#BusinessGrowth #Bankruptcy #Entrepreneurship #FinancialPlanning #SmallBusiness
๐ Grew my business to bankruptcy ๐
Have you ever experienced the exhilarating highs of growing your business, only to be faced with the harsh reality of potential bankruptcy looming on the horizon? As an entrepreneur, the journey to success is often filled with unexpected twists and turns, and sometimes even the most well-thought-out growth plans can lead to financial turmoil. In this article, we’ll explore the story of a business owner who faced the challenge of growing their business to the brink of bankruptcy, and discuss potential solutions and alternative strategies to overcome this setback.
## The Rise and Fall of a Successful Business Venture
### Setting the Stage for Growth
At just 25 years old, this entrepreneur took the reins of their father’s company and successfully grew the business from 800kโฌ to 5Mโฌ in revenue, with a team of 35 employees. Their strategic planning and smart financial decisions led to profitability and promising growth opportunities in a 3Bโฌ market.
### The Pitfalls of Rapid Expansion
Driven by a desire to scale the business through technology and new locations, the entrepreneur made significant investments in hiring, marketing, and sales activities. However, despite initial growth and a 50% increase in monthly recurring revenue, the business soon faced challenges with cash flow and mounting costs.
### The Dilemma of Funding and Financial Stability
Facing a cash crunch and limited options for financing the future growth of the business, the entrepreneur found themselves at a crossroads. Traditional bank loans required increased safeties, while venture capital seemed like a risky and uncertain path given the immediate financial constraints.
## Exploring Alternative Solutions
### Leveraging Real Estate Assets
One potential solution proposed by the entrepreneur involved leveraging a piece of real estate owned by their father to secure a larger loan for financing the business growth. While this strategy could provide the necessary capital for the next three years, it raised concerns about risking family assets and retirement funds.
### Seeking Investor Partnerships
Exploring alternative funding options such as venture capital or strategic partnerships with investors could offer a lifeline for the business. However, convincing investors to commit significant funds while facing immediate financial challenges remains a daunting task.
### Strategic Business Restructuring
Taking a step back to reassess the business model, cost structure, and growth strategy may reveal opportunities for streamlining operations, cutting unnecessary expenses, and focusing on sustainable growth. Implementing a comprehensive turnaround plan could help the business navigate through the current challenges and emerge stronger on the other side.
## Embracing Growth Challenges as Opportunities
While the path to bankruptcy may seem daunting, it also presents a valuable opportunity for growth, learning, and resilience. By facing the realities of financial turmoil head-on, the entrepreneur can gain valuable insights, make necessary adjustments, and emerge stronger on the path to sustainable success.
In conclusion, navigating the challenges of business growth and potential bankruptcy requires a strategic mindset, financial acumen, and a willingness to explore alternative solutions. By learning from past mistakes, seeking innovative financing options, and embracing change, the entrepreneur can turn the tide and steer their business towards a brighter and more prosperous future. Remember, every setback is an opportunity for growth, and with determination and strategic planning, success is always within reach. Cheers to overcoming challenges and embracing the journey of entrepreneurship! ๐๐
#BusinessSuccess #FinancialResilience #EntrepreneurialJourney #StrategicPlanning #SuccessOverAdversity
Ego ch eck
Don’t beat yourself up. Scaling is pretty difficult and many companies sink because this step didn’t work out.
That you tried when you saw the chance shows your entrepreneurial spirit.
Perhaps you can find a better investor than a bank. It’s really bad for a company to depend on risk-averse bank managers.
I mean why take out a loan? Was there really no saved up money from the company at hand to use?ย
Your Dad is way too nice to let you play in his face lilke this
Like others have said, I wouldnโt convince your father to sell the real estate which he is relying on to retire. Bringing in a partner could be an option
You seem to have a dangerous level of optimism. Maybe its time to step back and really recalculate your projections.
Banks are risk-averse, but there are other options. Look into angel investors, debt financing with asset-based lending (using your existing inventory as collateral), or revenue-based financing (investors get a percentage of your future sales).
Your growth story is impressive, but it sounds like you’re focusing too much on rapid expansion and not enough on sustainable growth. It’s essential to match your pace with your financial health.
Also, consider that convincing your dad to use his retirement fund is a huge ask, and it puts both of you in a precarious position if things don’t go as planned.
Have you looked into revenue-based financing? It could be a more sustainable way to fund your growth without giving up equity or involving personal assets.
