What we can learn from the Scribe Media “shut down” and layoffs

Last July I found myself a few pay periods away from the kind of shut down and layoff that just occurred at Scribe Media. (Note: it seems they have not shut down, but “slimmed down” and will continue operations with a much lower headcount, while they look for a buyer.)

It was terrifying, and I made it through and lived to tell the tale as the CEO of a now once again thriving Company (rather than out of of business) because I royally screwed it up back in 2010, didn’t survibe, but learned the right lessons to apply this go round.

Now, I share them with you so you can do it better.

Much like Scribe Media CEO JT McCormick did a couple of weeks ago, back in 2010, I let almost everyone working for me go with no no notice, and did it so poorly that I lost many of my customers in the process as well.

Fortunately, my Company was much smaller than Scribe Media, and it only impacted about 7 people, not 80.

But, for those 7 people, it was bad.

What was going on behind the scenes is that I had gotten in way over my head. My overhead was about $70,000 per month, I was about $300k in debt, and I felt lost and confused.

On the outside, it appeared I was “killing it” — big house, best-selling book, fame in the form of appearances on TV as a family, financial and legal expert — not unlike JeVon, in many ways.

But on the inside, I felt a massive burden that created a disconnect between me and my team, and my clients. I was crumbling, and on the advice of a coach I was working with at the time, I hired an interim CEO to come in and help me.

The first thing he did was tell me to fire just about everyone working for me, cut my overhead, and regroup.

So, I did. And I did it badly. I got the opportunity for a do-over of sorts in 2022, and instead of collapsing, I rose with most of my team intact.

Today, the Company is back on track, hitting its goals, has a far more effective and aligned team, and is serving our client base with a level of excellence that has me excited for the future.

I’m writing this article now as a lessons learned guide from my own experience, and from reading between the lines of what I’ve seen published about what happened at Scribe Media.

This article is written through four POVs, take them for what they are:

1. As a business leader, Scribe’s debacle touched my greatest fear, and it brought back the intensity of the feelings I felt twelve or so years ago, when I made a similar decision, albeit with a much smaller company and impact.
2. As a Scribe client with an active project, I wondered what would happen to the work we are doing together and whether I needed to take fast action to not lose my investment. If you were a Scribe client, you may wonder the same.
3. As a teacher of “Eyes Wide Open” life and business resource management, I am concerned with the lessons I see people taking away related to managing their own resources — what happened with Scribe is not a lesson for not taking on debt. It’s a lesson of many other things, but not that.
4. As a human, I have compassion for JeVon McCormick, the (now former) CEO of Scribe Media, and a prayer that he learns the right lessons, and that I can look at what’s happening here and learn the right lessons as well.

I process and learn through writing, so let’s see what we can all learn from the debacle at Scribe Media, and use it as a collective wake up call for leadership. JeVon, if you read this and want to talk any of it through, reach out — we have friends in common, and I’d be happy to connect and support you to process this experience so you can come out the other side with more access to your heart and soul.

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Lesson #1: Get Vulnerable

The fear of running out of money and having to fire everyone is (or should be) the greatest worry of every business leader. When we think about the fear of failure around starting or growing a business, what is it really a fear of exactly?

A fear of not being good enough. A fear of not knowing how to [fill in the blank]. A fear of letting people down. A fear of humiliation.

Underneath all of that is the fear that people will rely on me, and I will let them down.

If I was good enough, knew how to [fill in the blank], then I wouldn’t let people down and I wouldn’t be humiliated.

I’m breaking that down for you because if you can see it, first of all, you can have compassion for the CEO of Scribe, JeVon McCormick, who is almost certainly going through an ego death of epic proportions given how much he seemed to care about being seen as a great leader, a conscious leader, and a CEO who prioritized a great company culture over profits.

When I think back now to how I could have done it differently, and perhaps what JeVon could have done differently here, I would have had to get a lot more vulnerable with my clients and my team.

I didn’t have access to vulnerability back then.

Vulnerability felt like weakness, which didn’t seem allowed in the world of business.

I didn’t know how to be vulnerable and powerful.

And, the truth was too hard to share without knowing where it was safe to share it, or how to do it.

So, I let my tears and fears out to my business coach and my interim CEO, but neither of them had the life experience or the emotional range necessary to guide me into the kind of communications I could have been making that would have potentially avoided the degree of pain I created for myself, and my team, and likely my clients as well.

How I (and perhaps JeVon) could have done it differently.

I wish I had gone to my team and said, I’m in over my head, I’m scared, and I need you to help me figure out what to do. Instead, if I did go to them at all, it was likely with blame, finger-pointing, and panic. From some of what I’ve seen written by former Scribe employees, there may have been a similar culture at Scribe.

Lesson #2: Watch the Numbers

A few years ago, I handed over financial and operational control of my Company to my COO, and the CFO he hired. We had begun to hit revenue numbers I’d never been at before, and I hit up a lack of confidence in my own financial management abilities, so I gratefully let go and focused on creating instead of managing.

