10 Feet Tall and (Not So) Bulletproof
I was 25 when I bought my first business. I was young and confident. Five years later, my business was gone.
It was an after school center I bought from the founder. The business was 20 years old, profitable, and had a solid clientele. We did great for the first two years. Then the bleeding started.
A couple new centers opened near us and siphoned off clients so, when it was time to sign up new kids, there were fewer to go around. Our enrollment dropped and never returned to full capacity.
Competition is expected in business. You face it, adjust, and deal. But you must also structure your business so it can outlast the dips. I didn’t and mine wasn’t.
Why I Failed
Bottom line, my overhead was too high. The woman from whom I bought the business had the facilities, vehicle, and other “daycare stuff” paid off long ago. Her overhead was low so she could absorb downturns.
I over-mortgaged to buy the business so I had to stay at max capacity all the time to be profitable. When our enrollment dropped, I had no gas in the tank to ride it out.
I Did Better Next Time
For my second business, a home improvement service, I vowed to never borrow for anything. I only fudged once – I bought a commercial lawn mower and paid it off in six months (I had just signed a one-year deal with a big townhome complex, so I had secure revenue).
I ran and grew that business for 10 years profitably and closed it on my own terms. My overhead was almost nothing, so I wasn’t under pressure all the time. What a difference.
Manage Your Overhead Or It Will Manage You
I know it’s tempting to use debt to scale your business. Don’t fall for it. Don’t start or buy a business that takes every dime just to maintain. Take the longer route, sleep better at night, and up your chances of survival.
Postscript: Failure is Not Glamorous
There is a lot of talk among entrepreneurs about the value of failure, as if it is something to be sought after. Yes, you learn from failure but, trust me, it is not glamorous. Read more in this article I wrote for HomeDabbler.com.
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