How I bounced back from losing $4,500,000
It is never fun to lose money
The only thing worse than losing all your money is losing all of other people's money.
TL;DR Sometimes business can almost kill you... work hard and ask for help. Friends make it better.
Several years ago I started another business. I had successfully launched and grown a few businesses, both my own and for others. This one was a little different as it was a franchise I was buying into.
I saw the potential, my wife was excited about it (she is a very important gauge I live by), and all the advice around me was "go for it".
I was so excited and had a good pitch; I was fortunate enough to raise $100,000 in the first 30 days. We used that to buy the rights across a few major regions and to start the plans for the first location.
The capital raise was quick and successful. We had excellent investment papers, a great story, and were in the right place at the right time. Over the course of the next year we raised over a million dollars and I quit my job because I could no longer manage both the business and a full time career.
With this successful momentum we started construction on the first location. This was my biggest mistake.
In all my eagerness, and seemingly endless upside, I started building before we had all the money. Hindsight is 20/20 and this is the crucible moment I wish I could change.
6 months later, with investments still growing, the economy slipped and we lost a rather large commitment. This initiated our backpedalling and, on Friday afternoon, we had to call our imminent employees to let them know we could not have them start on Monday. I never want to do that again.
Now comes the scramble.
For the next 18 months, upon promise of funds from our HQ, we went hard into raising more capital, growing pre-opening memberships and continuing the build. And managing a growing list of debtors.
Our debts grew as we burned through investment dollars. Without a salary, my personal debt grew as well. Having to manage credit card collections, utilities collections, landlords and mortgage lenders, as well as the rising expectations of the investors became a full time job. On top of this there were the death threats from well deserving vendors.
Through all of this there were continued promises from our HQ, from different types of investors, and from some promising speculative investors. It all fell through. In the end we had raised about $4,500,000 worth of investment and nothing to show for it but a half-built location. For some their initial investment was a hope for their liquid cash to bring some excellent returns. For others it was a retirement fund, or an inheritance, or a loan against their mortgage. Very personal money.
In the last days of dealing with this, on top of everything else, I somehow managed to contract Flesh Eating Disease. Nothing like a good bout of necrotizing fasciitis to make your year better. At first it almost killed me. After three months of hospital stays, massive rounds of antibiotic cocktails, and several surgeries, I won. At least that part.
Finally there was a spark.
An investor out of Toronto had been successful in businesses like this before and liked what I was saying. He came out and spent the day with me and the team - including me, with an IV hanging out of my arm, giving a tour of a 34,000 square foot facility in the dark with a flashlight because the power had been cut.
It goes to show you that circumstances don't always matter.
He was so impressed that I had countered all the key risks he had experienced - before he could even bring them up! - that he changed his flights and flew out immediately to talk with his team of investors. They agreed to invest, pending due diligence.
Those are the days you love. After all that had gone on, there is a break in the clouds and that beam of light is actually shining on you. This was the rescuing number. The amount that would get the project back on track and allow us to open and build the dream we had imagined. Life was good... right at this moment.
But that was short lived. After talking with HQ, he came back and said the franchise itself was 60-90 days away from bankruptcy and he would not be able to invest. Talk about hopes dashed on the rocks of life; big sigh of relief... followed by a loud "POP" as the balloon burst.
While most of our investors were incredibly supportive, there were a small pocket who wanted my head because they were convinced I had taken all their money and was moving to Mexico. I can't blame them for feeling this way. A few of my advocates suggested they go look at the lifestyle I was living (no income, massive debt, full-time rescue operation) and they would see I was doing my best.
Eventually, with spent hopes and no leads left, we packed it all in and my investors urged me to stop pushing a dead horse and go get a job to take care of my family. So, I did.
Somehow, that last year, we were able to keep a family of 5 alive on under $20,000. We went from a new minivan and BMW X5 (the only smart thing I did early on was to pay for a two year lease in advance) to borrowing a friend's unused and barely running VW Golf with a 40cm hole in the passenger side floor - awesome going through slushy snow puddles. Our neighbour, at just the right time, was selling their 1990's 2 door Ford Tempo and was willing to take pay-when-you-can payments for a seemingly insurmountable $600.
