human resources, says one major goal in the retail locations is to avoid the cattiness that sometimes accompanies commission sales. “All of our staffers are on joint commission structure so there’s no fighting over customers. It’s a very shared environment. The salespeople are all aligned to doing what’s best for the customer.”

Scott says that friendly culture is everything. “It doesn’t matter how great your product is, your company will not grow and you’re not going to thrive if you can’t keep and make people happy.”

Family in Front

Near the end of our time together, I raise the issue that comes up in nearly every interview with a female business owner who is also a mother: How does Scott’s family fit into her life as an entrepreneur?

She takes a deep breath. There aren’t any easy answers. “I work at it every day. Some days are better than others.” Scott says she blocks out time every evening for dinner and homework unless it’s an emergency. “It’s not perfect. When I have to travel to the stores, I have this crazy schedule because I want to get home to my kids. I’d rather work all day and get the last flight out so I can wake up and have breakfast with them.”

Her family-first belief has driven her to ensure that all of her employees have the same opportunity to arrange their lives around their families.

The company will move to a state-of-the-art, 43,500-square-foot headquarters in 2016, complete with study rooms for kids who join their parents at work in the afternoons, a room for nursing moms, and even a dog-friendly office policy. Add in free yoga classes and other perks, and Kendra Scott employees will have the makings of mommy heaven.

“When I became a mom and they handed me that little baby. I knew at that moment that nothing was more important than being able to be present for him. And if I could figure out a way to create a business that allowed not just me, but other men and women, to be present in their families and do what they love and be able to give back, that would be success. And that’s what we’ve done.”

Her broad smile returns. “I feel like the luckiest person alive. I really do. I wake up every day, and I can’t believe I’m living this life. It is a dream. It’s actually bigger than I could’ve dreamed. And now I’m actually dreaming much bigger. Now I feel like we’ve just scratched the surface.”

Related: Kendra Scott: ‘What Would You Do If You Were in My Shoes?’

 

Kendra Scott is featured in the April 2016 issue of SUCCESS magazine, on newsstands March 8.