Over 10 years ago, I was called into a meeting to discuss my family business. At the time, my late father, who owned and managed the box-making business since the early 80’s, was on the verge of declaring personal and corporate bankruptcy. The company had lost over $300,000 in the previous fiscal year and had little to no equity remaining on its distressed balance sheet. Sales were in decline, debt was piling up and interest costs were high and increasing quickly. Employee morale was low — due to the financial uncertainty, many employees feared for their jobs and the company’s future. With very little cash in reserve, constrained access to credit and significant monthly cash flow deficit, I knew we needed to act quickly. That meant I had to make some hard and cold decisions.
The first order of the day was to examine the numbers. After reviewing the financial statements, I discovered that the CFO was paying himself dividends as the company was running at a loss. When confronted on this item, he declined our request to defer dividend payments until the company was in stronger financial health. It became clear to me that I had to fire the CFO.
Next, I had to shop around for a financing deal that would consolidate all of the company’s debts — instead of the high-interest line of credit the company was paying too much for. But getting a bank to take a chance on the business was no easy task. At the time, I was working full-time in procurement for IBM where I was responsible for negotiating vendor agreements to save the company money. That experience came in handy. I had to knock on many, many doors. And eventually, I found an institution that was willing to give my small business a shot.
After finances, I had to put in place new processes after discovering that the three main divisions of the company (sales, manufacturing and accounting) worked in silos. I eventually got involved in the business full-time and took over as CEO until the company was in stable financial standing. I later hired a general manager to run company operations. Turning the business around was a huge learning experience. Here are some of the lessons learned, which I hope help you manage your own business.
Know Your Company Finances
No matter how big or small your company is, make sure you understand your balance sheets. I recently graduated with an Executive MBA, but you don’t need to have an MBA to learn how to read financial statements. You can always take a course online to help you get a grasp on your numbers. Always get a second opinion on your financial situation — whether things are going well or not. After firing the CFO, I hired a small accounting firm that specializes in small business accounting. For a small monthly fee, they ended up doing a much better job than the CFO who was costing the company 300,000 a year.
Don’t Be Discouraged by Rejection
When I was looking for a financing deal, I received one rejection letter after another. I met up with several bank representatives. Most were very helpful and gave me good advice but were not able to take on the risk and finance a small business. But I persisted. I kept reaching out, making appointments and showing up, until finally, a major bank agreed to give my business a chance. Without that financing deal, the company would not be in business today.
Surround Yourself With the Right Team
It was during those difficult times that I learned the valuable lesson of surrounding myself with a team that I can rely on. When I took over the company, I realized that the previous management had isolated its vendors, clients and employees. It’s amazing what can happen when you treat everyone as part of the same team, working towards the same goal. When the company was in financial trouble, I reached out to our vendors and asked for extended deadlines to make payments. To my surprise, many agreed to it. It was around that time that I developed my “Let’s Grow Together” philosophy. I’m a true believer in the strength and absolute necessity of teamwork as the foundation of success.
A version of this post originally appeared on Medium.