We got into a real mess because we didn't keep accounts from the beginning

I have a photographic memory. I keep all the details of the business in my head. I do have a notebook where I record invoices and orders and once every couple of months I do a profit and loss.

In the first quarter, our business had $18K in sales. Now we have $87K and I think we’ll reach $150K by the middle on next year. I still keep everything in my head but I have to admit some things are slipping through the cracks.

Finally, I gave in and we hired someone to do the accounts. He slaved away and after two months had things somewhat under control. He found over $12K in unpaid bills including demands for the local and federal tax offices. Together these came to over $30K; we don’t have that kind of cash on hand.

Two days later we saw the first set of accounts since we started the business. We had lost over $90K, were selling at least half our products at a loss, and had not paid state sales tax for three months.

I was astonished. I priced all my products myself and thought we were making good profit since we had cash in the bank. I was also sure I had paid the tax bills.

I couldn't separate myself from the success and failure of my business

While I’ve never been the best at anything, I know I have the potential to do great things. I wasn’t at the top of my class, I didn’t win any contests, and I wasn’t good at sports, but I have a burning desire to succeed. When I started a business I couldn’t afford to fail.

I had great people working with me and we had all the money we needed for the first two years. We focused on execution and customer and operational excellence. People loved the product. Everything was going really well. We won the outstanding entrepreneur of the year award.

Finally, I was the best at something. I was finally being recognized for my hard work and I was being recognized for the person I really am. I was nominated for more awards and asked to speak at conferences. The press would call me for quotes. I was on top of the world.

The recession hit us much worse than we expected. In six months, business was down 24% and we had to let people go. We had reached our credit limits. We staggered on for three more months and then had to call the administrators in to wrap everything up. We were finally sold to our major competitor for 10 cents on the dollar.

When the business died, I died. The business was me and I was the business. I feel like a total failure and I can’t get distance from what happened.

I'm worried that my work is all that defines me now

People who identify themselves by the jobs or positions they have seem so one-dimensional: “I am the CEO of Cosmetics.com.” For these people, what they are is who they are. They define themselves by their job and have no identity outside of it. They’ve surrendered themselves to it and there is no work-life balance.

Am I becoming one of these people?

Pitching with no results is getting exhausting and eroding my self-confidence

Our pitch was good. We practiced and rehearsed it with several people. We had a list of questions we though investors might ask and prepared answers for these.

At the first investor, only two people came to the presentation and they were our age – late 20s. They listened, thanked us, didn’t ask any questions, and left the room.

The second investor focused on the cash flow and said the work they did showed with a 1% margin drop there was an 18% reduction in cash flow. We couldn’t explain this and promised to get back to them.

The third investor kept interrupting us, so when the hour was up, we were still on the third slide.

By this time, I had lost my self-confidence and didn’t want to do another presentation.

I fired Alan after he was rude to a customer

This was the third time Alan had been rude to a customer. I spoke to him but he ignored me and didn’t listen to what I had to tell him.

This time the customer wrote to me and told me what had happened and said this was the last time he would do business with us. He bought 3.4% of everything we sold, so I went to see him myself and said I would handle his account. He demanded we fire Alan. I was so mad that when I got back to the office, I called Alan into my office and fired him. I refused to write a reference and just paid him until the end of the month.

Everyone in the office was surprised by my reaction but no one said anything.

The CEO was setting unrealistic expectation with the board and investors

No matter how much time and effort we put into controlling our project costs everything always cost more and takes longer than we expect. We’re not dumb – we just can’t get it right.

We tried to figure out what was going on. After a lot of discussion, we focused on what the CEO expected. It emerged that the CEO made promises to the board and investors that he knew he couldn’t keep. He then tried to impose these targets on us and the projects. He just thought it was easier to manage the board this way.

We told him this wasn’t the way we wanted work. We needed honesty and transparency and it was better to face reality than to create expectations that we knew were unrealistic from the start. He and we couldn’t rely on this type of behavior as the business grew.

I'm having a very difficult time dealing with conflict in my team

I hate conflict. I have been like that since I was young. It’s not that I want to please everyone or have everyone as a friend, but I hate conflict.

We have four people in the business. I thought about us as a team and I never imagined real teams having conflict. When people disagreed I did not know if it was personal or business. The more this happened, the more withdrawn I became.

I’ve now reached the stage where asking people to do something makes my stomach turn. If I’m going to stay in business I think I need to see a therapist.

Our friend's father took advantage of us

Our board was made up of friends and the two co-founders. We need to recruit some others people before we raised money and wanted someone with fundraising experience.

We interviewed several people and couldn’t find the right person. Then a friend introduced us to his father, a retired banker looking for something interesting to do. We all liked him and offered him the position and some share options. He attended the first board meeting and had some good ideas. He used his network to find us three potential investors. They all seemed nice knew one another. One had a teach background, which would be good for us.

Development work on our app went quickly and there was great market feedback. We needed more money to continue development. Our four new Directors said they would match any institutional investor.

Two days later they introduced us to Dragon Investments. After a lot of hassle they agreed to buy 40% of the company at a $10M valuation. This seemed good since we were only two years old. Once the investment was made, Dragon and the four directors owned 80% of the company.

At the first board meeting they said they wanted a new CEO; I was voted off the board and fired. They paid me six months salary and I kept my options. At the next meeting they fired two more from the original team. They announced that Sunrise Technologies offered to buy the company based on a $12M valuation. The two companies merged.

Six months later we found out that our friend’s father and two of the Directors were also directors of Sunrise. We also learned the merged companies were sold to a third party for $35M.


The investor's culture and values were very different from ours

When we first started the business, it was a lot of fun. We had some seed money and weren’t making real salaries, but we had a lot of freedom. We spent a lot of time together and had a great time. There was almost a thrill to see if we could pay our bills each month.

When we got $250K from some friends and an angel investor who was a friend of my brother, it made us feel more like “adults.” The angel investor would come in each week to see what was going on. He kept asking questions, wanting to know how meetings went, asking about the burn rate.

Fun turned to stress; I began worrying constantly and was always anxious. This affected my decision-making and my relations with everyone.

The angel investor introduces us to Green Island Investment. They wanted to buy up to 25% of the company and get seats on the Board. They needed to do due diligence and set a deadline of 3 weeks. We had to create a data room and I had to be there to answer questions. There was nothing friendly about the due diligence process and I took a distinct dislike to the people from Green Island.

Finally I had enough and went to talk with others on my team and said I did not want to do business with Green Island. They were all shocked but listened. It was money versus culture and values. We didn’t know what to do.

Should I pay the $500 bribe for the permit?

He said I’d have to give him $500 to get the permit. I didn’t know what to do because we couldn’t open without the permit. I asked everyone for advice. My parents said to pay him – this is how business was done. My sister said it was wrong to pay him. Our lawyers said this was normal, but they couldn’t advise us on this. Finally, I just paid so we could open up.