Phil Knight Was One Bank Call Away From Collapse. Again and Again

I never knew just how tenuous the Nike story was - for years! - until I read Phil Knight’s autobiography. Wow. And one thing I always loved about Nike is their great content - commerials and ads and what have you.

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Before there was Nike, there was a scraggly, scrappy, 26-year-old former middle-distance runner selling shoes out of the trunk of his car.

In 1964, Phil Knight started Blue Ribbon Sports to import running shoes from Onitsuka Tiger in Japan and sell them at track meets around the Pacific Northwest.

It sounds charming now. It was not charming then.

From the beginning, the business had a structural problem: Cash . . . or a lack thereof.

You see, Blue Ribbon had to pay Tiger before retailers paid Blue Ribbon. So every time sales increased, so did the size of the next order, and every larger order required a larger bank loan.

Growth did not make things safer.

It made things tighter.

In his autobiography, Shoe Dog, Knight describes living in constant tension with his bank for years:

• His credit line was constantly stretched

• Bankers continuously questioned him

• Extensions were negotiated time and again.

At one point, the Bank of Oregon nearly pulled all of its support. If that had happened, the company would have collapsed overnight.

And that was just the early chapter. Money was a constant worry, problem.

Nike’s Supplier War

Things got worse.

In the early 1970s, Tiger began exploring other U.S. distributors. The very company supplying Blue Ribbon Sports its product was quietly trying to replace Blue Ribbon Sports. The relationship deteriorated into a legal battle. While fighting that dispute, Knight and his team made a high-stakes move:

They secretly created their own brand and named it Nike ( for the Greek goddess of victory)

The swoosh? Created by an intern and purchased for $35.

They launched, barely.

But then came another hit.

Fighting the Feds

In the mid-1970s, the U.S. government reclassified imported footwear in a way that dramatically increased Nike’s customs duties. The bill was massive and Nike suddenly faced a multi-million-dollar tax bill that threatened to wipe them out.

Money became, somehow, a secondary problem. Knight writes about the shock of realizing the government was now a bigger threat than unruly banks or tough competitors.

Nike challenged the assessment, but in the meantime, the liability loomed. Cash was already tight. Now it was potentially catastrophic.

As if that were not enough, the issue also triggered federal scrutiny. At one point, the FBI showed up during the broader customs investigation. Imagine building a young company, already stretched thin, and then federal agents walk in.

Eventually - whew! - they settled.

Crisis Stacked on Crisis

Yet even as sales climbed, the cash pressure never disappeared. Rapid growth required bigger production runs, more overseas manufacturing, more financing. The faster Nike grew, the more money it needed.

For years, the company was profitable on paper and starved in practice.

Finally - finally! - came oxygen.

Swish . . . err, Swoosh!

In 1980, Nike went public.

The IPO was not just a milestone. It was relief. The infusion of capital stabilized the balance sheet, reduced dependence on fragile bank credit lines, and finally gave the company room to operate without constant financial brinkmanship.

And then they signed Michael Jordan and lived happily ever after.

The Takeaway

The great thing about Phil Knight’s story is that he refused to stop growing his business, even when the odds were against him. Money problems? Onward! Tax issues? Onward! The FBI? Bring it on!

For we mere mortal entrepreneurs, it’s a lesson is perseverance and believing in your vision.

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Steal This Strategy

📖 Book — Shoe Dog - Phil Knight’s jaunty autobiography about one of the great entrepreneurs of modern times.

🏛️ Branding: Nike Commercial - We all want to be like Mike!

🛠️ Free Tool! — Top 10 AI Content Creation Tools Nike has always been great at creating content, and these days you can be too. Here are our top AI content creation tools/sites, courtesy of your pals at Notes to an Entrepreneur!

About Steve

Steve Strauss is the best-selling author of The Small Business Bible (and 17 other books), Inc.’s small business columnist, a lawyer (non-practicing), and an entrepreneur. He sold his last venture, TheSelfEmployed.com to Mark Cuban & Zen Business. Need a ghostwriter or a newsletter for your business? Contact Steve!