The signs could no longer be ignored. We were losing money every day we stayed open. It was time to close the business
February 12, 1997, had been circled on our kitchen calendar for more than six months. It marked the opening night of a musical called The Secret of My Success. I was director as well as president of the Hosanna Players, the Christian children's theater group producing the show. The cast included 3 of my own children, not to mention 68 others, a 9-person technical crew, a 13-person stage crew, and a 14-piece orchestra. The show was about a pushy, cocky business-school graduate, Miss Morebucks, who applies for a job with a company called Solomon & Associates. Little does Miss Morebucks realize that Solomon & Associates is not very interested in making money; rather, it is interested in saving souls. Bing Solomon and his associates help Miss Morebucks understand that she needs to reexamine her priorities and goals, that God has a plan for her life (quite different from her own), and that she needs to look beyond worldly riches to find the real meaning of success.
February 12, 1997, turned out to be an important day for me for another reason (not on my long-range calendar). It was the first day that my business, Automatic Door Specialists Corp., a 34-year-old security- system installation company I'd purchased in 1989, was out of business. So here I was, directing a show called The Secret of My Success while my own business had just closed. The irony was obvious. Could I hang on to the point of the show: that true success, real success, has nothing to do with money?
Throughout the fall and winter, the company (which did business as ADS Systems) had been plagued by accidents, illnesses, and bizarre happenings, which together had put us in a deep cash-flow hole. But at the same time there had been more work on our job board than there had been in the seven and a half years since I had bought ADS. It looked as if we were doing well. For most of the years since 1989, we hadn't had enough work. Now we had plenty of work but not enough qualified people to install the card readers, electric locks, cameras, and other security devices on order.
In my view our only chance to survive was to somehow bust through the logjam. The key was to get some help--qualified, competent, reliable help--and get a bunch of jobs done fast, bill them immediately, and get paid pronto. But I'd been looking for some more qualified, experienced, competent technicians for a year and a half. What chance did I have to find one or more right now?
Then, unsolicited, a rÃ©sumÃ© came over the fax machine. Matt was experienced in our part of the industry and with many of our product lines. He could run his own jobs; he could hit the ground running; he could start producing revenue his first day on the payroll. He was going to be expensive, but I didn't see any other way out. I offered him a job. He seemed really interested, but then I waited--and waited--and waited.
Finally, I said enough was enough; I had to have an answer. Matt liked my final offer and said he could start on Tuesday. I figured if I could get a couple of good solid weeks of work done...
Matt called on Monday, February 3. He had torn a muscle playing touch football on Sunday. He wouldn't be coming to work on Tuesday. When would he be able to start? He didn't know. It could be days, maybe even weeks.
Despite all that was going wrong, despite my near certainty that I needed to close the doors (we were losing money every day we stayed open), ADS still could have pulled out of the nosedive if Matt (or someone like him) got a lot of the jobs done quickly and we got some bills out the door. But now Matt wasn't coming. That was the last sign I needed.
I made an appointment to see my lawyer. I told my accountant. He wasn't surprised. I told Flo, the office manager, and Laura, the finance manager. I called a meeting with the six technicians for 7:15 a.m. on Tuesday, February 11. Flo began informing callers that we would not be bidding on work because we had decided to close the company. We began (discreetly) to let certain customers and suppliers know that we were closing down. After 34 years ADS was going out of business.
In hindsight, I can't imagine any other outcome. It's humbling, to say the least, to look back and ask the obvious question: How could I possibly have been so foolish?
I thought I had done a decent job of checking out the company during the summer-long due diligence process in 1989. My accountant and I had whacked away at the inflated inventory and accounts-receivable numbers. We had uncovered bills that had not been posted. The purchase price for the company had come down steadily until it was 40% of the asking price. But it was a classic good- news, bad-news situation: the good news was that I didn't pay much; the bad news was that I didn't get much.
When my wife, Judi, and I first saw the office, in July 1989, we knew there was a problem. The office was worse than a dump: it was filthy, rat-infested, disorganized, and disgusting. The owner obviously didn't care what the place looked like; neither did the employees. Judi asked presciently, "Do you really think you can work with people who are comfortable in a place like this?" The answer should have been obvious.
Yet I did it. I put everything on the line, too: house, stocks and bonds, college fund, the whole ranch. I can only chalk it up to hubris, pure and simple. I really thought I was a smart, talented, hardworking guy and that I could fix whatever was wrong with the company. Never mind that I didn't have a technical bone in my body and that this was a technical business in a technical industry. Never mind that the company turned out to be struggling and, in fact, losing money when I bought it. I, Niemann the Great, could do it. Proverbs 16:18 says, "Pride goes before destruction, a haughty spirit before a fall." Indeed.
