I thought it would be fun to run a magazine

Ray Washburne's Texas Business is a case study in how not to run a business

"We probably should have started at a walk, but we took off in a dead sprint," says Washburne. He blames his lack of prudence on his excitement about the staff. "Everybody just lived the magazine," Washburne says.

On the eve of the first issue, Washburne strutted his plans past The Dallas Morning News. "I'm spending a tremendous amount of money on technology so we can be cutting-edge," he said. His next statement would prove ironic: "I'm looking at this as a long run, not a sprint where we'll print five or six issues."

In truth, Washburne was financing major purchases like a small-timer. Staff members stood in wonder when he tried to charge a $12,000 computer system on his VISA card and the bank denied authorization because the purchase would have put him over his $10,000 limit.

"The reason he wanted to charge it was for the [American Airlines] AAdvantage miles," says Philip Chalk, former art director at Texas Business. "He was trying to finance the magazine on a credit card, and it was over the limit. We couldn't believe it."

Washburne doesn't deny he wanted the air-travel perks, or that he charged the computer. "There's nothing sinister about it. When I found out I was over my limit, I called the bank and got my limit raised. It wasn't a problem."

Spending never seemed a problem because Washburne and Carroll, working in tandem as owner and publisher, set wildly errant projections for advertising sales, Slaughter says. A March 12 budget sheet projected $232,000 in ad sales for June 1995, the first month of publication. Actual ad revenues were $120,000. In October, projections were set at $243,000; actual revenues came in at $87,000. Each month, Carroll set sales projections well over $200,000; real sales never even reached half that.

Carroll blames the unrealistic projections on Washburne--who, in turn, blames them on Carroll.

According to Slaughter, who says Washburne disregarded his advice about Texas Business: "Ray just had no idea what it took to sell ads. He would sit in these meetings and talk like the budget was endless, and of course the only way they could spend money was to make it. But they weren't making it."

Washburne never commissioned any market surveys to test the climate for readers and advertisers, and a business plan--the backbone of any new business--was practically an afterthought at Texas Business. "That was my mistake," Washburne admits, ruefully. "John and Tracy were so anxious to leave the Business Journal and get started. We had a plan, but I should have had a more complete business plan."

Everything plunged forward as scheduled. In the magazine's first issue, the editorial staff appeared in a sepia-toned photo, posed in front of an old linotype press and beaming like kids with a new bucket of Legos. In her editor's note, Staton boasted of the magazine's whirlwind start-up and frenetic news-gathering pace: "We'll cover all of Texas industry--infant industries and established ones, old companies and new, from huge corporations to small companies."

Had staff members checked Washburne's divorce file, they might have asked more questions about their own Texas company. Records of the May 25 divorce reveal the complexity of his finances. They offer no indication of his net worth, but do show his liabilities at the time: $15.4 million, including $622,000 on his Highland Park home mortgage, $1.5 million to Hunt Financial for a Las Colinas property deal, and more than $10 million in Bank One loans for various real-estate projects; his MasterCard--it presumably had a higher limit than the VISA--was at $22,000. The court also ordered Washburne to pay Caldwell $505,000 for unappreciated equity in community property awarded to Washburne.

They kept their own Harleys.

Texas Business, still in its infancy, began to struggle in September, after three straight months of expenses quadrupling revenues.

Circulation was limping along as well. Between June and August, the magazine printed 100,000 copies a month. In September, Carroll cut back to 75,000.

But in October, according to a memorandum the managers created for potential investors, the magazine had just 9,000 paid subscriptions. At their peak, newsstand sales reached 20,000 a month. The remaining 45,000 issues were complimentary--distributed free to business executives and potential advertisers.

It was finally dawning on Washburne that everyone who had any experience with a monthly magazine was right. Shortly after he bought the magazine, many predicted a venture like his would take $3 million to $4 million. He never expected anything close to that. "The start-up costs were just one hell of a lot more than I expected," Washburne says today. "If I knew then it was going to take $4 million, I wouldn't have done it."

Washburne says he and his fellow investors poured about $1.5 million into the magazine.

He declined to say how much of that came from his own pocket, but Texas Business insiders put that figure at less than $1 million.

By late September, staff members say, Washburne was giving the magazine three weeks to survive. Life in the White Swan office was in shambles. Free-lancers weren't getting paid. Staff paychecks, including Dave Scott's, bounced. "I thought it was a joke, but it became very real," Scott says. "People weren't getting paid."

Staffers developed a system for cashing their checks--they called them "Raychecks"--at Washburne's Bank One branch in Preston Center. If they went to the drive-through window instead of the lobby, the checks usually cleared, though no one knows exactly why, Scott says. "We were just glad to get our money."

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