I want to start my own business but I know it's going to be lonely

After university, I wasn’t sure what to do. I really wanted to start my own business and work for myself, but I didn’t have a business concept developed yet so I went to work for a local bank. I didn’t enjoy the work but thought it would give me the time to develop a business.

I was at the bank for a year when I was offered a promotion and a chance to work in England. I thought this would be great experience and so off I went. I spent three years in London and learned a lot and developed a strong network there.

I returned home and went back to work at the bank. I was bored but I wasn’t sure if I wanted to start my business. I was scared and knew starting something on my own would be lonely. I couldn’t see myself sitting by myself everyday.

I spent two more years at the bank and nothing really changed. Yet, I still could not make the move to break away from the bank. I keep telling my friends I wanted to started my own business but after a while they stopped listening.


We didn't plan for currency exposure and are now facing major losses

We had a good harvest this year. This means we will have plenty of product. We bought everything we could from the farmers and moved it into our local warehouse. We planned to work three shifts in the factory and organized for more storage space in Europe and the US.

The production went smoothly and we started shipping product. We had never covered our currency exposure as we did not have enough volume. With the increased volume we thought about it but did not want to incur the expense.

By the time the shipment reached the warehouse the exchange rate had gone up which meant the wholesaler either increased his price in dollars or we made less in our currency. The difference was 4% and increasing. The situation with the Euro was worse.

By the time we finished processing the year’s harvest, our currency losses were greater that the profit from the increased production. If we wanted the breakeven we would needed to increase our US sales 12% and Eurozone sales by 15%.

My mentor gave me the wrong advice

I have worked with Sam as my mentor for almost three months. We meet monthly for about an hour. He was very useful and had a lot of experience. He gave me some input on my business plan as well as some details about the market and key competitors, which I included before sending it to some investors.

When I met with a friend, she said some of the information I was given by Sam was wrong. I double-checked and found out that she was right.

I got a note back from the investor thanking me for the business plan. They said it was a really interesting idea but that some of financial calculations were incorrect and affect the discounted cash flow. I had done the DCF the way Sam told me to do it.

What do I say to Sam? If I can’t trust him who can I trust?

There was a lot of change when the investors replaced the Founder with a new CEO

The new CEO is very smart and had a good education but doesn’t have a clue about how to run a business. The new investors replaced the founder in order to allow the business to grow. The founder was bored by the day-to-day and had a new business idea.

We’ve been working in an open plan co-working space, but the new CEO insisted we also get an office. He also wanted to get a receptionist/bookkeeper. He commissioned an agency to look at our logo and branding. This alone was going to cost $12K, which is more than we had spent on anything so far.

What seemed like trivial expenditure to him seemed like a fortune to the rest of us. He also wanted us to do an 18-month rolling cash flow forecasting. None of us really knew how to do this and it took a lot of time. He would call a meeting to review it and this would take more time. None of us were sure what we suppose to learn from this.

He kept telling us these were things we needed to do to grow. But we were only 18 months old, our cash position was marginal, and we were barely coping with our day-to-day obligations.

No matter what we said, the new CEO refused to engage in the daily operations. We needed help and all we had was more things to do. It is OK to add new things, but surely we should stop doing some other things.

Even though I started the company, maybe I'm not cut out to be a manager

Managing a team is a pain in the ass. Everyone is so self-centered and needy. It takes all the energy out of me. As the company grows it is becoming more difficult to get people to work together. Why should I be spending my time on this? I should be out getting more business.

Yesterday a team member resigned. She was the first person to leave the company. She said it had nothing to do with money or status. She loved the product couldn’t work with a dysfunctional team and leader.

It wasn’t fun to come to work. There was no clear direction. Priorities changed day-to-day and people didn’t support one another. She looked me straight in the eyes and said there is no leadership. She told me I was in over my head and didn’t realize it.

Did I know, she asked, that I had not spoken to her in three months and there are only 15 people in the company? Did I know her mother had died? Did I care? I told her this was not intentional and I was sorry. She said that was the problem.

 

I didn't realize taking spending money out of the company would cause tax issues

Every month I took $2000 out of my business for my own expenses. This was in addition to my salary. I used credit cards and cash and thought this was my company so it was my money.

When we filed our tax returns we did not declare this as income for me. There were only five of us, so no one was really looking. We paid taxes on all the income we declared. Over the next three years the business grew and I started taking $3000 per month. No one said anything.

One day we got a notice that there would be a sales tax audit by the local government officials. I didn’t see any problems with this as we paid all the tax that was due. We passed the audit but I began to think what would happened if they audit our federal returns? I had taken more than $100K over the years. Even if I wanted to declare it, I could not afford to pay the tax and penalties. I was stuck

We needed to get a bridge loan from the bank to finance a new machine in the factory. When they examined our accounts they immediately said there was something wrong. The financial accounts and the bank statements did not balance. I told them I would look into it but knew the difference was the money I had used for my expenses

How did I get into this mess? How do I get out of it?

Even after we did an audit and installed security cameras, we couldn't figure out why stock was missing

Over the past few months we have been running out of stock of certain components. This held up production and cost us a great deal of money. No one seemed to know why this was happening so we had an audit.

What we found was shocking. We were running out of stock because someone was stealing the key components. The invoices showed they were delivered, the internal stock systems said they were on the shelves, but when went to the shelves, they weren’t there. There were only two people in the warehouse. We didn’t know what to do because we couldn’t accuse someone without evidence.

We installed security cameras but didn’t see anything suspicious. We were still missing stock- in fact we lost over $10k of components. We couldn’t figure out what was going on so we finally called the police. They sent someone from the fraud squad who looked at all the records. She said nothing was stolen. The fact was it never arrived at the factory. The invoices were false and one of the warehouse men, who was in on the fraud, recorded them as real and then entered them into the system.

The warehouse man was arrested as was the sales rep at the supplier. It turns out they were cousins and had done this at other companies.

Our CEO was shocked investors didn't want to invest after his presentation

Alan was a CEO. He was the founder and held all the patents. He decided that he would handle all the fundraising. He was not financially literate but that didn’t bother him. He led the seed round and was convinced that he could do the series A.

I went with Alan to an investor meeting, but he did all the talking. He had some PowerPoints and basically just read them. He had a set of notes and did not look up from them and had no eye contact with the investors.

When they asked him questions, he took it as a personal challenge and got aggressive. When he didn’t know the answer to questions, he didn’t consult me or say, “I don’t know, I’ll get back to you.”

At the end of the meeting Alan, asked the investors when he would get the money. When the most senior investor said never, Alan was shell-shocked.

How do we account for bribes to the customs agent?

We have to bribe the customs agent every time we ship something out of the country. How do we report this in our accounts? Does this go into the cost of goods?

The breakeven number we need doesn't exist; does this mean my business model is flawed?

At school, we learned about the economies that could be achieved in a service business when there is density in terms of customers. When customers are closer together it is cheaper to serve them as the operating/logistics cost are less. One professor said the ideal would be a really tall building where you had all your customers. We discussed clusters.

As part of our support for guesthouses we provide facilities management including repairs, laundry, and food delivery. We started with 12 guesthouses, all within a few kilometers of one another. We could offer them rapid response at a realistic cost. As we added more guesthouses, distances grew until we were working in a 6 km radius. This was in a dense urban area where 6 km is a large distance and rapid response became almost impossible with the traffic. Service levels declined.

We modeled the cost of opening a facilities management depot and it was too high. It appeared we needed 30 guesthouses to cover the cost of a depot. There weren’t 30+ unit clusters anywhere in the city. Does this mean our business model is flawed?