Mopping up with Method

October 10, 2013, 11:29 AM UTC

Eric Ryan, 40, and Adam Lowry, 39, know how to fight dirt. As roommates in San Francisco in 2000, the two co-founded Method Products, which sells green cleaning supplies in chic packaging. They were so successful that giants like S.C. Johnson and Clorox (CLX) developed their own eco-friendly lines. Today Method’s annual sales run north of $100 million, according to Lowry and Ryan. Their corporate culture remains collaborative and quirky: Nobody has an office, and there’s no receptionist — everyone takes a shift at the front desk, including the two co-founders. Their story:

Adam Lowry: I grew up in the suburbs of Detroit, where my dad worked for Chrysler in the late ’60s and early ’70s and my mother was an English teacher.

Eric Ryan: Adam and I lived six blocks away from each other, and I was a year ahead of him at Grosse Pointe High School. In the summers we’d be sailing friends.

Lowry: In 1981 my parents started their own business as manufacturers representatives selling interiors to the automotive industry. I was 7, and remember eating chili for a week when they were strapped for cash to start their business. I got a taste for entrepreneurism early on.

Ryan: A lot of my entrepreneurship comes from my great-grandfather and grandfather, who started a company that supplied everything from car doors to vinyl moldings for the Big Three.

Lowry: I studied chemical engineering at Stanford University and graduated in 1996. My first job was working with a plastics company in Michigan on recycled automotive parts. Then I went to work for the Carnegie Institution for Science at Stanford, doing climate science to show the impact humans were having.

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Ryan: I went to the University of Rhode Island, and graduated in 1996 with a BA in communications. I started my career in London with an internship at Integrator and fell in love with marketing and design. Adam and I had lost touch after high school. But in 1997, I had the opportunity to work with Hal Riney, who created the Saturn brand, and moved to San Francisco. One day Adam and I happened to be on the same flight back to San Francisco, and we realized we were living on the same block.

Lowry: I was in a five-bedroom flat, and when one of the roommates moved out, we invited Eric in. At work, I grew frustrated that the climate science was not reaching a mainstream audience. I thought business, the most powerful institution on the planet, would be the best way to create positive change in the world.

Ryan: I wanted to go into business for myself too. I decided to find a consumer category that was big and established but had missed a cultural shift. In that gap would be a niche no one else had.

I moved to Tattoo Strategy, and spent a lot of time in grocery aisles doing research for a client. One day I opened a bottle of Snapple Element to drink and thought, “Why can’t Pine-Sol smell like this? What if this was a cleaning product?”

I told Adam about the idea that Christmas. With a cultural shift toward healthy living, I would approach cleaning products from the design perspective and Adam would approach it from the eco perspective.

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Lowry: Before us, you got either a toxic product that got the job done or a green product that didn’t. So I left Carnegie and started writing the initial business plan. We incorporated in the summer of 2000.

Ryan: Adam and I each put in $45,000 — from savings and with help from friends and family — and started the company with $90,000. We could have used stock packaging, but I was such a believer in industrial design as a make-or-break that we spent $30,000 on creating the first bottle.

Lowry: Our first four products were kitchen, shower, glass, and bath cleaners. The first batches were made in a lab, and we hand-filled the bottles at home with funnels and put labels on them out of Eric’s bedroom. We started a manufacturing process with small product runs shortly after that.

Ryan: In the beginning we gave it to friends to test, and for a while our apartment was the cleanest it’d ever been. When I told my mom about the cleaning idea, she said, “But I’ve never seen you make your bed.”

Lowry: Back then, I’d walk into grocery stores in the Bay Area at 6 a.m. to persuade managers to try us. It took six months before Mollie Stone’s Grocery Store in Burlingame, Calif., gave us a shot, and we went on its shelves on Feb. 28, 2001.

Ryan: A week before going into Mollie Stone’s, we didn’t have enough of the shower cleaner. So we had to take back the samples we’d given our friends, clean the bottles, and refill them to have enough for the store.

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Lowry: As we got into independent stores, we’d drive around and deliver product ourselves. We reached out to friends and family, and raised about $200,000. That got us venture capital from Simon Equity Partners in two tranches totaling $1 million. It was very exciting and nerve-racking.

We’d planned on closing the financing around September, but 9/11 delayed things. By the time we got the first tranche that November, we had $250,000 in payables, with most on personal credit cards. We couldn’t make any more product, and we had $16 in the bank. We were really overextended.

Ryan: We didn’t choose to go down the path of sustainability because we thought it was a good business model. It wasn’t, back then. We hid the environmental credibility of the product on the back of the label at first. When people started writing to us saying “we love your product,” we knew we were on to something big.

Lowry: By 2002 we had built it to 700 stores, mostly on the West Coast. We thought Target (TGT) would be the perfect national retailer for us to reach the mass market, but when we met with them, the head buyer said there’s a snowball’s chance in hell of Method getting into Target and being successful there.

Ryan: Going after corporate goliaths who have a 100-year head-start was a challenge. I loved the idea of disrupting existing categories and playing the challenger role.

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Lowry: So we designed an innovative dish soap that dispensed from the bottom of the bottle, in concert with Karim Rashid, one of the world’s best-known industrial designers. Target wanted to work with Karim, so he and Eric met with Target while I was working on the bottle prototype. Target loved it, and by the end of 2002 we were national with it.

Ryan: We continued to expand our product line, and within a few years we launched our laundry detergent, and had an automotive brand called Vroom and a line of air fresheners, room sprays, and candles. In 2006 the economy was roaring, and it was hard to turn down opportunities. We ended up growing too fast, and were in too many categories.

Lowry: In 2008 one of our biggest failures was a personal-care product line called Bloq. The body washes, soap, and lotions were phenomenal, but it didn’t resonate with consumers because the marketing was too abstract. It failed in the millions.

Ryan: At the same time, the recession hit, and S.C. Johnson and Clorox launched their green brands [Nature’s Source and Green Works, respectively]. They were all gunning for our space, which was a shock to our system. We got out of our unprofitable lines, and had to lay off 10% of our employees.

Lowry: We navigated our way out of the mess, and decided to stick to our knitting more.

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Ryan: Last year we decided to sell to Ecover Group, which owns one of the largest green cleaning companies in Europe. They were 100% aligned with our mission, would preserve our culture, and protect our employees.

Lowry: I’m now the chief greenskeeper for the global operation.

Ryan: My title is chief brand architect.

Lowry: We’re not going to combine the two brands, but in our mission to rid the world of dirty, we are going to take over the world.

Our Advice

Have a distinct point of view. Instead of having one product aimed at every person, we know some will love our products, and some might not. Our first brand campaign featured people half-naked, cleaning in their homes, with the idea that our products are safe enough to use that way.

Codify, teach, and enforce your company values. One of our values is “Keep Method weird.” Performance reviews measure how well people contribute to the company’s innovative culture, and how well they demonstrate our other values.

Never ask for money. When you write your business plan, send it to people and ask for advice. If they don’t offer to open up their checkbook, you don’t have an idea that’s good enough, so keep working on the concept.

This story is from the October 28, 2013 issue of Fortune.