They turned off the financial systems I had created, and began to implement their own. We had plenty of money in the bank, and they seemed to know what they were doing, so when the refused to report on the financials using the systems I had created to keep a close eye on the numbers, I acquiesced.

I didn’t trust myself. I thought that maybe what I had created was only necessary for $1–3M/year Companies, and that now that we were getting into the $5M+ range, it wasn’t necessary.

I was wrong. They were wrong.

The financial systems I had created were more important than ever.

After we missed projections two quarters in a row, I realized that my private clients had better financial reporting than I did, and insisted they work with my personal CFO (who my COO had fired when he came on board) to rebuild the financial reporting and cash flow management systems that had been dismantled.

By May of 2022, about 6 months after I first asked for it, I got my first look in to what very quickly showed me we were in trouble.

We were going to be out of money by September, and approximately $350k had been spent with a single vendor with no controls on the contracts my COO had signed.

I had made a big mistake.

I believed they knew better than I did, took my eye off the financial management, and we were tanking.

This article reported that Scribe used open book financial management, but I haven’t been able to verify how they reported their financials. It does appear there was some view in, at least abstractly.

An anonymous Reddit post from a former Scribe employee wrote:

“The truth is that Jevon was always in over his head. Scribe never had a CFO because Jevon kept insisting that we didn’t need one. But his decisions about money were so erratic and set off alarm bells for many of us.

Scribe’s last profitable month, as far as I could tell, was January 2021. In 2022 alone, the company lost somewhere in the ballpark of $3 million and revenue was down by a quarter. By March of this year we were losing $800K a month. Meanwhile, payroll doubled from 2021 to 2023 and JeVon decided to double the office space (rent is $100K a month). He also seemed to spend a lot of money on his own personal branding/marketing. At one point, cameras were following him around the office.”

Reading financial reports can be complex and confusing, even for the best CEOs, especially if they aren’t being reported in a way that breaks it all down in very easy to read and understand ways.

The way my CFO was reporting our financials prior to May of 2022 made it nearly impossible for me to see what was really going on, and what would need to happen to fix it.

It wasn’t until I had our financial reports reconfigured into the 3-year roadmap I had designed that I was able to see what I needed to see.

Thanks to my ability to look at the numbers in time, I was able to fire my executive team and take back control of the Company in time to turn things around. If I hadn’t, I would have run into the same unforeseen business circumstances and unavailability of capital that Scribe reported to the Texas Workforce Commission.

Instead, I was able to see what was coming, get vulnerable with the team members I needed to get help from, and ask for help so I could do the hard things I’d need to do.

Today, we’re on track for 2023 to end with 10% profits on $10M instead of the 13% loss we had on $7.5M in 2022 (yes, that’s a $1M loss in one year). And, while I still need to rebuild reserves — and, yes, we are using debt + a coming capital raise to do it — we are on the right track, and watching the right numbers.

How I (and perhaps JeVon) could have done it differently.

I should never have given up control of the financials the way I did. I’m not sure what JeVon did to let the financials get as out of control, as they did, but my guess is that he was managing his money with some serious blindspots, inaccurate or incomplete reporting, and a whole lot of trauma in his system, leading to emotional and non-logical decision-making. This last part, I’m reading between the lines based on only surface information I’ve read about his upbringing from blurbs about his book (which I have not read yet) and comparing his childhood to mine, and the financial trauma that my childhood left me with, which I’ve had to contend with as a CEO, personally.

No matter what size Company you have — and even if your business is tiny — get a weekly financial report that indicates how much you have in the bank, how much is available on credit, how much is coming in, and how much is going out plus any unanticipated or one-time extraordinary expenses coming up.

Monthly, I recommend you review your P&L, detail level with your bookkeeper, controller if you have one, and a financial analyst or CFO. Your P&L will tell you if you are profitable, or operating at a loss, and you can look back at comparisons to the prior months, plus identify whether you are properly forecasting for the future months. If you aren’t, you can adjust your intentions/goals, and actions + team in time to get back on track so you don’t run out due to unforeseen circumstances.

During my time of being what Ben Horowitz calls a “war-time CEO” in his book The Hard Thing About Hard Things: Building a Business When There are No Easy Answers (which I read in the bunk bed of my RV during Burning Man this year — yes, I considered not going, but the cost going, other than my time, had already been sunk, and it turned out to actually be an important trip for the business as I got to coalesce the next iteration of my leadership team and speak with some of the best business coaches I knew about what occurred and what I should do next), I looked at my forecast and my numbers daily. Now, I’m back to weekly for the financials because our key metrics are on track.

Lesson #3: Take on More Debt, Not Less

Part of why I invested the energy to write this article is because I saw a dear friend writing on LinkedIn about #ScribeMedia, and her takeaway was:

I am dedicating the rest of this year to eliminating my business and personal debt so that I can build reserves to protect myself and my team from the tidal shifts inherent to any industry, and so that I can continue to serve my clients at the highest level.

No, no, no. This is not the right lesson for a small business owner to take away from what happened at Scribe! Please do not make this the takeaway.

