When a marketing initiative fell through, my husband and I were left holding hundreds of thousands of dollars in inventory. Here's how we turned things around.
I have yet to meet an entrepreneur who hasn't asked herself the questions: "What the hell am I doing?" and "How in the world did I get into this situation?" According to the SBA, only 33 percent of businesses survive beyond 10 years. Sometimes, one might wonder: If the odds are so stacked against me, is it even worth trying?
At the five-year anniversary of my company, Heritage Link Brands, our biggest marketing initiative of the year fell through. Just a few weeks before it was to begin, our customer, with whom we'd partnered to do the initiative, furloughed 2,000 employees, affecting its ability to execute the very program we spent months working tirelessly to execute. Overnight, my husband and I were left holding a bag of inventory worth hundreds of thousands of dollars, with no clue how we were going to pay our suppliers or staff. Our pillow talk was spent discussing how we could reshuffle funds to cover day-to-day expenses like our mortgage, child care for our two children, and student loans. What a brutal time!
Thank goodness everything worked out, and our company is stronger for the experience. But trust me when I say it was tough.
In the spirit of learning from my hardships, here are some tips on how my company decided to trust ourselves to "know when to hold 'em; know when to fold 'em:"
- Reach out to trusted advisors: Ours (many of whom had been in our situation before) coached us on how to manage the difficult-but-frank conversations that we had to quickly have with our staff and suppliers as soon as we knew we wouldn't be able to pay our debts in time.
- Communicate! Often times this may require eating a few pieces of humble pie. In our case, we were very candid with our customer about just how serious the implications of their action (or lack thereof) was to our bottom line. Depending on how they respond, you'll quickly know just how much or little they value your service or product (and relationship). In our case, they committed to making good on the failed program. But sometimes it's when the rubber meets the road that you find out whether or not you need to cultivate or quit your customer.
- Swipe your credit cards: Yeah, I know this sounds counterintuitive, but as a result of the economic downturn, we knew the prospect of getting traditional funding was bleak. While there were other finance vehicles we could have explored, their interest rates were higher than we wished to spend and not as attractive as leveraging low interest consumer credit cards my husband and I had available.
- Come to grips with making hard choices—quickly! It's never easy to lay off people, especially when you recognize just how deeply the effect will be felt by your organization. However you have to be ready for anything when it comes to sustainably managing and operating a for-profit business. If you don't take decisive measures (i.e. becoming more efficient when expenses spiral beyond the revenues to support it), it could result in the loss of the entire enterprise.
- Call on your passion to see you through. Never have I read where starting a business would be easy, and chances are you haven't, either. You likely knew this would be a hard road even before you decided to take the plunge. So take an inventory of "why" exactly you decided to get into business for self in the first place, and see if those same reasons still apply. Every amazing entrepreneur I know has honed two difficult skills: 1) the ability to make mountains move to save their business, and 2) the ability to walk away from a business in which they are no longer passionate. Passion can save a business that others may have thought had no chance, just like compassion can save entrepreneurs from forcing themselves to stay the course with a business, even after they realize that is not the best decision.
Weekly wine tip: To soothe the anxiety of difficult decision making, indulge with the 2006 White Oak Syrah. With silky texture and smooth tannins, you know exactly why Wine Enthusiast gave this fine wine 91 points!