Keep your head out of the sand

When the economy goes sour and our business affairs turn against us life can get downright scary. Instead of dealing with the root cause of our problems it’s often easier to strike a course down the dead-end river of denial where certain catastrophe awaits. Whether we’re driven by fear, ego, stubbornness or all the above, the longer we postpone addressing our problems head-on the worse they will get. Following is a case in point. I’m sharing this story with you to hopefully spare you from making some of the same mistakes.

In the late seventies I found myself in an entrepreneurial business venture that my partners and I thought was the venture of a lifetime. It looked good, so good that in the early stages we were concerned about how we should shelter our earnings. Tragically, in just a few short months from startup our hot new darling enterprise imploded with the white hot intensity of a nova dwarf star. Crawling from the wreckage was painful and costly. It was also a blessing in disguise; a damned good disguise, but none the less, a blessing because it taught me about life after death. The lessons learned in dying are invaluable and the life that invariably comes after death brings insights that only walking through the valley can bring.

I once read that 90% of the people that start businesses fail within four years. I’ve also read that 97% of the people that try and fail are successful the second time around. Sadly, most people that fail never muster the nerve to take a second trip to the mountain. Instead, they take their valuable, hard earned experience and disappear into the shelter of the nine-to-five herd.

Why did our business venture of a lifetime fail so miserably? In looking back, I have to say that it was my fault! I sensed things were not right but I was afraid to face the truth therefore I played ostrich and conveniently buried my head in the sand. Granted, my partners shared some of the blame but there is no salvation in blame. The main thing I learned from surviving a major business failure is to take responsibility for problems early and act decisively and quickly to fix the problems.

I was in charge of sales and sales were booming. When things started turning sour, instead of taking the initiative to call a meeting with my partners to analytically delve into the reasons of why all was not well, I naively and conveniently assumed that more sales could fix the problem. Instead of insisting we look into manufacturing cost efficiencies, raising prices, discontinuing unprofitable product lines and thereby eliminating the associated personnel I ramped up the sales fleet and we hired a night shift.

As I later learned, this was wrong, wrong, wrong! I learned you can’t sell yourself out of every situation. We didn’t need more sales, we needed more profits! What was needed to stop the bleeding was hard core analytics of our complete product mix and immediate, old fashioned, non-headin the-sand leadership to correct the problems.

Had we had comprehensive bi-monthly profit and loss statements, trend statements, cash-flow reports AND taken the initiative to set ego aside and act on the problems as they emerged, the venture would be thriving today.

We also waited too long to take advantage of bankruptcy reorganization laws. Bringing a business under the protective umbrella of bankruptcy to buy time to reorganize can be a wise move if done early, before irreparable harm has been suffered. Bankruptcy protects you from creditors, eliminates a large portion of debt, offers a way out of leases and even offers a certain degree of protection from the IRS. Taking a business into bankruptcy to buy time to reorganize and survive is a valuable tool that shouldn’t be overlooked by any serious entrepreneur. Unfortunately, like seeking the services of a marriage counselor, by the time most couples do so it’s too late. (I should note that I am not an attorney).

It is imperative that we have accurate and expedient financial reports to operate our businesses. When times get tough, as they currently are, it’s also imperative that we deal with our challenges head-on and resist the actions of the ostrich.

Ernie Mitchell, Moose Lake Hill, Orr, MN, © All Rights Reserved 2010.

Ernie Mitchell’s “Ten-Second-Tip”:

If your prospect doesn’t believe one part of your sales presentation or ad, they won’t believe any of it.