On February 20 I was seated in a small conference room at Provident Bank of Maryland in Baltimore. Across the table were the vice-president of commercial banking, a pleasant woman, and the vice-president in charge of "special loans," the bank's innocent-sounding euphemism for loans that were in trouble. (In other words, you did not want your loan to be "special" at Provident Bank.) Mr. Special Loans, as I will call him, had one of those faces locked in a permanent scowl, which I supposed was a prerequisite for his job.
I told the bankers that I had ceased operations and was in the process of notifying customers and creditors that my company was closing. I had prepared a couple of summary pages showing our financial situation. We had about $473,000 in debt and accounts payable, while the receivables and assets totaled (at best) about $142,000. Not a pretty picture.
I said that I did not want to declare bankruptcy, that I wanted to pay everything I owed, even if it took years. They said nothing. The bank was first in line and therefore entitled to all receivables, all proceeds from the liquidation of assets, all money in our bank accounts. And if that wasn't enough (which it wouldn't be), there was always our house. If it was sold at auction, there would be plenty of money with which to pay off the first mortgage holder--and Provident Bank. The question was, How long would the bank wait before taking our house?
Mr. Special Loans told me that the bank had frozen the company's account and that in the future all checks I wrote had to be cleared by him or his staff. He was going to prepare a letter stating that a condition of default existed and therefore Provident Bank was officially calling the loan. He would pay me a visit at our offices soon.
Finally, he said he wanted February's loan payment immediately (it wasn't due for another eight days), and he wanted another $2,000 in principal paid immediately thereafter. Would I be so kind as to go back to my office and type out a letter "requesting" that Provident Bank take the money out of our account? I could tell this was going to be a lot of fun.
Over the next five weeks, I learned what it meant to be hounded. Mr. Special Loans called me daily (sometimes twice daily) for no particular purpose other than to let me know he was there and, unlike a bad dream, was not going to go away in the morning. Creditors called every day by the dozen. As the word got around, customers called in a panic: Who was going to finish their job? Who was going to order their part? Who was going to make the service calls?
March 7 was Flo's last day. As she was leaving she said that the company's closing was for the best, that something better would come along for me.
March 12 was Laura's last day. Our parting was awkward. Neither of us knew what to say.
Laura: I'm leaving now. (pause) Good luck, Drix.
Me: OK. Thanks. I'm sure I'll be talking to you. Thanks for finishing everything up.
Laura: That's OK. Give my best to Judi.
Me: I will. See ya.
Laura: See ya.
Then she was gone. I thought to myself, "That was the last employee of ADS. Ever." I was now totally alone.
The landlord had given me until March 24 to get out. So far, I had managed to sell three of the vans, some parts and tools, and a few pieces of equipment. I was keeping the fax machine, my computer, a bookcase, and one desk and chair. Everything else would be liquidated to pay Provident Bank.
There were eight offices and a conference room filled with furniture and files; more than 20 filing cabinets of all shapes and sizes; and the accumulated treasures of 34 years in business, including a 2,500-square-foot shop packed with welding equipment, a metal-cutting band saw, a monstrous air compressor, old tools, motors, camera housings, transformers, electrical fittings, more than 100 spools of wire, and assorted gizmos and gadgets that, even after seven and a half years as owner, I only vaguely understood.
The only option was to sell everything piece by piece, gizmo by gizmo, gadget by gadget. Whatever wasn't sold by 5 p.m. on Monday, March 24, would be going into the trash.
We were also racing against other deadlines. I had not paid the phone bill for more than two months and couldn't now. The electric bill was a month overdue. If Bell Atlantic caught up with us before March 24 and shut the phones down, I could use the cellular phone for a few days--but that bill, too, was two months overdue.
I took out some "business liquidation" ads in the newspaper. Judi came in eight days before D day to help me clean up and move out. She cleaned out one office completely and turned it into a nursery for our 2-year-old and the young children of friends who came to help. She made big pots of pasta and sauce to feed the hungry work crews.
My former office manager's husband, Norm, a self-described tool junkie (and unlike me, someone who knows what he is looking at) came in for several days to set up and properly merchandise the shop. At Judi's request, Peter, an unemployed friend from church, came with his family for the last five days to clean up, sweep out, throw away. After assessing the situation the first day, he began making phone calls at night to other friends and fellow church members, who in turn gave hours (in some cases, days) of their time to help empty out the dirty, disgusting, depressing company.
