People who've experienced business failure: What do you do now differently, to what you did before?

[Karimbo]

Share your stories.

 

[fisicx]

What’s your story?

 

[JEREMY HAWKE]

What’s your story?

Well there was this one time on a camping trip....

 

[Mark T Jones]

It's a great question - as above, an insight to your own story would help too.

For me- it depends how you define failure. I have a few dissolved companies, most of which are things that didn't quite go to plan, but have fizzled out without debt or drama (there was a bit of drama in one, but it was between 2 other shareholders, not me)

In my mind, the real failure was in my current business - which was trundling along, making money (just) but which I had come to detest in many ways.

So I took a huge step back and went out driving vans for a living. I told myself that was it - that I would become a van driver - but the fact that I kept the business live (just) suggested otherwise.

Whilst driving I did lots and lots of thinking 18 months later it hit me what was wrong and what I should do. It was absurdly simple - stop trying to do everything and become a 'go to' expert in one thing.

It's a mantra I preach loudly and adhere to (despite temptation to go off at tangents) to this day

 

[The Byre]

Everybody has experienced business failure - those who have not are either not telling the truth or did not really have a business. My first proper attempt at a business just slowly petered out under an unsustainable debt burden.

What do you do now differently, to what you did before?​

I avoided all debt like the plague!

Yes, it means slow growth - unless you have a business that does not require capital. But too many businesses require a constant topping up of capital that turns into a private Ponzi scheme. The business owner(s) are both running and victims of their own Ponzi schemes - just as the banks in 2008 were!

Since then, debt is at new all-time highs and this Summer should see the beginning of the debt collapse.

 

[MBE2017]

Had several businesses, market trading for just over a decade, started with £50, never borrowed a penny, went full time on it after three weeks. Eventually had 8-10 markets on the go, plus three shops after three years. I eventually saw a change happening in the sector and sold the shops to one competitor and the market stalls to another.

Also had my own small removals, courier company for a decade, used my old market van to start with and it was going great guns until I got RA, so I sold my company to a competitor who just happened to approach myself at the right time. If it wasn’t for my RA I would still be doing the driving.

Have always had direct sales teams working for myself for forty years, it is beginning to die as an industry as the internet takes the bulk of sales.

Recently came out of retirement to start in property development three years ago, now I just sub contract all works out.

I have no debt, never had any, my wife’s family lost everything to debt and got myself to promise it would never happen to myself. It has slowed myself down at times, but not that much.

My biggest piece of luck is having a 100% supportive wife and family, who just let myself do what I like. My wife ignores my “training” holidays away, my not being in a secure job, allowing the freedom to experiment and have fun.

What would I do different? Nothing I can think of.

 

[Carbtec]

I built my first business into a very profitable commercial painting & decorating Co', employing 60+ contractors.

Then, my first wife decided she didn't need me anymore. So I walked away & in my depths of depression took my solicitors advice & gave her 'everything'.

Best advice I ever listened to. Because it was ME who built that Co' & she just did the books. So I started all over again without her, built another very profitable painting & decorating Co' & took all of her customers & staff off her. Within 2yrs she was bankrupt & could no longer afford to maintain the lifestyle she thought she was entitled to.

 

[Karimbo]

What’s your story?

Sorry I intended to write my story in the opening post but had a nature call so had to just dump the post.

I intended to come back but forgot about it. You can edit this into the OP if you'd like. I out of the wediting window.

I haven't had a major catastrophic business failure or anything. But I have had a business that was just pottering along unremarkably for a very long time.

The business wasn't scalable and I would have had a hard time hiring staff to replace my roles in the business without a substantial amount of capital. It was a events IT equipment rental business and very inexpensive to do by myself in my MPV out of self storage units. But to grow the business it would have been quite difficult to do as it would require a HUGE step up in capital investments to hire the staff, vehicles, storage facility etc.

I was never on top of the accounts, I felt that I earnt more money than what the year end accounts showed.