As if one period on the end of that chapter isn't enough, I had no other choice but to declare bankruptcy and, a year later, we lost our house through foreclosure for two missed payments in that year when we had nothing.
Can we stop digging now? Time to rebuild.
At first it was working with a friend (read guardian angel) who knew I had many general talents he could use, and he was willing to work with the very limited income I was allowed while going through bankruptcy. Once that was done, I moved back into my old role of recruiting, hoping to regain the excellent income I had before all of this. Unfortunately, the world of recruitment had changed a lot, and I did not fit in as I had in the past.
The next 4 years were a blur. Trying to build a side hustle, trying to earn enough to survive with my family of growing kids, and working at anything I was accepted to do. The economy was still very challenging so everything I was doing was slowed to the pace of winter molasses. I looked at Fiverr, TaskRabbit (AskforTask in Canada), uber (my car was too old), hundreds of different roles that I was "over qualified" for - nothing is more frustrating that that. Roles with tire companies, oil change places, anything that might have a reasonable schedule. I tried warehouse work at a temp agency but my bum ankle (a whole other story) hurt so bad I couldn't walk after work.
Let's talk about something here for a minute: There is this stench that you feel you walk around with after a disaster like the tale above. You feel broken or, at least, incompetent. There is this battle that goes on in your head wondering if you're able to overcome it. When I was a part of the aforementioned recruitment team, we spent the day working with a DiSC specialist. Mine was close to what I expected. However, when I asked the specialist about something in my profile, she said "Hmmm, what happened?" I was unsure what she meant. She continued "I can tell you should have a high 'i' (for influencer) but it is very low on here". (Well that's because I just lost $4.5M of other people's money. I don't want to promote anything to anyone anymore!) This experience had changed my personality... hopefully not forever.
I also wrestled with destiny in the sense of wondering what I was going to do now, or what I was even good at. I thought I knew my talents, but without that "thing" to apply them to, I wasn't sure of the next vehicle or if I was even accurate in what I was good at. This mix of desperation because we need to work to survive and wanting to do something big in the world but stalled out falling backwards was an ongoing argument in my head. On top of all of this, here I am trying to promote a business while not sounding desperate. "Sure I can help you with your business, I've completely tanked mine and lost everyone's money. Trust me now?" This is a learned skill in and of itself.
One more mind wrench: I'm a deeply Christian guy and it was clear to me God opened the doors when I started all this and then it seemed they were slammed shut once firmly inside. Many hours were spent in prayer and wrestling with God trying to understand why this happened. "Think of all the other people who would lose money. If it's a lesson for me, let it just be on me!" Then it turned to asking about what I did wrong and what I was supposed to be learning and what I should be doing. It was a 6 year wrestling match. I don't have all the answers but I do have a few, and I'm much more confident now.
Through this time we moved 4 times in 4½ years as each landlord decided to sell the house or move back in due to personal challenges. Yeah, moving isn't cheap. On a good note, we kept getting rid of extra "stuff" and have become pretty lean.
I finally got a break when an acquaintance who owned a trucking company was willing to let me work with a 2 hour break in the middle of the day to meet with client prospects for my own business. This worked, and after a year, I secured a client who paid me double the money of the driving job for a ¼ of the time.
There was one other major benefit to the driving job: I loved being able to drive around and listen to podcasts and audiobooks all day. I consumed massive amounts of learning, and it is a bit of an addiction to this day. I think this was a huge game changer in my mentality, my abilities, and my education. By the way, this started with free books from the library and free podcasts. Nowadays, my favourite tool is Blinkist. In 12 months I was able to crank through 450 books. Talk about education on steroids. Now back to our regularly scheduled program...