Peter's wife, Annie, an expert on the subculture known as yard-salers, made signs and put them in strategic places throughout the office park and neighboring major roads, and explained how to attract the Saturday and Sunday yard-sale junkies for the last, crucial big weekend.
As my friends came to help I was embarrassed to have them see the condition of my company. Like the former owner, I no longer had noticed the dirt, the grease, the grime, the disorganization. I had allowed the men's offices, their desks, their vans to become no better than the inside of garbage cans. I had let the shop remain in a state of chaos since we had moved there, in April 1991. Even though friends were coming out of the woodwork to help us, with no thought to their own schedules or priorities, I got more and more depressed. The enormity of my mismanagement and the scope of my incompetence overwhelmed and all but defeated me.
ADS had lived under the financial gun week after week, month after month, year after year. Our losses had mounted into the hundreds of thousands of dollars. Our payables-to-receivables ratio was rarely less than 2.5 to 1. We were constantly being put on "credit hold"--and there is nothing more embarrassing or infuriating to an employee than having the gas credit card refused (after he's filled up) or going to pick up a part and being turned away because the company's payments are past due.
The technicians and I never connected--ever. My lack of technical experience and knowledge grated on them--and rightly so. What good is a boss-owner who cannot truly understand what the staff is grappling with and who can contribute almost nothing to a discussion of a technical problem?
And I was totally unprepared for the way the technicians thought: the boss is automatically a bad guy; the boss will always take advantage of you; the boss is interested only in making money for himself; everything you do must be done to protect yourself from the boss. It took me years to understand that most of my employees thought that way most of the time. I never figured out how to deal with, or change, that mind-set.
We even fell behind--way behind--on employee withholding taxes, which I had always felt were sacrosanct. On April 1, 1993 (April Fools' Day, no less), the Internal Revenue Service "swept" our bank account and took $7,200 out for back payroll taxes. There is no way to describe the feeling as, with shaking hands, I read the notice from my bank informing us about that. I felt so low, so helpless, so angry, so frustrated that I kicked a hole in the wall outside my office.
But the worst part of the seven and a half years was the overwhelming sense of hopelessness, of fearing that I would never, ever be able to dig out of the hole. I hated the business, hated the industry, hated the job. Yet I would not, could not, give up or give in. My house was the ultimate collateral for the loan I'd taken out to buy the business. Therefore, lose the business, lose the house. I was trapped, and I couldn't turn the situation around, either. I tried everything I knew. I tried expensive staff, cheap staff, experienced staff, inexperienced staff. I tried to make money by having lots of people on the payroll and then by having few people on the payroll. I went through six bookkeepers, two operations managers, three sales managers, three office managers, and dozens of technicians. I applied every management principle known to man. Nothing changed. I simply had no choice but to hang in there and hope and pray that somehow I could make enough money, someday, to pay what I owed, lock the door, and walk away. I no longer had dreams of financial success. I just wanted to survive.
I was confused and frustrated by the dichotomy between my work life and my personal life. My home was an island of peace, calm, and joy...well, joy, anyway. My marriage was strong. My wife was a treasure. My children (we had three when we first bought the company; a fourth was born in 1995) were a delight. Our health was good. Our decision to teach our children at home was yielding tremendous benefits academically as well as spiritually. I'd begun teaching Latin and creative writing to Wesley (11) and Dale (9), and loved it. We were liked and respected in the home-schooling community and in our church. I was elected president of the local chapter of Habitat for Humanity. I coached soccer in the U.S. Naval Academy children's league and later in a new league that a friend and I launched. Judi and I were asked to take over the children's ministry at our church. A few men looked to me as an adviser and even a mentor. At work I felt like a deadbeat, an idiot, an incompetent fool. At home or anywhere but at work, I was a...decent guy.
I finally realized that the business/industry/job I hated was God's chosen tool for humbling and changing me. And, boy, did he pick a good one!
When your company is perpetually in financial trouble, you spend a lot of time apologizing and making excuses for not being able to keep your commitments. That is humiliating. In that kind of pressure cooker, you are easily tempted to get angry, hold a grudge, call someone a well-deserved name, fib, cheat, prevaricate, fudge, exaggerate, and mislead, just to survive. That shows you your character--and sometimes it's not a pretty sight.