After doing this for years, I got nowhere with it. I felt like I wasted good 10 years from my late 20s and early 30s just hacking away at a poor business idea. I think I learnt to be very critical with business plans and be realistic, be realistic not be a dreamer.

I am now doing ecommerce in a business I really enjoy. I see constant perpetual growth month by month and my earning potential is a lot higher just doing it by myself. When I need to hire staff it won't require a huge step in investment.

It's a lot more scalable, with IT equipment rental, I was booking in work, invoicing customers, and then delivery & collecting equipment on the road. Parking up every 25-30 minutes to check my email to deal with enquiries. There was a cap of max £6000 I could make in a month before I am overwhelemed.

With ecommerce I can process up to £18000 profit in a month, before I need to hire someone else.

 

[Scott DLE]

I really like that people are saying stay away from debt. I’m at a crossroads myself where I am tempted with HP on asset equipment, I can manage without it, but the temptation is always there. Especially when similar companies are growing faster.

 

[japancool]

Likewise, staying away from debt.

The first time round, I grew very quickly, but at this point, my company and me were tens of thousands of pounds in debt. It eventually collapsed under that weight in the aftermath of Brexit.

This time, the company has no debt (other than the DL it owes me), and I haven't taken out any loans. The company is ahead of where it was the first time round, with far more competition. I'm not quite at the point of reclaiming my place as market leader, but I'm in the top three. I've developed an allergy to debt, and I sure as hell ain't signing any more personal guarantees.

Also, the first time around, we did a lot of loss-making activities - conventions, and expanding into areas outside our core speciality. I've cut all of that out and guess what - it turns out I didn't need to do any of it to get here. I'm concentrating solely on our core product. I forgot the golden rule that turnover is vanity, profit is sanity.

Plus, and most importantly - the stress the first time around when things went bad cost me my kidneys, and then my left leg. So I'm taking a more sanguine approach this time. No more lying awake at night wondering how to grow sales, how to finance debt repayments or how to raise money for more stock. Of course, it helps that the company is in a position where it doesn't have to do that.

 

[Mark T Jones]

I really like that people are saying stay away from debt. I’m at a crossroads myself where I am tempted with HP on asset equipment, I can manage without it, but the temptation is always there. Especially when similar companies are growing faster.

Yeah - let's hope it doesn't catch on, or I'll have to get into debt!

But seriously, the low point I alluded to above was largely because I had become "that" broker - looking for ways to lend money rather than considering outcomes (for them).

The most alarming trend at this moment is whole raft of easy-access short term finance products. Euphemistically referred to as 'working capital loans' they are often gateway debt - an easy route in to inappropriate borrowing.

People won't agree on what is appropriate - but obsessive attention to the plan and the purpose will give some insight.

I always favour the alcohol analogy

Some people lead happy, fulfilled lives without it

Many people enjoy it in a sensible and controlled manner

And others get into hell of a mess on the back of it

 

[bodgitt&scarperLTD]

The main reason to stay away from debt currently is because interest rates have risen, but the deadwood that can only survive on low interest rates hasn't yet been shaken out. In the plant and machinery world, new kit has risen greatly in cost. Secondhand has fallen from COVID highs, but still has a way to go as demand shrinks.

In the last few years though, I'd argue that you would have been mad not to finance a new machine that your business needed- at around 2% flat rate. I always fixed over five years rather than the customary two or three, because the interest payable each year was comparitively tiny in comparison to the earning potential of a machine, and that allowed me to purchase multiple types of machinery and expand that way with little requirement for labour which was in short supply.

@Mark T Jones will be able to provide some more up-to-date finance figures, but with rising interest rates I suspect a new machine now needs considerably more work to pay for itself.

Finance does still, and always will, make sense when there is an opportunity for a return on a capital asset that you currently cannot afford outright but could put to work right away. The margin for error in your assumptions just got a lot smaller though, and this is where many fall down.

