If bankruptcy is synonymous with failure, then an overwhelming majority of businesses who file a bankruptcy petition are choosing to fail. Very rarely will your suppliers-turned-creditors initiate the steps to force an involuntary liquidation. Regardless of how many times they call, condemn, or harass, they are secretly rooting for you.
Rooting for you because your success is their success – you’re on the same team.
And now, maintaining keen relationships with your suppliers has never been more important. In addition to their service, suppliers can provide much needed cash flow relief when your business needs it most. In the wake of the 2008 financial crisis, it is impossible for small businesses that have less than three years of proven income with little assets to obtain unsecured loans. Yes, there was a time when a solid business plan, a personal guarantee, and a small down payment could score the needed funds from any financial institution. But last year – between ten banks of all shapes and sizes – the closest we came to financing our $10M company was a $50,000 secured SBA loan. The collateral? Purchase a $50,000 certificate of deposit. Nice try.
Could Reed Street have been saved? Sure. If we could go back and influence certain decisions, this blog would be published from here instead of here. But time travel has yet to be discovered; so we must fail our way to success and take note of the factors which led to defeat.
I sat across the long wooden conference table fidgeting. So this my replacement – Reed Street’s new CEO? Looks a little old to be running a company that produces zombie obstacle races. To anyone else, he was better known as the court appointed trustee. Now he had my job. And he had no idea what he was getting himself into…
It was a frigid winter walk winding between the skyscrapers in Baltimore. I was paranoid as I approached the Garmatz Federal Courthouse, and frequently caught myself looking around as if everyone knew exactly where I was heading and why.
The room was packed. I looked around, studying the faces of the people I hurt. A month ago, they were just a word and two numbers: Vendor Name, Amount Owed, and Days Late. And now here they sat, a few of many, but still a combined total of $1.1M. Never again.
My phone vibrates – “that’s the reporter [from the Wall Street Journal].” Just great – I’m sure this next article will be just as good as the last time we were on the cover. Correction – there’s now one less creditor in the room, and some asshole pretending his way to a juicy scoop.
The meeting was a blur. There were times of angst, sorrow and anger – but most important was the takeaway. I walked out with a better understanding of the effects Reed Street had on other organizations. A company I wholly owned only months before. A company I was responsible for until using American laws as a veil. There was a new respect gained for the disadvantages of leaning on your suppliers. Not the danger for us, but the danger for them. The danger for suppliers that ultimately become partners. And now the silence is deafening – phone calls and e-mails stopped. Though assumed to have slipped into the shadows, I never stop thinking about the 252 names who I last saw on the aging report. One day.
There are two aspects of defeat: the effect from the cause(s) determined to be a setback; and the opportunity it presents. Fortunately, Newton’s third law applies to defeat and failure just as much as physics – for every action, there is an equal and opposite reaction. The harder the fail, the more to be gained. But you must understand, decode and extract the seed to reap the benefits.
Tough lesson: I wasn’t ready. The company’s purpose was on paper, but I had yet to fully discover purpose.
And patience. Just as important as operating with a greater-than-self purpose, patience must balance. I see that now.
You will face defeat. You will face setbacks. But failure is chosen. I will never again fail, for failure is a product of choice. A choice to accept defeat and quit – and I’m done quitting.