On August 16, 2007, Matt Johnston met with the board of his staffing company, Workway. But it was hard to focus on the agenda. That morning, Countrywide Financial -- Workway's biggest customer, accounting for a fifth of its business -- announced it had tapped $11.5 billion in credit lines, stoking rumors of imminent bankruptcy. Johnston knew immediately that Plan A wasn't going to work anymore. Time for Plans B, C, and D.
I'm a big agenda setter, and I had one for this meeting. Countrywide wasn't on it. But in the days leading up to the meeting, there was a lot of concern. And it was no secret that the subprime industry was in trouble. Everybody wanted to talk about it.
We called our lead rep on the Countrywide account and got some data points. We always had a high level of confidence in Countrywide, but we had never seen anything like this, so you begin to doubt your position. At various points in the meeting, we would go online and check the stock and would just watch in bewilderment as it fell like a rock. We read some chat boards and got infected with anxiety, panic, some irrational thinking. But we tried to calm down and go back to what we knew.
We decided right there that we needed to put together a business plan to diversify out of subprime. We decided to start a health care staffing division. We acquired a software company whose product we reengineered to help large companies manage temporary workers. And we created a division that would target only large companies that need bulk staffing.
I started Workway in 2005. It was my second staffing company. I sold the first one, Title Temps, which also did staffing in the real estate industry. So I knew that real estate is very cyclical. When all of this started to happen, I thought, This is just another down cycle. But I had never encountered a business climate where everything completely changed overnight.
In August, our business started going down; in September, it went down more. Then, in October, we had our best month ever. It was a complete anomaly. In November and December, the decline accelerated, so we had to act quickly. We closed seven offices and laid off 25 people. Some of those people were completely dependent on real estate staffing, which evaporated for six months.
It was the first time I had to lay off this many people, and it was horrible. As founder, you want to believe that you can make it happen for everyone. But there's a point where you look in the mirror and realize what's in your heart and what's in your mind are not the same thing.
What made the layoffs so hard is that we have fun here. Everyone works really hard, but we like to enjoy ourselves whenever possible. We have a party for everyone's birthday. And the day before every major holiday weekend, we have a potluck. Before the July 4 weekend, we had one with an '80s theme.
We eventually lost all of Countrywide's business, but I never specifically felt any disdain toward them. I've worked with them since 1997, when I was launching my first company, and have respect for everyone there I've worked with. Still, it was a really good business lesson: No customer should be more than 10 percent of the business. If one is, you'll always be exposed.