Getting up early and going to work in a distasteful job in an industry I abhorred with people who didn't like me was a very good character-building exercise. Most important, though, I developed a sense of humility. When I bought ADS, I thought I could figure out anything. I had very little patience with those whose intellect did not match mine. I did not have good money sense. I had an explosive temper. Those flaws have been sanded down with God's heavenly sandpaper: adversity. The flaws aren't gone, of course, but they are now less visible. Proverbs 11:2 says, "When pride comes, then comes disgrace, but with humility comes wisdom." I guess I now have a great deal of wisdom!
On March 20 a number of fellow home-schooling families came for the day to help. Some competitors (I guess they were officially "former competitors" now) were in to look over the inventory of parts and equipment, and pick up files. A dozen or so bargain hunters also were looking around: a trucker from Pennsylvania who had seen our signs on the road, an office manager who had read our ad in the newspaper, folks who had just been driving by, a couple of guys from the coffee-service company three doors down. "Business liquidation" means "get stuff cheap" to most people, and everyone loves a deal. The bulk-salvage guys were salivating as they came by to give us their business cards.
A former employee who had left in 1993 to open his own company (taking a top technician and a number of customers with him) bounced in. We were not, to say the least, good friends. He wandered around for a few minutes, bought a ladder and a couple of other parts, and then left. I think he enjoyed himself.
The bankers had chosen this chaotic day for their visit. They wandered around the shop, looking at the piles and shaking their heads. As they were getting ready to leave they gave me their estimate of what the liquidation of the company and the receivables would bring in. Needless to say, it was a lot more pessimistic than mine. Oh, and by the way, they said, we want to see a plan in two weeks showing how we'll be paid off--in full--within 90 days. Have a nice day.
All day long Judi, Peter, and Norm kept finding tools, parts, and equipment stashed all over the office--under people's desks, in locked drawers, on top of shelves. There was thousands and thousands of dollars' worth of inventory I hadn't known about. Out from under a desk came a padlocked toolbox that weighed 60 to 70 pounds. (Of course, I had no clue where the key was.) We used bolt cutters to cut off the lock. Inside was $250 to $300 worth of top-of-the-line hand and power tools. We found another padlocked toolbox under the operations manager's desk--again, no key. The bolt cutters took care of the lock, and more tools surfaced.
But the toolboxes were just the beginning. Digital vehicle detectors (which open gates when they detect the presence of a vehicle and which cost $85 to $90 each) appeared by the dozen. Two boxes of brand-new gate operators (worth approximately $500 each) were discovered. Brand-new keypads. Transformers. A public-address-system amplifier still in the box with its original packing. Circuit boards. Camera housings. And on and on and on.
Judi and Peter kept asking me, "Did you know you had this?" "Where did it come from?" "How much does it cost?" No, I didn't know we had it. No, I didn't know where it had come from or, more often than not, why we had ordered it. Yes, unfortunately, I had a pretty good idea of how much it cost. What a naÃ¯ve, trusting fool I had been! How had this happened? Why did we have thousands of dollars' worth of stuff I never knew about? Why? Why? Why? Over and over and over that day, I said to anyone who would listen, "Now you know why this company is going out of business. The owner is an incompetent moron!"
On March 24 the clean-up crew consisted of three men, four women and 15 children. That was my move-out staff. There was a $4,000 penalty staring me in the face if we weren't out by the end of the day. I tried to get an extension; the landlord said no. We went into super high gear.
Throughout the day the pickups and vans shuttled between the ADS office and the various locations where the records and other items we wouldn't (or couldn't) sell would be stored: a friend's basement, my house, Peter's carport. (Peter and his wife took all the salable "junk" to sell at a yard sale.) The bulk-metal salvage guy (whose company's name was Subtractions--cute) came at noon and took away a couple of tons of metal. He paid me $175.
The phone company called at 3 p.m., telling me it was going to turn off our phones--tomorrow! I pretended I was upset. "Tomorrow, you say? That's March 25, correct?" "That's right, Mr. Niemann," the stern-sounding operator said. "We're going to turn your phone service off tomorrow if you cannot pay the bill. Will you be paying it?" "No, I'm afraid not," I replied. "Very well, Mr. Niemann." (You could feel the chill through the phone line.) "Good day." Click. We'd made it!
The electrical contractor to whom I had traded the phone system (in lieu of some of what I owed him) disconnected the phones and pulled the phone-system control box off the wall around 4 p.m., right about the time the junk man (whose name was Woodrow Wilson--honest) was due. The real estate agent, to whom we had to turn over the keys, came right at 5 p.m. Judi unplugged the office clock exactly at 5 and took it off the wall. We were finished except for the loading-dock area, which was piled high, awaiting Mr. Wilson, who was late. I kept calling, and Mr. Wilson's wife kept saying he was on his way.
