I Got Sick, My Business Suffered
Going into 2019 I was sure that this was going to be the year where the business broke through. Where it finally became profitable enough to pay me a living income. But instead the opposite has happened.
As I discussed in the last few entries, the year began with losing our biggest customer and roughly 20% or so of our revenue. Having that customer was both a blessing and a curse. It was a blessing because it forced me to take on more business than we could handle and I had to adapt quickly. It was good to learn how to handle that insane amount of volume. But it was a curse because it interfered with the natural growth of the business. We were so busy that i had no time to work on growing. In fact there was no room to grow because we were close to capacity. And thus, losing that customer set us back 6 months, back to where we were before that customer.
During that time, I should have been building the cash flow. I should have been preparing the business for possible catastrophes. Not doing so was a grave mistake.
In March, I had a health crisis. I couldn’t walk 50 yards, or climb 2 flights of stairs without feeling so short of breath that i had to sit down for a minute. I went to the doctor and she ran some tests. Turns out my red blood cell count was dangerously low. I had been bleeding from my hemorrhoids. During the last few months the bleeding had gotten worse but I didn’t think much of it because i was under the assumption my body would generate the blood it was losing. Turns out, not so fast. As a result my hemoglobin level was a 5.5 when an average level for a male should be around 12.0. She referred me to a specialist but they wouldn’t take me due to lack of health insurance. The only way i could get a blood transfusion was to go to the emergency room, and the doc made it clear that it was an emergency.
Getting a blood transfusion was not enough. We also had to stop the bleeding which meant a colonoscopy and a hemorrhoidectomy. 3 days after spending the night in the emergency room getting a blood transfusion, I underwent these 2 procedures as well.
To keep my business going during this time I had to enlist the help of my brother who already works more than full time as a lawyer, and my uncle who drove down from Oklahoma City and stayed with me for a few days to help. Sales in March were ok but the cash flow got obliterated because I had to pay for a couple of these procedures up front. Also during the time that i was sick my car broke down and i had to borrow my brother’s car to make deliveries.
Going into April I was quickly running out of cash. My first solution was to refinance my condo but my debt to income ratio was too poor for any bank to approve me for a new mortgage. My brother was also struggling financially so my only option was to take out a loan against my sales. What this means is that the credit card processing company will give me a loan but it is paid back daily. They simply take a percentage of sales every day until it is paid back. I had just done this in December to fix the massive plumbing issue that had cost $5k, but that December loan was for $7k and with interest $8k. I was paying it back fast though, with 6.5% of my daily sales which amounted to roughly $1k a month. My balance on this loan was down to $4k going into April.
The only funding option I had at the beginning of April was to renew this loan. I thought if i renew it for $10k, it pays off the $4k, and i have $6k which should keep me afloat for at least a few months and then sales always go up in the summer. So I did it and now I’m paying it back with 8.5% of daily sales!
I felt good. Yes I had just went through a horrible ordeal but at least there was cash in the bank and I could relax for a few months while i recovered. My full recovery would take roughly 2–3 months, which at the time of this writing still has a few weeks to go.
April also started with a bang because I got 2 huge customers. The first was the Dallas Mavericks. There was an accident at their merchandise warehouse where a crane had accidentally dropped something on their roof which cause it to cave in and get dust all over the merchandise. They hired us to wash 750 pounds of laundry in just a few days. Because we don’t have this capacity at the store I had to send a couple of employees to the coin laundry, which is much more expensive because i have to spend $80–100 a day in coins for the machines.
At the same time I got another huge corporate customer that offered to send me 300–500 pounds of laundry a week and pay weekly for a discounted volume price. I made this deal and the laundry started coming in fast. The first week of April, 2 of my employees got overtime pay and my payroll increased from about $1700 a week to $2200 a week. But it was ok because we were busy as all hell and there was money in the bank. In fact I felt so comfortable that i decided to spend an extra $1000 in advertising, buying a couple of neon signs for my storefront and running some ads on Facebook and Instagram.
After a couple of weeks went by, neither the Dallas Mavericks or this other new company had paid. For the Mavericks it was odd because we had done work for them in the past and they always paid on the spot. This time I had to send an invoice which i thought was normal procedure for a bill that high ($1600). The other company had told me during negotiations that they would pay weekly but hadn’t paid. Of course, I still had to pay my employees who were getting overtime working on these orders. I began to probe both companies about payment but I didn’t want to seem too desperate. Most companies have a 30–60 day delay on paying invoices. My efforts so far have been futile.
So now April is over. Today is May 1st. Rent is due. The payroll has been decimating my cash flow. Instead of $6k I only have $2k in the bank and accounts receivable is over $8k! I have to choose between paying the rent and paying the payroll. I’m choosing payroll.
But that’s not the end of it. My tenant in Florida is having issues with a few appliances that need to be replaced. My car is still in the shop. I got it back for just a day and it broke down again with the same exact problem. My credit cards are maxed out because of the medical procedures i had to pay for up front. Between all of my loans and credit cards, just my personal debt payments are about $2500 a month. I am under water. My brother is also hurting financially so I can’t lean on him like i have been for the last 3 years.
I’m writing all this because I want to convey to my future self the intense pressure i felt in this moment. Everything is coming to a head. The 1st priority is to pay the employees. Then the bills. If I can do those 2 things I can keep the business open. This is the most stressed I have ever been about money and/or work. It feels like everything is falling to pieces around me. I’m to blame for it all because of the poor way i have been managing money. And now I understand how important the skill of proper money management is to entrepreneurship.
When times were good I should have been building cash flow to prepare for crises like this one. Instead I spent the money on improvements to the store and raises for the employees.
Right now as it stands my business is profitable but not solvent. The profit it is making is not enough to cover the personal loans I have taken out to fund it. For it to get to that point the sales need to go up by about 30-50%. That’s going to take some time.
The only solution i see out of this mess is to sell my condo in Florida. But even that is complicated because i have a tenant there with a lease through the end of this year. I’ve started that ball rolling but I feel like it’s going to take quite some time.
In the meantime, I’m taking meaningful steps towards staying in business. I’m making calls to chase down some of the money in accounts receivable. I’m also putting all of my personal money into the business to keep it afloat.
My goals for this year are to grow the business by about 30% and sell my condo to get out from under this crushing debt. And by selling my house i want to put myself into a position to open a 2nd store in 2020.
I know it’s high hopes for a business so clearly under water and drowning. Sales is a cure all and I’m going to work on it.
This story is part of a series documenting the journey of a Dallas startup called Feather Laundry. For your reference here is the Table of Contents for the series.
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