The story of how you can lose your business the same way you build it--one day at a time.
Inc. Journal
As Sue Mackarness of Transworld Teachers discovered, you can lose a company the same way you build it--one day at a time
There was a chill in the air the evening Neville Fridge stepped into Transworld Teachers for the first time.
As far as almost anyone knew, he had come to the school that night in February 1994 for the same reason the 40 or so others, most of them either corporate refugees or recent college graduates, had: to hear the school's founders, Sue Mackarness and Christopher Notley, pitch their system for teaching English to students in other countries. The owners, a married couple, displayed the combination of strengths that had meshed so effectively to make San Franciscobased Transworld an innovator in the four years since its founding. Notley, a natural marketer with a booming voice, spun stories about graduates' overseas adventures. Mackarness, an accomplished teacher, explained the school's curriculum in her upper-class British accent, before turning the floor over to an instructor who conducted a demonstration lesson. Fridge, like the others, jumped right in, pretending to be a foreign student.
He wasn't actually considering enrolling in the program, as the couple knew. He was a consultant who had come to see them that night, after being contacted by an investor in their business. After the session, he joined them for beers at the English-style pub next door. Was it true, as he'd been told, that they needed someone to find them a professional business manager? They nodded wearily.
Fridge could not have arrived at a more critical time. Although Mackarness and Notley had boosted sales to $550,000, they were exhausted. While the school's enrollment was at an all-time high, so were expenses. And except for one eight-day vacation, the couple hadn't had a break. "We were just too burnt out to be effective," admits Notley, who spoke candidly to Fridge about the need for better financial controls. Less than two weeks later, Fridge had indeed found a business manager for Transworld: himself. Fridge seemed a godsend as he set about making the hard decisions required to get the company's finances in order. Mackarness and Notley were ecstatic. "We thought our problems were over," says Notley. "He was bright. He was a Harvard guy. I didn't think it could get any better. I thanked my lucky stars that he had come into our lives."
Just five months later, Notley and Mackarness would be even more grateful to Fridge for leaving their lives. By then, though, it would be too late. Transworld Teachers would have become a victim of their bitter power struggle.
"If your business depends on you, you don't own a business--you have a job," writes consultant Michael E. Gerber in The E-Myth Revisited. "And it's the worst job in the world because you're working for a lunatic!"
In that respect, the collapse of Transworld Teachers is entrepreneurship's oldest cautionary tale: the story of founders whose passion for what they're doing matters far more to them than building a business. As a result, they fail to detect that their growing company is developing distinct needs, above and beyond what they can naturally give it. They remain ignorant--blissfully, at first--to such pressing organizational requirements as formal planning, defined responsibilities, and financial controls. "We always thought of it as just our little mom-and-pop store," says Notley. Often such founders begin to address a company's growing pains only after a series of unsettling events: a serious financial loss, a key employee's defection, even a worrisome health problem.
No one trauma mobilized the founders of Transworld Teachers. Ultimately, they just got too exhausted to contend with the constant unpredictability: How come, with revenues soaring, they couldn't pay their rent? Since they lacked an understanding of how their business actually worked, everything just seemed to come out of nowhere. "We said to each other many times over the years, 'Despite us, Transworld grew to be very successful,' " Mackarness says.
Successful, that is, by the definition most start-ups apply: Mackarness and Notley had defined a market need, created a service to satisfy it, and kept the organization afloat day to day, all while maintaining an informal and free-spirited environment. What they hadn't done, and what they needed a professional business manager like Fridge to do, was to make profits an explicit goal, help focus employees' efforts, and create a workable blueprint from the plans Notley carried around in his head. In many ways, Mackarness and Notley had been fortunate to reach that vulnerable point--at which many businesses quietly implode--without finding themselves under assault by a major competitor, say, or badly weakened by low morale.
Sadly for them, their luck was about to change.
Few founders, no matter how badly they manage this delicate transition, will suffer for it as much as Mackarness and Notley did. Some may find themselves running stagnant companies, while others endure the indignity of having board members jettison them. In any case, such stories are rarely shared, except by successful entrepreneurs trotting out past failures as if they were old war wounds.
Neville Fridge declined to give his account of what happened at Transworld, saying he preferred to put it behind him. For Mackarness and Notley, it's not that easy.
It was in late 1989 that Christopher Notley convinced Sue Mackarness, a colleague at the vocational school where they worked, that they could create a school at which Mackarness could train others in her more imaginative approach to teaching English as a foreign language. Their classes would be informal and fun, quite unlike the stuffy academic programs they saw. Mackarness, whose appetite for adventure had led her to teach English in 14 countries over an 18-year span, agreed to give it a go. The two borrowed money from family, friends, and friends of friends, and set up shop.
