A $100,000 loss.
That was the number I was staring at with disbelief on a fateful November day in 2013.
After most staff had left for the day, my bookkeeper and I took a walk in the warehouse. She cried and I sobbed.
It had been a crazy year of highs and lows up until that point—and now we were looking straight down the cold barrel of business bankruptcy.
My company REfficient, which sells refurbished and never-used telecom equipment, had grown at warp speed, eclipsing a million in sales.
But earlier that year, my trusted bookkeeper had become gravely sick and took immediate leave to have life-saving surgery.
I rushed to hire someone new to take over our accounting, but they did not have the same financial acumen.
Neither did I. My own inexperience with starting a business in Canada and certain diversions – I was focused on raising capital to fuel more growth – meant I didn’t have the pulse on where my company was at.
When our original bookkeeper returned months later, I really didn’t know how bad things were. Our income increased significantly, but our expenses grew even faster.
I stared at that -$100,000 on our income statement. We had six weeks left in our year and I had no idea how we’d dig out of it. Soon we would run out of cash — and I’d be bankrupt.
This is how the darkest period of my life ensued. For seven months, I took every measure to save the business. I took myself off the payroll and cut expenses to the bone. I rallied our sales team, without trying to make them worried. I desperately searched for new ways to generate sales and much needed cash.
Luckily, my story has a happy ending. Later that year, we won a large contract. That set us on a new trajectory.
But my lowest point also coincided with the biggest personal and professional growth of my life. I learned a lot from almost going bust, and since that fateful day in November, REfficent has gone on to have a customer base in over 20 countries and divert over 150,000 products from landfill annually. I’m a better leader from trudging through the muck.
I look at the businesses struggling for survival today due to the pandemic and empathize. It probably feels like the rug has been pulled out from under you.
Here’s what I learned from almost going bankrupt.
Having a support system was key
At first, I didn’t tell people the depth of what was going on, because I didn’t want others to worry. Deep down, I was also ashamed that I had plunged us into this mess.
There were two people I opened up to completely: my best friend and my business adviser. It was important to let myself cry with them and process my emotions. It was also important to have these cheerleaders remind me what I was capable of in a dark period.
Another pivotal person: my accountant. He gave great advice for dealing with the bank, with whom we had a sizable loan. He suggested positioning the story: we went through a hard time, we’ve taken steps to address the issues and we’re seeing new results – then showing evidence of the new results before the old data.
The broader lesson is to cultivate your trusted support circle – your accountant, business advisor, lawyer, and other key people whom you can turn to in good and in bad times.
Diving into our numbers – even if I didn’t want to look at them – gave me clarity on choices
Back then, I only liked looking at our numbers if they were positive. I avoided looking at our bank balance if I knew I wasn’t going to like what I saw.
Big mistake.
When I was faced with our huge loss, I forced myself to look deeper into our financial data. It was painful for five minutes, but then I got over it.
I could see clear choices in our game of survival. We weren’t making money on certain product lines, so they had to go. Was there sufficient value being created from our expenses? If not, they were cut.
I also figured out how much money we’d need to cover the next 30 days. This allowed me to plan accordingly and gave me peace of mind.
A more profound insight happened in all of this. Before I had made our numbers a reflection of how good I was or not. Now they were just numbers on a screen, devoid of any personal meaning.
This gave me tremendous liberation and sparked a love of personal finance which continues to this day.
So do a dive deep in your numbers and look for the patterns that emerge – especially if it’s your own money block.
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Being straight with suppliers allowed us longer payment terms
It was vitally important to me to always pay our staff and rent on time. At the worst point, I had maxed out my personal line of credit and carried a balance on my personal credit card – something that I had never done in my life.
During this period, we often could not pay our suppliers on time.
We had two choices: hide out and avoid until we could pay or be straight about our situation.
We chose the latter. We had difficult, but necessary conversations. We informed the suppliers that we were going through a tough time and offered a payment schedule.
If we could not honour the payment plan – and this happened – we would communicate, pay them what we could and revise the schedule.
Two interesting things happened.
By being open, suppliers shared with us about going through tough times of their own. More businesses have been to the brink and back than you may think.
Secondly, we earned great respect and trust through our openness, something which has carried on and helped us to win more business to this day.
As hard as it may seem, be transparent with your suppliers. You will reap both immediate and long-term dividends.
The access to the other side was mastering the mental
Giving up was never an option. We created a plan and executed on it, day after day.
The real battle was with myself, mentally and emotionally.
One day in spring, I was confronted with a simple question that changed everything.
What’s the worst thing that could happen?
I realized the worst-case scenario was that I would close the business down, sell my condo to pay off any debts and get a job through my now-expansive network. And I would talk about the experience so that others didn’t make the same mistakes.
If that’s the worst-case scenario, I thought, it’s totally bearable. That gave me newfound freedom. Not long after that, results followed.
We won a large contract and then another. By the end of that same year, we had record sales and our profit more than covered the losses.
It’s true that adversity makes us stronger. In hindsight, I’m thankful for this experience because it pushed me to grow beyond what I thought possible. I am a far better entrepreneur for it.
Stephanie McLarty is an award-winning entrepreneur and champion of sustainable business. She is Founder & CEO of REfficient, which provides a reuse and recycling marketplace and services in the Telecom sector. REfficient has been a Certified B Corp since 2012, and was named six times to the “Best for the World” list for the company’s positive environmental impact. Stephanie is also Founder and Mentor behind Wealth of Family, which helps moms build thriving businesses that make a positive impact in the world.
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