Seems like a bad time to open 10 locations honestly. Start smaller and reinvest the profits. Itโs a slower play but attainable. Cash flow can destroy a business no matter how โgreatโ of an idea it is. So I think whether or not itโs an incredible plan, execution is going to be key here
Agree I would not go to your dad to mortgage his retirement on this, if he had some capital elsewhere and wants to help thatโs fine.
Iโd consider scaling back your growth plans if thatโs possible, even if thereโs a loss, assuming you can get yourself out of it with the growth of other locations etc.
If you havenโt, you can work on renegotiating your terms both with the banks but also your product suppliers. Try to get longer payoffs etc. to make your cash flow work for you.
I think the big risk was to go beyond your cash flow and rely on funding for operation without a dedicated investor.
Scale Back Growth and Focus on only High ROI channels with any property leveraged capital, sell any other underperforming assets, take revenue pipeline based financing
Definition of born on third base and thought you hit a home run
Many VC/PE investments have โJ-curveโ returns, meaning the investors are in for a five-year term, expect value to drop early and then take a big bounce back up as you work toward year five.
Maybe use contractors and agencies to scale so you donโt take it on the chin in a downturn? Tech infrastructure can be risky, good on you for taking the risk.
I grow b2b companies in tech. We just helped someone who grew to $20MM then hired too much and blew up too. Now we are getting them back to ATHs, but profitably.
For my thing personally I am growing it $0-$20MM using almost no money. No debt or equity investors.
Curious, if you were able to take the initial bizs revenue from 500k to 5 mil, what percentage exactly was the profit after all expenses and liabilities subtracted? This may have given you a clear picture of whether your growth projection was sustainable to begin with. In short, DONT GAMBLE YOUR DADS RETIREMENT. WALK AWAY.
I feel like the best lesson learned in this sub is simply โslow and steady & enjoy what you have.โ
Owning a profitable business is like less than 1% chance to happen. Just fucking enjoy that you got lucky. Donโt try to 10x your profit In 5 years.
Greed is the killer
If I where you I would milk the business much as I can and dip
To the OP, trying to scale a business is the hardest part. How old are you now?
If your plan is good enough to risk your dad’s retirement it’s good enough to find alternative financing
Seems like the classic gamblers fallacy. I can bet you if you sell ur dadโs house, youโll lose his money too .
Donโt think if you can convince other people to throw enough money at your operation that theyโll have huge profits in 2-3 years.
I know someone who thought this. They had a profitable business and when things turned suddenly they were losing $200-$300k a month. They thought they just had to grow through this, so they put all of their personal savings in it to sustain the losses rather than massively cutting back when they had the chance.
What happened? Once they burned all of their personal savings they had to give away half of the company for more cash, then they burned that. THEN they had to cut anywaysโฆ
So the company is now a shell of its former self. It is now too small and poorly profitable to recoup the many $ millions thrown at it when it was burning cash. And the owner no longer owns 100% of it.
And now new competitors are coming into the market. I donโt see it ending well.
Sounds like you are opening lots of locations. Cut back to just 1 and prove that the 2-3 year plan works.
Do not risk destroying your dads retirement.
Now there is not a zero interest rate environment, so adjust your growth plans to the macro environment.
Reduce costs, slow down the growth plans some, stabilize the Cashflow to be profitable again and proceed to grow with smaller steps.
Once rates fall, obtaining financing will be easier, then you can increase the growth factor.
Now is the time for calculated and controlled growth.
I feel like youโre not giving the whole story.
But risk your dadโs retirement so you can possibly make more money in your business?
Hell to the no
There is no such thing as a โsolid planโ. From your general language it appears as if youโre very risk-taking and suffered from overconfidence and a lack of attention to the risks. If possible, your best way forward would be to scale back the growth and try to recoup some of the investments. Donโt threaten your fatherโs retirement by getting him involved further in this. You need to own your losses. Use it as a learning lesson and it wonโt have been wasted. Youโre young and Iโm sure youโll have many opportunities in the future to recover from this.
What do you do? What is the product?
What business are you in? I need more info to give you a better advice
35 employees on $5 million๐คฆ๐ฝ SMH. Not to be rude but thatโs definitely something a first timer would do. Way too much overhead to survive. We have 8 employees on more than $5M.
Go fund me?ย
Put all of your companyโs recurring expenses, payroll, everything that costs money under a microscope. Make hard decisions now about what and who to cut, before that decision is made for you.