Credit is a great way to establish reserves, especially if it’s available, untapped credit that sits in the background and costs you nothing to have available as your reserve, so you can put your cash to use to reach more clients and grow your bandwidth to serve your clients.

It’s easy to jump to the conclusion of demonizing credit, but this is one of the things that gets small business owners in the most trouble … our incorrect understanding and use of credit.

My friend came to the conclusion she did because the reason given for the shutdown of Scribe was “inability to access capital.” But this doesn’t mean we shouldn’t take on debt.

It means we should access all the capital we can, in as many forms as we can, before we need it.

Y’all — apply for all the business credit you can, now.

Learn to use debt wisely, so that when we are using it, we don’t get caught off guard that we’re going to run out of money before there is time to take calm and rational action, rather than reactive action because we ran out of money.

How I (and perhaps JeVon) could have done it differently.

The way I handled my leadership challenges in 2010 ultimately led to me choosing to file bankruptcy in 2012. Back then, I thought it was because I ran out of capital. But, now, I can see it was because I ran out of clarity.

With awareness, we almost always have more choices than we think we have. My guess is that JeVon was collapsing under his own insecurities, making poor investment choices — for example, purportedly spending $100k/month on rent of a physical space — and scared to share what was really going on internally with those who could have supported him to see what was in his blindspots before Life had to give him a 2x4 upside the head for him to see.

That leads into the 4th, and maybe most important, lesson I’m going to be processing the most for myself.

Lesson #4: In Times of Financial Challenge, Don’t Invest in Ego — Invest in Client Acquisition + Service

I’ve invested quite a lot of money over the years in various endeavors that have boosted my ego, but when I look back with hindsight, they may not have done much more than that.

At the time, I believed these investments would help to grow my business. But, were they the laser-focused investments that brought me clients and helped me serve my clients better?

The right investments at the wrong time are the wrong investments.

For example, I invested $25,000 on a PR campaign when the first edition of my book came out. It got me on the Today Show, and then $10,000 in a radio campaign when the 2nd edition came out, and that got me about 10 radio interviews.

Investing in PR then was wise because I had a business that could capture the lead flow that came from it, and direct it to the Personal Family Lawyer firms I was serving.

Contrast that with the $15,000 I invested in a PR campaign a few years ago, when I didn’t have a book coming out. My message was unclear, and I didn’t have any real way to monetize the PR.

With hindsight, I can see I invested in the PR campaign so I could clarify my message and boost my ego when I was in a time of questioning my value and impact. If I could have acknowledged my ego needed a boost, I could have used that $15,000 to hire a messaging coach or even a business therapist, rather than on a PR campaign that didn’t actually support my business at the time.

Similarly, I invested $25,000 in a team that promised to help me bring my work online in 2006, but because I wasn’t ready for it — I was trying to serve the wrong audience, and they didn’t help me see that first and foremost — I left every call more confused than the one prior. Bad investment.

Right after that failure, I invested $30,000 in a business coach who helped me clarify what I was selling and to who, and then helped me successfully ell my first online program. And, because we started with the fundamentals, we created $250,000 in 6 weeks together. Good investment.

All that to say, the right investments at the wrong time can be bad investments.

When I look at the call-outs from the Scribe team about the investments Scribe Media made in JeVon’s personal brand …

Personal memoir style books, acquiring significant media around himself as a great CEO, and one team member reported him hiring a documentary film crew to follow him around the office. I get it. I’ve done it. And, while I don’t regret it because the footage is extremely valuable from a nostalgia perspective, it never did get made into anything that will serve my business.

These all seem to be ego-boosting, and not business boosting investments, and shouldn’t have occurred without making sure the Scribe Media business fundamentals were working first.

Perhaps those investments paid off by making it appear the Scribe was a great place to work, and that allowed Scribe to acquire great talent. And maybe those investments even got Scribe customers.

But, without the financial fundamentals to support the costs, were they the best place for JeVon to be focusing the Company resources? Seems not.

How I (and perhaps JeVon) could have done it differently.

Don’t get sucked in by the ego-boosting investments, like “ripple of impact” until you have the solid business fundamentals needed to make “return on investment” from your “ripple of impact” clearly. Once you do, go ripple of impact all the way, but first the fundamentals.

What’s fundamental?

• A high value service or product that makes a positive impact for the people it serves, and the capacity to serve.
• One or more marketing channels to reach your customers, and clear goals to reach your results — this means you must know WHO you serve, a step so often skipped.
• A sales process for engagement and enrollment with a high conversion rate that you can track.
• A financial model to track all of it, and ensure you are charging properly and that your investments in all of the above are paying off.
• A team to support it all.

After you’ve got all that in place, invest in all the ego boosting you want. It can be lots of fun, but recognize it for what it is.

I hope my processing of the Scribe Media “shut down” and lay offs help you make sense of what happened and lead you to more “Eyes Wide Open” decision-making. If you see more than I’m seeing and want to share it, or have questions about anything I wrote here, please message me or leave a comment.

For my macro view on how to make Eyes Wide Open decisions with the resources you do have and find hidden resources you may not be aware you have access to right now, get my video series: “We Create the Economy” here. It’s free.