UpFront - January/February 2010
Bouncing Back
Business failure isn’t the end of the road if you can learn from your mistakes
by Laurie Zuckerman
Rebecca Boenigk had no doubt her startup would succeed. The reason: She already knew failure. Her first business attempt ended in corporate bankruptcy. "The worst already happened," she says. "After you blow one up, that fear of failure is gone. We knew how not to do it."
Lots of business owners are probably feeling like Boenigk right now, as business bankruptcy filings have surged since the beginning of the downturn. In 2008 alone, 43,546 U.S. businesses filed bankruptcy, which was a 54 percent increase over the previous year, according to the American Bankruptcy Institute.
But Boenigk is proof that going under doesn’t mean the journey’s over. Twenty years after filing bankruptcy, Boenigk’s new business, Neutral Posture, based in Bryan, Texas, is one of the country’s top manufacturers and retailers of ergonomic office chairs.
She admits the turnaround didn’t happen with the snap of her fingers. First, she needed a few months to mourn her failed company. Then she pulled herself together and told her business partner--her mother--she wanted to try again. With startup capital from family and friends, the mother-daughter team launched out of Boenigk’s garage. Boenigk built the seats; her mother the backrests.
They were clear on one rule: They wouldn’t spend money they didn’t have. "We probably could have grown faster if we had taken more risks," Boenigk says. "But we have 80 families who rely on us to make smart decisions. I take that seriously."
Of course, not everyone who dissolves a business--either through bankruptcy or other means--succeeds in their next venture. David Williams, a small business attorney with Kent, Ohio-based Williams, Welser & Kratcoski offers these tips for starting fresh after a financial failure.
Know when to fold ’em: Don’t sink so deep into debt that you can’t dig out. The point of bankruptcy is to offer a fresh start by clearing debts. However, certain debts, such as a tax bill, don’t go away with bankruptcy. "If you can’t pay your payroll taxes, it’s time to get out," says Williams.
Pinpoint the root of the problem: To avoid making the same mistake twice, you have to ask the hard questions: How did I get here? Exactly when, where and why did things go wrong?
Get cash: If you’ve filed bankruptcy, traditional lenders probably won’t help. But there is seed money available if you know whom to ask. In addition to small business development corporations, there are those, such as accountants, financial planners and small business lawyers, who have clients seeking investment opportunities in promising young businesses.
Hold back the reins: Entrepreneurs are not known for their patience. But, facts show, many second-attempt businesses start small and grow slowly.
Hire a financial guide: Did you fail to understand what it costs to run a business or how to budget? A third party may help.
Hold your head high: "Don’t be embarrassed," Williams says. "Have some self-confidence and say to yourself: ‘That didn’t work out, but I work hard, and I’ll get this done.’ You have to have that air of confidence about yourself so others will trust you, too."