Finally, Woodrow Wilson and his associate careered around the corner in a 1960s-era flatbed truck of indeterminate make. The sides of the truck appeared to lean at a permanent 45° angle. Mr. Wilson backed up to the loading dock. "Start throwing it on," he commanded. On it went. An old refrigerator. Rusty shelving. Old motors. Bent pieces of conduit and wiremold. The last filing cabinet. (The rest had actually sold.) A desk. A couple of old desk chairs. An automatic sliding door. A piece of an old gate. Mr. Wilson didn't care what it was or how it went onto the truck.
The pile on the truck climbed up to the level of the side panels. Mr. Wilson commanded us to keep going. More shelving. Another chair. Cinder blocks. Broken bags of cement. The pile was two feet higher than the side panels, then three feet higher, then four. The panels threatened to split.
Mr. Wilson's truck had gone past "full" several hundred pounds ago. There was one more parts shelf. With the sun setting, the temperature dropping, a band of home schoolers fighting exhaustion, and a landlord waiting (fairly patiently) for our departure, Mr. Wilson wrestled the last parts shelf onto his truck. The load swayed dangerously as he and his associate strapped it down. The load was easily five or six feet above the cab of the truck and above the sides.
When Mr. Wilson finally chugged around the corner, my friends tried to find out which way he would be traveling so they could avoid taking the same road. No one wanted to be driving anywhere near Mr. Wilson and the detritus from ADS.
I hugged and thanked all our friends and their children. We'd done it! I shook hands with the real estate agent and turned over the keys. I walked slowly through the offices one last time. The space was very large and lonely and lifeless when it was empty. It was hard to believe that people--myself included--had spent thousands of hours there.
I walked out the front door, got into my car, and paused to look at the sign, which read "Automatic Door Specialists Corporation." For six years I'd been planning to add "ADS Systems" to the sign, and I'd kept putting it off. Now that was just another item on my long list of things I wished I'd done (or done differently). I was utterly exhausted physically and completely drained emotionally. I started my car, turned on the lights, and pulled away for the last time.
Home. What a wonderful place to be. I'm usually up before anyone else and typically go into my new home office to have my coffee, pray, and read the Bible. I love hearing the sounds of the children's voices as they wake up. Eventually, they "find" me and come in to give me a big hug. I adore their still half-asleep young faces, so full of life and wonder and joy. At some point, one of the girls usually says to the baby, "Let's go see Daddy," and the little 2-year-old guy comes trotting down the hall, opens the door to my office, yells "Daddeeee!" and runs in to greet me.
Spending the mornings with the children and Judi is a wonderful respite from the world in which I had been living. But there is a cloud hanging over my refuge. A white Ford Aerostar that hasn't sold yet is parked in our driveway. I personally guaranteed the note, and there is still $11,000 left to pay on it. The former owner of ADS and the former landlord are together owed about $60,000 and have my personal guarantee (which means they can garnish the wages from any job I might get). There is around $200,000 worth of trade payables, which I fully intend to repay somehow. And I still don't have a job.
But the good news is that Mr. Special Loans is history. With a loan from my parents, money from cashing in Judi's pension and life insurance, and a second mortgage on our house, we've paid off the Provident Bank. We also paid off the IRS and the state of Maryland, in full. Two months after we closed the doors for the last time, I can finally move on with my life.
In fact, we're packing to go to the same beach where we've vacationed for 12 years. We're going not to the house we used to own there (that was liquidated to pay down debt years ago) but to the house next door, rent free. The girls have new clothes and shoes, courtesy of Nannie (Judi's mom). Gas and groceries will be paid for from the proceeds of a big garage sale last weekend. (The people who came wondered why I had so many tools to sell!) The bread and canned goods we'll be taking come from a church food pantry in southern Maryland (donated, of course).
And, yes, I think I do know the real meaning of the word success.
Hendrix Niemann lives with his family in Edgewater, Md. As we went to press, he had just taken on a project with a Washington, D.C., company to develop specialized TV programming. And he had just sold the white Ford Aerostar.
Part One: " Buying a Business," Inc., 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."
Part Two: " The Rest of the Story," Inc., October 1991
When he wrote his second article, Niemann had owned ADS for almost two years. On the business side "there was never any money in the bank. We made payroll with $37 to spare one week....My personal financial situation was as bad or worse."