Sunday, July 15, 2012

And then you....survive.

There are other elements to survival the article doesn't talk about. Probably only a mom-and-pop would know these, and they'd have no reason to talk about them.

I've constantly mentioned some of them: asking proper prices (not being afraid of a mark-up that makes sense), not getting too carried away with promotions and advertising (I'm swimming against the tide on this, since most advice I hear is the opposite), working the store yourself, and otherwise keeping the overhead low (the article touches on this, but I'm just re-enforcing the idea.) Keeping the store well stocked and diversified.

But there are two major elements that need to be talked about.

1.) Over-expansion (or over-extension).

Most of the businesses mentioned in the article were content to run their small businesses, but I know from experience that the temptation to get bigger is nearly irresistible in this country.

Someone told me early on that too much success was nearly as dangerous as too much failure. Which didn't make a whole lot of sense to me, at first.

But actually, my business suffered from this problem. Having 4 or 5 years of nearly exponential growth was one of the toughest things I ever had to handle.

Think about it. If you are growing double every year, you have to bring in TWICE as much product as you did before. If you are earning 40% margins, you are actually spending MORE money than you are making. And each year, this problem is compounded.

I ended up opening 4 stores (Sisters, Redmond, Mountain View Mall, as well as my downtown store) trying to service this explosive growth.

Then it all collapsed, while I was still in the red. My sales had grown hugely, but I was still deep in debt. I'd churned through a whole lotta cash but nothing had stuck.

2.) Having no other option.

So I just hunkered down and spent the next 7 years working every day, (except Christmas and Thanksgiving, and a couple days on average per year that my wife relieved me) getting by on as little inventory as possible, trying to get better margins, keeping my overhead down to as little as possible. (As an example, we combined our home and business garbage into one can, we cut every single service we had that we didn't need, I brown-bagged it every day, "Make it do, or do without; Use it up, or wear it out.")

All because I perceived that I didn't have any better options. Who knows? If I'd had money to fall back on, or a different job waiting, I might have made a different decision.

Economically, it probably would have made more sense for me to go bankrupt in the mid-90's. But, according to my accountant, there was no legitimate way for me to keep my business if I made that decision. (Yes, I see other businesses survive bankruptcy, but I'll be damned if I know how they do it...)

At the same time, I felt the store actually was solid -- without the debt. I'd wracked up my 10K hours of experience and more, and knew what I would be able to do if I could just get out of debt.

And, after those horrendous years, I think I was proven right. The store is pretty solid these days, and I'm so glad I hung in there.

I made the decision to stick with it, and did what I had to do to make it work.


H. Bruce Miller said...

I've also read somewhere that more small business fail by being over-capitalized than by being under-capitalized. Reason: The owners try to solve problems by throwing more money at them instead of working to find the best and cheapest solution.

Anonymous said...

Failure is pre-ordained, the racket is fixed. Survival post 3+ years is nearly impossible.

Success, do as dunc, ... no employees, pay your self min-wage, min-rent, have some kind of product that you can sell to tourists who forget to bring their scrabble-boards to town.

problem with all this bullshit is BEND is a tourist town, and much of the writing on this subject is about gentrification in a REAL live community.

Bend is just TRAILER-TRASH 'white' selling to trailer-trash from over the cascades. Survival? Means selling burrito's to the locals during the week, and beer&chips to the tourists on the weekend, and praying they forgot to bring their board games for DUNC.