The market for new construction ground to a complete halt -- for the first time in more than a decade, developers in Washington, D.C., were having a hard time of it. Our company showed a loss of $53,000 for the fiscal year. Given that Peter Klosky had lost more than $200,000 during his last year as owner, I suppose I should have been grateful it wasn't more.
Things began getting worse in November and December. We had to hit the line of credit again and again. The balance crept up to $75,000. I was within $5,000 of being tapped out.
Even the mice came back. They had not been heard from in more than a year, but they announced their return very aggressively. They built a nest at the back of one of the drawers in my desk, using pieces of memos, forms, stationery, and business cards they had transported from every other drawer. They ate an entire roll of peppermint Lifesavers, plus several packets of catsup, sugar, salt, and pepper. They urinated on a payables report in the accounting department. Other mice/rats leave sinking ships; our mice, loyal to the end, came back instead.
In January I panicked. I personally took over the scheduling, not only for all the jobs but for every service call and minor errand. I pounced on the mail as soon as it arrived, to see how much money had come in. I removed all discretion from the accounting department in terms of what we paid and didn't pay. For the first time at any of the companies I have owned or run, I played the float with the employees' withholding taxes, conduct I had always derided and found inexcusable in others. I began second-guessing everything everyone else did. I didn't like it; it was the height of poor management. Yet I did it anyway. If I was going to go down, by God, it was going to be because of what I did.
In February our health insurance was canceled for several days for nonpayment of the premium. Our two Baltimore phone lines were cut off after we weren't able to pay the phone bill for four months. We came within 24 hours of having our water cut off. That's how we played the game. We strung people out until we got within inches of our lives; then we paid them. I hated doing business that way. At the end of every day, I felt as if I had been through a war. For the first time in 15 years of marriage, Judi looked at me and said, "You really look awful." She was right.
At the end of February, I let one technician go and instituted an across-the-board 10% pay cut for everyone else. But we were too far behind at that point for this action to make much difference. Among the many overdue payables was part of one quarterly payment due on my purchase note to Peter Klosky. In March he filed suit to collect the entire amount of the note.
In April we moved into new offices in an office-warehouse industrial park about five miles north of our former location. Because of the Washington real-estate market, we got a very good deal -- a couple hundred dollars a month more than we'd been paying for the dump down the road. It was a lift for everyone's spirits.
By June our situation with our suppliers had deteriorated to the point where we were all but paralyzed. We were placed on "credit hold" with practically everyone, which means either we paid up or anything we ordered was COD. We literally could not afford to do certain jobs, because the cash flow simply wasn't there. A few suppliers insisted that our customers sign direct-pay agreements -- when the jobs were completed, the customer would pay the suppliers, who would deduct their share before forwarding the balance to us. I started actively considering bankruptcy.
I held a staff meeting to let the employees know just how bad it was. Two quit; I let two others go. Word spread. I started getting calls from competitors, asking if there was "anything they could do." (The buzzards were circling.) The new bookkeeper, who had been on board for less than two months, said she couldn't take the pressure and would be leaving. (She was fielding 15 to 20 calls a day from creditors, so who could blame her?) Since our personal assets were securing the company's bank debt as well as the note to Peter Klosky, Judi and I began discussing personal bankruptcy as well. It was quite possible that everything, including our house, would be lost.
I've been asked one question in particular 100 times or more since purchasing Automatic Door Specialists: "Would you do it again?" My response is always "Define it." Buy a business? Buy this business? Run the company a certain way? Change industries? I will admit that buying a company that was losing money in an industry I knew nothing about, attempting to turn it around in a down economy, and trying all that with almost every personal asset I had in the world at stake, was perhaps not the smartest thing to do. But it was my best shot at the time and I took it.
Still, it is with grim irony that I look back on the reasons I decided to buy, not start, a company: I didn't want to risk everything at this stage of my life; I didn't want to take too much time away from my family; I didn't want the huge emotional commitment a start-up entails. Right. For all the apparent advantages of purchasing a business -- staff and product lines already in place, ongoing cash flow, reputation established -- there turned out to be concomitant disadvantages. To those who think (as I did) that buying must be easier than starting from scratch, I say, Think again. Or, more to the point, caveat emptor.
* * *
(Editor's note: By late August Niemann had ruled out Chapter 7 bankruptcy but had not declared Chapter 11, either.)
Read Part One of Niemann's saga, " Buying a Business," from February 1990. In his first article for Inc., Hendrix Niemann chronicled the seven-month odyssey of searching for his "dream company." He'd already tried a start-up and thought it would be safer to buy a business: "I didn't want to risk everything . . . I didn't want something that would take me away from my family."
Read Part Three, " The End of the Story," from October 1997. "The signs could no longer be ignored. We were losing money every day we stayed open. It was time to close the business."