The other curveball is that when both finance and new asset costs rise, it sometimes starts to make more sense to buy secondhand and repair as neccessary. Especially if you can pick things up cheaper from distressed sellers in a downturn. Of course, this depends upon your attitude to risk and the amount of acceptable downtime for your asset.

 

[Mark T Jones]

The main reason to stay away from debt currently is because interest rates have risen, but the deadwood that can only survive on low interest rates hasn't yet been shaken out. In the plant and machinery world, new kit has risen greatly in cost. Secondhand has fallen from COVID highs, but still has a way to go as demand shrinks.

In the last few years though, I'd argue that you would have been mad not to finance a new machine that your business needed- at around 2% flat rate. I always fixed over five years rather than the customary two or three, because the interest payable each year was comparitively tiny in comparison to the earning potential of a machine, and that allowed me to purchase multiple types of machinery and expand that way with little requirement for labour which was in short supply.

@Mark T Jones will be able to provide some more up-to-date finance figures, but with rising interest rates I suspect a new machine now needs considerably more work to pay for itself.

Finance does still, and always will, make sense when there is an opportunity for a return on a capital asset that you currently cannot afford outright but could put to work right away. The margin for error in your assumptions just got a lot smaller though, and this is where many fall down.

The other curveball is that when both finance and new asset costs rise, it sometimes starts to make more sense to buy secondhand and repair as neccessary. Especially if you can pick things up cheaper from distressed sellers in a downturn. Of course, this depends upon your attitude to risk and the amount of acceptable downtime for your asset.

One thing this accurately highlights is the difference between primary and secondary debt.

In a hire company financing machines is primary debt - and as you say, variance in interest rates can take a big chunk out of margins. For the most part I'm involved in secondary debt,m - inthat whilst it's business-critical, it's a small part of the overhead so rates have far less overall impact.

There are any number of other variables, too.

 

[Scott DLE]

Yeah - let's hope it doesn't catch on, or I'll have to get into debt!

But seriously, the low point I alluded to above was largely because I had become "that" broker - looking for ways to lend money rather than considering outcomes (for them).

The most alarming trend at this moment is whole raft of easy-access short term finance products. Euphemistically referred to as 'working capital loans' they are often gateway debt - an easy route in to inappropriate borrowing.

People won't agree on what is appropriate - but obsessive attention to the plan and the purpose will give some insight.

I always favour the alcohol analogy

Some people lead happy, fulfilled lives without it

Many people enjoy it in a sensible and controlled manner

And others get into hell of a mess on the back of it

I didn’t have any business debt until covid, now have a BBL I’m paying back, at 2.5% it’s pretty manageable interest wise.

I don’t have any problem taking asset finance, I have a friend who took about 250k to invest in some kit, he’s just paid that off and the kit is still making him money. I didn’t have good enough credit before to do such a thing, so have scaled smaller by re investing profits and used the BBL also to buy a new van. Having spoken to the leasing company matey used, they have said I would be eligible nowadays to get finance. Good to know, but shall hold off until things look more stable in the economy.

 

[lingsd]

after experienced the business failure, of course you will adjust method to avoid the same mistake, some failure may help your growing up,we should accept them kindly, and also experience will help you understand the life well, you will not be defeated easily psychologically.

 

[m4hmo]

I turned £1 Into a turnover of £3000 plus a week, selling on eBay, between 2003-2005. After that it declined when the wholesale suppliers themselves came onto eBay to sell at trade price plus postage to the public. I was cocky and arrogant, aged 22 at the time. Was a nice initial lesson in business. Last 15 years I been developing and managing a bunch of HMOs my parents own in London and Bristol. I'm now a HMO conversion specialist and more. (Qualified electrics and nearly gas safe as well, also doing the usual plumbing & carpentry works).

 

[HFE Signs]

I always say - mistakes are fine as long as you learn from them. No two businesses are the same, if you fail then you re-group and accept responsibility - if you can't self critique then you shouldn't be in business. You can't be perfect at everything and you never stop learning, make your experience count