How Paul Orfalea Built Kinko’s Into a $2.6 Billion Business

In the world of entrepreneurial success, there are stories that defy odds and reshape industries. Paul Orfalea, the founder of Kinko’s, stands as a testament to grit, vision, and an unorthodox approach to business. He transformed a modest $5,000 investment into a multibillion-dollar enterprise, ultimately selling Kinko’s to FedEx for $2.6 billion. But this story isn't just about the money—it’s about the lessons learned, challenges faced, and the unique strategies that drove one of the most successful business journeys of the 20th century.

Humble Beginnings

Orfalea didn’t start with the ambition to revolutionize an industry. In fact, his early years were marked by struggles, particularly in school due to dyslexia. He often found himself at the bottom of the class, a challenge that would later fuel his relentless pursuit of independence and success. The difficulty he faced with reading led him to a path of practicality rather than academia. From a young age, Orfalea was a saver, constantly looking for ways to make his money work for him. His entrepreneurial spirit was evident when, at nine years old, he started selling strawberries door-to-door. These early ventures laid the foundation for what would eventually become Kinko’s.

The Birth of Kinko’s

Kinko’s started in 1970 with a simple idea: make photocopying accessible to students. Orfalea opened his first store near the University of California, Santa Barbara, recognizing a need for affordable, reliable photocopying services. With a small loan of $5,000, he rented a space in a strip mall and set up his first store with a single Xerox copier.

His intuition was spot-on—students and professors flocked to the store to make copies of study materials and textbooks. The demand for affordable, convenient copying grew rapidly. But it wasn't just luck that fueled Kinko’s expansion; it was Orfalea’s keen understanding of customer needs and his willingness to take risks.

Scaling Kinko’s to Billions

As the business grew, Orfalea maintained a sharp focus on experimentation and continual improvement. He believed that businesses should run smoothly without the owner’s constant involvement, allowing him to focus on growth and innovation rather than day-to-day operations. One of his key insights was decentralizing operations by empowering store managers to make decisions, which fostered a sense of ownership and accountability across the rapidly expanding chain.

He also developed a keen sense of leveraging marginal decisions to drive profitability. With a marginal cost of 17 cents per copy and a selling price of $1, Orfalea was able to scale the business quickly while maintaining healthy profit margins. His knack for identifying small yet significant changes—such as offering calendar printing during the holidays or adding complementary services like binding and stationery—further solidified Kinko’s as a go-to resource for students, businesses, and individuals alike.

By the time he sold the company in 1997, Kinko’s had grown to over 1,200 locations worldwide, generating nearly $3 billion in annual revenue.

Challenges Along the Way

While Kinko’s grew exponentially, Orfalea faced significant challenges, including lawsuits, financial pressures, and the stress of managing a growing enterprise. One of the most notable moments came when Kinko’s was sued by the publishing industry for copyright violations, as many professors and students were using Kinko’s to create anthologies from various textbooks. Orfalea lost the lawsuit, which resulted in significant legal costs and an injunction, but he viewed it as just another hurdle in his journey.

Another challenge was maintaining the entrepreneurial spirit within Kinko’s as it grew into a massive corporation. Orfalea lamented how large organizations become defensive and bureaucratic, which can stifle innovation. He was always pushing his managers to take risks and avoid the pitfalls of rigid corporate structures, which he believed led to the downfall of many large businesses.

Selling the Business: Relief and Regrets

Orfalea ultimately decided to sell Kinko’s in 1997, a move that brought both relief and reflection. He often advises entrepreneurs to step away from their businesses after a sale, likening the process of staying involved to “cutting the tail of a dog an inch at a time.” The stress of being involved without authority was, in his words, torture.

Selling Kinko’s allowed Orfalea to breathe again. He had spent decades worrying about financial pressures, employee well-being, and the constant demands of running a business. For him, the sale wasn’t just about the financial windfall; it was about reclaiming his life from the burdens of responsibility.

Despite his success, Orfalea expressed regret about one thing: not saying “thank you” enough to the people who helped him build Kinko’s. In the rush of daily operations and financial stress, he felt he didn't express enough gratitude to the dedicated employees and partners who were instrumental in the company’s growth.

Lessons for Aspiring Entrepreneurs

Orfalea’s story is filled with actionable insights for entrepreneurs:

1. Delegate and Empower: Orfalea built Kinko’s by empowering his store managers to make decisions. By trusting others and decentralizing control, he was able to scale the business efficiently.

2. Experiment Relentlessly: Kinko’s was built on experimentation. From new products like calendars to expanded services like binding and 24-hour operations, Orfalea constantly tested new ideas to meet customer needs.

3. Don’t Let the Business Own You: One of Orfalea’s core beliefs is that a business should serve the owner, not the other way around. Entrepreneurs should never let their business consume them emotionally or financially.

4. Prepare for Ambiguity: Orfalea thrived in ambiguity and uncertainty. He understood that business decisions are often made on the margins, and entrepreneurs need to be comfortable with risk and ambiguity.

5. Sell at the Right Time: Orfalea advises entrepreneurs to leave their business immediately after selling it. Remaining involved without control can lead to frustration and regret.

6. Balance Work, Love, and Play: According to Orfalea, true success comes from balancing work with family and leisure. He made it a priority to spend time with his children and inject fun into his life, even during the most stressful periods.

Philanthropy and Legacy

Since selling Kinko’s, Orfalea has dedicated his life to giving back. He’s particularly passionate about education, working to improve public schools and ensuring equal opportunities for students in impoverished areas. His foundation also focuses on providing orthodontic care to underprivileged children, which he believes can greatly improve their confidence and long-term success.

Orfalea’s story serves as an inspiring example of how an unconventional approach to business, combined with persistence, experimentation, and a clear vision, can lead to extraordinary success. For entrepreneurs and business owners, his journey offers a wealth of practical lessons on scaling, managing, and ultimately stepping away from a business on one’s own terms.