Long before JAY Z ruled the worlds of music and business, Greek Philosopher Plato dropped this: “A good decision is based on knowledge and not on numbers.”
Sound business decisions are based on complex financial analyses and projections, right?
And also. . .sometimes, no.
I work with Business Owners armed with data on everything about the state of the company — but nothing about what they should do next.
Two Business Owners approached me a few years ago. Together, this husband and wife team had slowly grown their small local service business into a 20-employee companythat grossed nearly $3 million per year. They had customers across the country and owned a beautiful home, cars, and even had a cool shooting range in their back yard.
Then, suddenly, they lost their biggest client, and revenues quickly dropped under $2 million per year with no relief in sight. And they did nothing.
By the time we met, they were buried under $2 million in debt. Their bank line of credit was maxed out, they were way behind on payables to their suppliers, and their personal credit cards were perilously close to their limits.
Because they had refused to have difficult conversations with each other and their employees about lifestyle changes and company downsizing, their out-of-control beast of a company was close to putting all of them out of work.
“I don’t see a light at the end of our tunnel,” the husband told me. “We’re ready to close the doors. File for bankruptcy. Personal and business.”
Through her tears, his wife whispered, “Our employees are going to be left jobless and broke, possibly even homeless.”
Nearly half of their staff lived in depressed areas, so I knew the picture she was creating in her mind. Unemployment lines and missed meals for the children of her beloved employees.
Unfortunately, her big heart was partially responsible for the crisisthe company faced. By fearfully avoiding the difficult “we’re going to have to let you go” conversation with a few employees,she had unintentionally put all the employees, her business and her own home in jeopardy.Instead of downsizing slightly and seeking new business opportunities, she faced bankruptcy and an uncertain future.
I reviewed the past several years’ worth of tax information, P&L statements, and expense reports. I scoured the bank reports for any sign of hope. Sure enough, the data spoke loud and clear: Shut. It. DOWN.
Back to Plato.
There was more to this than data.
I needed to initiate a difficult conversation.
“The problem you’re facing is not the loss of your biggest client,” I said. “The problem is…you.Both of you.”
I let that statement sit for a minute, just enough time for awkwardness to give way to admission.
“Yeah. . .” They both sheepishly nodded. “You’re right.”
“And that means the twenty people who are not guilty of wasting resources and backing away from responsibility must not suffer; if we can help it,” the wife said. Her husband somberly nodded his head in agreement.
“I know how important your employees are to you, and I have a plan that will allow your business, and most of the jobs—but not yours—to be salvaged,” I explained.
My plan involved the Owners keeping their home and most of their assets. I engineered the sale of the company to a key employee, who was better equipped to bring the company back from the brink.
I continued to work with the buyer, and today the company is back over $2 million in annual revenue with less than $300,000 in debt, all of which is in a revolving line of credit.
The business is in good standing with the bank, all suppliers are current, and many of the original employees never missed a paycheck.
Within 24 months of the sale of the business, the new owner reached substantial profitability by stripping away unnecessary expenses, and is now working to acquire a struggling business in the same field to expedite growth the next level.
None of this would have come to pass if my eyes remained on the data alone. By observing behavior, I was able to guide the old and new owners down a path that salvaged jobs and relationships, while creating a new, successful business.
If I hadn’t had the courage to confront the owners with the truth about themselves and the only solution available, this story would have had a much different ending.
They had to face some difficult truths, and did so with courage and grace. The life of a business owner is littered with mistakes. We all make them. What’s important is to learn the lesson and move forward. Having a coach will help, but you’re the one who must do the heavy lifting.
I opened with Plato, so I’ll let Jay-Z bring us home:
“The way to redeem your past is not to run from it, but to try to understand it, and use it as a foundation to grow.”