The resilience of American entrepreneurs is not to be underestimated. In just this past week, I've heard from two business owners whose businesses were not able to withstand the recession. Both realized they could not survive and decided to pull the ripcord. In both cases, just in time, before putting a lot of personal assets at further risk.
Not surprisingly, this week's news is that both have landed on their feet and started new ventures from scratch. Owing partially to their own experience and partially to ideas, support and relatioships they've had in place through Chief Executive Boards International, both have brought new ventures to revenue generation and cash flow in record time -- less than a year.
One of these cases provides a number of lessons others wish they'd learned:
- First, that you need to protect your personal assets from getting dragged into the demise of a business. Unfortunately, I have multiple friends and acquaintances who violated that rule and let assets from qualified plans, such as 401(k)s, otherwise bulletproof even from judgements and bankruptcy, get drained down in efforts to keep banks happy.
- Second, that it's hard to start a business with no money (see item 1). In one of these cases, the new business started with a $300,000 line of credit to cover working capital needs on the strength of the founders' personal balance sheets. Not without risk, of course, but a lot different than liquidating personal assets and putting $300,000 cash at risk.
- Third, that bad times create opportunity if you have some dry powder. That same business found Class A space downtown in an NFL city at bargain rates. A larger company shut down its local office, and offered a sublease at 1/2 their primary lease rate, including all furnishings right down to the fax machine and water cooler! Even better, at the end of the remaining lease period the new business owns all those furnishings. Wow, talk about a fire sale!
If you've started a new business after a recent failure, please click "comments" below and share your experience with others.
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Terry WeaverCEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
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