Cash Flow: How I Wrecked My Business, Screwed My Friends, and Almost Destroyed My Marriage (Part 2)comments (8) October 10th, 2011 in Blogs
BY MR. X
The housing-market collapse pushes one struggling homebuilder's business over the edge, but it doesn't break his spirit
As the federal government and the media started to use the term recession, a cash-flow crunch made business as usual impossible for our company. By fall of 2008, bills were late, accounts were frozen, employees were stressed, and relationships were strained. But we still felt that the recession would be short term and that we could power through. We had one spec house under contract to sell at the end of the year, a couple of others verbally spoken for, and several hard leads.
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We met with the majority of our subs and suppliers to create survival plans, sort of an informal Chapter 11 reorganization. Those conversations were some of the hardest I have ever had in my life. Everyone was in the same boat, struggling day to day with their own economy-related issues. Folks were obviously disappointed that we couldn’t pay our bills in entirety, but for the most part, they seemed glad that we were communicating with them and trying to save the business.
Unfortunately, the spec house didn’t close in December. The appraisal came back 15% below our contract price. People who were close to contracts backed out. Leads dried up as potential buyers decided to wait out the recession. Because our credit accounts were mostly frozen at that point, we couldn’t get materials, and without materials, we couldn’t build, which made it impossible to get draws and pay our accounts. The company could no longer operate. We had to lay off the remainder of employees (including myself), except for the office manager, who stuck around to pick up some of the pieces and sweep up the dust. I had to fire my best friends.
Out of all of this doom and gloom came a beacon. Our second daughter was born. I had some real concerns heading into her delivery (my concerns were rightfully dwarfed by my wife's, who was doing the heavy lifting). I was worried about the potential collapse of the business. I was terrified about how I could possibly well up more love than I already had for my wife and first daughter. At the moment of delivery, when I was tasked with determining the gender of our new baby, these concerns and distractions dissipated. I focused on obvious priorities.
I kept trying as hard as I could for a couple of months more, but it became obvious into 2009 that I was fighting windmills. We decided to close, and that was pretty much the end of the business and the end of communication with my partners. This part is especially painful since one of them was my freshman roommate in college and a very good friend. I've had a lot of varying emotions about the loss of that particular friend and colleague. We had been through a lot together.
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