How is owning a startup business like owning a failing business?
I have been in a few of these places — meaning I have been able to say I turned a failing business into a success, I have had to close a once prosperous business that no longer could find a reason to survive in a changed world, I have been a part of startups that have become successful and a few that could never quite get off the ground. Also, don’t miss the key word ‘owning’ in the title of this story. The experience of owning is a much higher reward, and higher risk, proposition than ‘running’ or ‘working for.’
I do not, fortunately, get much hate mail but it does come in occasionally. This snip is from almost three years ago (cheap digital storage makes finding good memories and bad memories just as easy):
As a prior employee of both of your father’s legacies, Captive Plastics and Lincoln Mold, just wanted to say that although you may carry his name you’ve sold out any claim to his righteousness. Your father was a great man while you were just a bean-counter. — (name withheld)
A lot of people seem to want to be the owner and “boss” but few understand what that really means. For the Captive Plastics reference it meant either signing my name to the $800,000 personal guarantee in place to a very unhappy bank after my father passed away or having them simply call the loan that was already in trouble. From my perspective, with almost nothing in my personal bank account — what’s another $800,000 going to mean on the short ride to zero? Basically I was all in whether I wanted to be or not and one of the first things I did at the time was reduce my salary to $1,000 a year. Yes, that’s not a typo. Assuming a weekly pay, my pre-tax income was a stunning $19.23 a week — why bother? I still needed medical coverage and this was the best way for me to achieve that. For those that are unclear on the timing the unhappy bank and failed performance were in place before I took over the business when my father passed away — so, yes, my personal mourning period needed to be put on hold as well.
When Lincoln Mold got in trouble it was a much smaller business that, despite years of trying to pivot, could never seem to find a new path to profitability. During those years of no profitability I stopped taking any income from the business. Thankfully the successful turnaround of Captive Plastics gave me the ability to cover the over $1,000,000 in liability of the defined benefit plan. This was true even after selling off all of the assets of the business, including the real estate, and using those proceeds to pay down the debt. Writing this now I am realizing, just from the ‘bean-counter’ perspective, this situation was a lot worse in magnitude than the first one I was in nearly 20 years ago. With no hope of a turnaround I would have been living a much different life now if I did not have the bank account to cover that liability.
So what does all of this have to do with a startup business? A read on Quora seemed to sum it up when someone asked, “How do founders pay their bills after they quit their full time jobs but are still seeking for investment in their startups?”, Ivan Mojsilovic, CEO & co-founder at Yanado.com responded with:
1. eggs for breakfast every day
2. cheap coffee for lunch
3. eggs for dinner (if you’re tired of eggs, skip dinner)
4. no restaurants
5. no new clothes
6. no cars (public transportation or walking)
7. no sex (this was hard)
8. bills, what bills? (it’s sucks not paying bills, but what a hell)
You would be surprised on how little money you can live on.
…and Sam Rosenthal added:
9. When we want entertainment, we go to places with no admissions. Parks and friends houses. I never knew how many great parks there are in my area until we had no money.
10. If a vital appliance breaks, we (my wife and I) become that appliance. I am now an expert dishwasher with a John-Henry-like ability to outdo even the most advanced dish cleansing apparatus! Though I suspect using a lot more water.
11. Any new big items we make ourselves. I’m making my son his first bed because, it seems, the littler the bed the more expensive. Lumber is cheap.
12. Invest in caffeine drenched products. I get up early to spend time with the kids and go to sleep late dealing with household stuff (some mentioned above).
13. Become an expert at the budget. Luckily, my wife handles this. As the author mentioned for #8, sometimes people will be payed later because that’s the only option.
#7 is still somewhat of an issue given the general level of exhaustion for the both of us. However, we’ve had some luck with strict scheduling. Though this too may well not be enough when, for example, one of us falls asleep reading to the kids. Kids beds and rocking chairs can be surprisingly comfortable and the mate knows it’s just better to let the other sleep than to stick to an intimacy schedule.
You do all of the above and if you get it right — be it a startup or a turnaround — the rewards can be huge. Huge as in a large section of the population would call them unfair.
You do all of the above and if you get it wrong — be it a startup or a turnaround — and the consequences can be devastating. If Captive did not turnaround to profitability it would have been personal bankruptcy. Even if I managed to get out of that hole there would have been most likely no way to get out next one Lincoln Mold would turn into just 20 years later.
Either way, while you are doing it life is hard. You need to find someway to either like, or at least tolerate, getting punched in the face all of the time. I didn’t go the egg route but rice and boxed Kraft Mac & Cheese became my best friends. Vacation only happened when the flames went down low enough so there was only smoke visible — and with that only as far as the car could take you with a few hours of driving providing you did not stay too long. Bottom line is being in failure mode or startup mode is not a sustainable place to be. Yes, there are dim bulbs in the leadership sphere that try to live the highlife as Rome burns but let’s discount those special kinds of stupid for this story.
Circuit City was founded in 1949 and 60 years later it was liquidated in Chapter 7. In some ways a business is like a life — some days are better than others but everyday forward is also one step closer to your death. Business has the fortune, through the right leadership, to keep pushing the span of its life further and further out. Kodak, Polaroid, Blockbuster, Borders, Tower Records, Circuit City, Pan Am, DHL, Eastern Airlines, Lionel Corporation, RCA, E.F. Hutton, Compaq, TWA, Arthur Andersen, F.W. Woolworth Company, Enron, Bear Stearns, etc, all got into trouble for various reasons. (Did you know Foot Locker is all that survives from F.W. Woolworth Company?) What about companies like Wesabe, Color, Pay By Touch, SearchMe, Joost, Cuil, Boo.com, Reactrix Systems, Spiralfrog, Friendster, etc? The list of startups that fail is far longer than mature companies that go out of business but the main difference is they have not been around long enough for most people to remember who they were even though their history is far more recent.
Luck helps a lot and the brutal fact of entrepreneurship is its not for everyone. It cannot be taught, it is a tough road, and the odds are so much against you that for those who try most are self-selected out quickly. You need to be in a place of total responsibility for the outcome — be it good or bad — while at the same time have the brutal self awareness to know what you suck at and where, and how, to call in for help. If you catch someone doing it right, do take the time to thank them for making it past the odds and supporting the lives of the so very many they touch.
Hey there! Quick favor: if you click that heart button below, it means more people will see this story. Would mean the world to me. Thanks! ☺