Confessions of an Entrepreneur's Wife

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The talk about a new life lasted about two weeks.

On November 15, 2005, the board of The Switch declared Chapter 11 and fired other key employees. The bankruptcy court set a date of January 23, 2006, for an auction at which interested parties could bid for the company.

Was Bill an interested party? Shareholders, creditors, and investors were asking him to buy back the company, and he decided to try. He stayed in touch with his former management team, found backers, and started negotiating terms on funding a buyout bid.

In the weeks after the bankruptcy, his team (including one of our friends who had invested) worked at our dining room table, huddled around the phone for teleconferences. Bill talked with several investment groups. It reminded me of the early days when his small start-up group gathered there, working on the business plan and packaging.

When I think about those start-up days, I realize I've given up far more than I had planned. Years of writing, of books and magazine articles I could have published. I lost a friendship, an airplane, a lot of money. I sacrificed years of socializing that could have sparked new friendships. I lament the toll on Bill's health, and Lily had no choice in giving up precious years with her father.

What I got in return was, ultimately, a closer relationship with my husband and a deeper understanding of what drives him. I learned invaluable lessons about the nature of friendship, and about my own emotional abilities and limits. I learned to live in the moment, not to hang my dreams on expectations. I relish the time I have spent with Lily. I got three glorious summers in Mexico, where Lily and I became fluent in Spanish, something we never would have attempted had Bill been more available for family trips.

The week before the bankruptcy auction, Bill still hadn't reached terms with his backers, so he didn't know whether he would bid at the hearing. I was tense, but Bill was surprisingly cool. "Hey, I tried my best," he told me. Intellectually I knew the value of his experience; I had written stories about CEOs who lost businesses and the critical lessons they learned. But this was hard.

Did I want Bill to win the company back? Or let someone else buy it and just consult with the new owner during a transition period? Or turn his back and not even make a bid? Each option held its risks and benefits.

My first reaction was that I wanted him to win, to take his company out of Chapter 11, rebuild it, and sell, just as he had always planned. I wanted our dream to come true. But then I thought about the price. Could we survive another year of what we had been through? What I truly wanted, I realized, was my husband back. I wanted him to stay the relaxed, happy guy he had again become. Maybe he had learned enough now to be that man and an entrepreneur, but I wasn't sure.

The bids were due the Friday before the Monday auction. Bill started looking into the court filings. He learned that in the three months since he had been gone, sales had dropped drastically, from 35,000 cases per month (half a million in revenue) to about 10,000 cases ($150,000). He wondered what less-obvious things had also been slipping. He debated about whether the company was even worth buying.

By then he knew that only one party was certain to submit a bid--Luther King Capital Management, the investment group that had put $800,000 into The Switch but didn't deliver the additional $700,000 Bill had expected. LKCM was working with the final two members of the Switch board.

It was galling. In 2004, Bill had been exploring the possibility of selling the company in an IPO. It was in part because of LKCM's pledge that he dropped the idea.

Bill decided not to give up. At a hearing on Friday morning, he asked for a two-week extension to pull together his bid. The judge turned him down. Bill got on his phone. By the 5 p.m. deadline he had enough investors to file. By Monday morning he had the high bid of $2.4 million--some of it cash, the rest of it equity for creditors.

The creditors' attorney was not impressed. He spent Monday asking the judge for delays while negotiating with both bidders. At 6:45 p.m. he recommended that the judge take the other bid, saying Bill's was too late, too complex, and not presented on the official forms.

After deliberating in chambers for half an hour, the judge awarded the Switch Beverage Co. to Luther King Capital Management for $1.166 million. Earlier, Bill had taken the stand to testify that LKCM's bid severely undervalued the company, and argued, as others had, that LKCM had planned the bankruptcy all along. "What evidence do you have?" countered LKCM's attorney. "Well," Bill said with a laugh, "all the testimony we've heard here in court."

LKCM and the new management of The Switch declined to comment for this story. When Bill was struggling with the board, however, he was told that his spending was at the heart of the company's trouble.

From the day Bill started The Switch we knew something like this could happen--I kept saying that on any given day we could be millionaires or bankrupt. He didn't choose to end the dream this way, but even he agrees that by the end it was sucking too much out of him for too little return. We're better people, and a stronger family, for what we've been through. And that's a good thing, because I'm betting that before too long, Bill will decide to do it all again.

Phaedra Hise is a former Inc. staff writer who now writes about business and aviation from her home in Richmond, Virginia.

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