That client I ended up landing brought mixed emotions. The owner wanted help but wasn't willing to make the needed changes. For a year I worked with them to change all I could, and hopefully it was of some benefit. What I did not do was work diligently to build other clients. That engagement ended and I was out of work again. Fortunately, I was able to have almost 3 months of expenses saved up, and I worked my tail off getting new clients. First one, then another, and more after that.
The next several years brought a lot of evolution to the business. From training leadership teams in hiring and team building (something that has always been a strength) to speaking and working with early-stage entrepreneurs. Today, I serve as an Entrepreneur In Residence at a university, I have successfully launched other businesses and have started helping entrepreneurs in developing countries through a new micro-lending, crowdfunding platform we co-founded. It is expanding into 10 countries this year. And, I do all I can to help ecosystems around the world that support entrepreneurs. Life is good.
From a reputation standpoint, I have since bought coffees and meals for a number of those key investors on a regular basis. Because of the way I handled the fallout, we were able to remain friends with most of them. I still feel sheepish but am reassured that sometimes, "s*** happens" and I did the best I could.
It has been an often dark and very rocky road back from a huge mess. The physical, mental and emotional challenges are all life-sucking, but I would rather have just the physical ones.
I have a few friends who have gone through similar situations. Some at the same time as I did - which really stresses the importance of having friends and someone you can share with. Believe it or not, you will not be judged as harshly as you judge yourself. It is important - nay, vital - to be open and vulnerable through challenges. We find the good in humanity and often receive much needed collaboration and help. We are all in this together, and working together is better than going it alone. Please trust me in this and get help from anyone close to you. There needs to be much more discussion around the reality of failed business and the challenges we face as entrepreneurs. We constantly feel compelled to answer "how's it going" with "awesome" and that's not always the case. Let's deal in reality, be vulnerable and ask for help. Let's be open with what is really going on and learn together. The world needs your genius. Don't give up.
As I was saying: I have friends who went through similar challenges; once in a while we talked about writing a book, and every time we laugh and say "it would have to be classified as fiction because no one would believe it.
Well, I spoke to a published author and we discussed the idea of a book I wanted to write about building a business the right way. I said "there are lots of books about that out there" and he asked "what's missing from them all?" It was an easy response for me: "The entrepreneur! They all talk about business and none really address the battle between the ears of the entrepreneur." Thus, The Entrepreneur Roadmap Book was born. Within weeks I had sketched out a framework for a tool suite, and it is currently live and active on this site. We have most recently launched a free app called ROOT: Entrepreneur Roadmap that is available on Apple and Android.
The model has been vetted by several seasoned veterans of the entrepreneur world who applaud it and suggest every entrepreneur go through it. The lessons I have learned through this journey have been invaluable. Those challenges helped me to be cautious and not rush into things. I'm still optimistic AND have a healthy dose of pragmatism. I take these lessons and help others see around corners. To be able to play out the future possibilities with risk tolerance and advice all entrepreneurs to win at the game we share a love for - business. I love working with entrepreneurs seeing their "ah ha" moments when we talk about practical and simple ways to develop their business. The "wow, I never thought of that" or "holy crap, I'm glad we talked, I wouldn't have seen that coming". These lessons are there to share and help each of us be better - together.
I tell people that far too many businesses fail. It's the needless failures we can avoid. Entrepreneurs are taken out by what they don't see coming... not by what they know. The Entrepreneur Roadmap and ROOT App are designed to ask entrepreneurs questions they never thought to ask. To ask those questions that seasoned entrepreneurs will ask and that allow the entrepreneur to be more prepared for investors, their spouse's security gland and the lurking mayhem that has killed off far too many good ideas because someone just didn't know.
I am sure you will find it to be helpful to get you through some of the toughest challenges you can take on while building a business and life. Life is awesome when you get it right.
Get access to The ROOT App:
If success was a road map, we would all be richer, healthier and happier. ROOT sounds like a fine way to begin the journey.
Great article, thanks for this failing forward article.
How have you overcome challenges in your life?