Donโt involve your dadโs house in this. Not even if youโre 99.9% certain, let alone โfairly confidentโ
I am not a business owner but a full time futures trader. But there is a saying โThe most dangerous moment is when you feel very confidentโ and its been true to myself
When you grew the business, you screwed the business. When you had 5 employees, the revenue per employee was substantially higher than current. You’re fixating on total revenue without focusing on net income, so you’re wrecking yourself on margin.ย
Many people think bigger is better. Usually it goes the way of your business. Not trying to be a Debbi Downer but maybe go back to your original company size make money and be happy. In business for over 40 years so I been through a lot of ups and downs. I wish you gl.
The last resort used for companies that require pivoting and retargeting similar to a cash strapped organization like yours is A/R factoring. Leverage your A/R, since you are growing, yet are break even with increasingly tightening FCF. In the future, always have a runway of 6 months-1 year in cash reserves similar to emergency savings at the personal level. Business continuity planning is mandatory and non-negotiable, as your best investors are contrarian looking at the downside risk, rather than the upside gain: no VC would support the venture in its current state of operation.
You are solely focused on growth allowing MC to be uncontrolled with excessive financing costs: limit financing to 25% of MR to fund 15% marketing costs in growth mode with 10% SGA. The rest is unit profit from your markup from production cost: you eventually realize MC = MR due to diminishing marginal returns, so plan out the PLC for a time to maturity and expense future growth accordingly.
Friend, you fucked up and thatโs what we do from time to time. Donโt you dare get the Old Manโs property involved in your shit showโฆ. Youโre smart enough to get into this ditch, youโre smart enough to get out of it. Lots of good advice in here.
Find a way to B/E with a cutting torch. Get back to a heartbeat and then take a breather and start negotiating. I know Iโm in the middle of the same damn thing.
Over expansion is a factor jeopardizing many business ventures. For just the reasons you are not paying attention to. Something else seems to be driving this, and it is not a six-month lag.
My guess is some family dynamic doing unmentioned.
Why are you growing? You really need to ask yourself that question. Your revenue per employee had gone down and your debt/risk has skyrocketed. I would be far less certain you know what you are doing and scale back. Seems like you are growing just to grow. Revenue doesnโt matter, profit and staying in business does.
You made a plan and it didnโt worked out as good as you thought. Are you now doubling down on the plan that wasnt as great as you initially thought?ย
Or are you learning lessons from the past year? Scale back to only 5 new locations? Dont start all 10?ย
Learn. Which ones are operating good? Which ones arent? Why or why not?ย
Just make sure you make decisions based on the latest relevant information and do not use sunk costs and pivot when information shows youย
> Iโm fairly confident that it will work out,
Lend me $2 million. I’m fairly confident that you’ll get it back.
I’m out.
Show the banks you’re not attached to your ego by cutting the number of expansions in half and just do 5. Once these 5 start to bring in theirย money, evaluate how reality stacked up to your plan. Make a new plan for your next expansion, show the learnings to the banks in this new plan.ย
Donโt have enough information about the industry, business model, etc to really give any good advice.
Itโs been a common theme in the business world that expanding and hiring too fast can be detrimental, itโs usually always best to stay as lean as possible unless you have a long runway and itโs for instances just like these unfortunately.
I understand you saw an opportunity for your company and you took a risk, which is what itโs all about, but you over-extended it seems and now youโve weighed out your options.
You said youโve already cut costs, but can you go even leaner? How much more can you decrease your expenses while still keeping your business running and staying profitable? Instead of trying to raise more money, maybe take a slower approach and cut those costs as much as you can to catch up. If the only way to survive is really though a raise, then you have to do what you have to do. But if you can be scrappy and find an alternative without that, weigh that option too.
Just my two cents, Iโm sure youโll find a way to get it sorted. Keep pushin!
Just don’t sell your dad property.
First you need to stop tying company growth your self worth. The reality is that your plan was not as good as you expected, and now there aren’t any good options. Since there is a lot of extra family dynamics at play, I would recommend scaling back your growth rate and just focus on plans that minimize the chance of going out of business.
Can you bring in investors/partners to take over some of the 10 locations? Like a franchise model?
Fairly confident isnโt enough for your dad to risk his life savings imo
So, whatโs the projected return and what are the risks? What have you pitched so far to investors?ย
Give me your best options laid out 1-5.
1) vc
2) dadโs property
3) ?
4) ?
5) ?
Letโs get some actual choices on the table because failure isnโt in that list bro.