💙 Fit or Failure?
Here are the Mistakes that led to my bankruptcy
This is the first in a three-part series about my bankruptcy. To learn how I got past it all read courage precedes confidence and failure builds confidence.
When I graduated from University, I thought I did everything you’re supposed to do when you start a business. For a while I did not talk about my bankruptcy because I didn’t know if people would still love me or think I had value. I had fears that people would think I wasn’t smart if they knew I had gone bankrupt.
I’m sharing this with you because I feel there are not enough people talking about failure. There’s no reason to feel shame, guilt, or embarrassment about going bankrupt.
In my heart I knew I was an entrepreneur, and the last thing I wanted to do was climb the corporate ladder. Working at the gym I started to become very passionate about wellness and beauty. Sales has always been my strength, but what I loved about the gym was the social aspect. Seeing the members, the community aspect, talking, making friends...I loved not being tied to a desk.
Naturally, I thought that opening up an anti-aging spa would combine my passions of the art of making a sale...and truly making a difference in the lives of others.
I thought to myself, If I could sell gym memberships and manage their team, I could sell weight loss programs. It was a brilliant idea. I learned that Medi-Spas were going to be the next big thing, a combo of medical and spa services.
We did everything we thought we were supposed to do. I did a LOT of research beforehand and made sure we had a sound business plan in place...there was some snafus with the build out, but it turned out to be “normal” trial-and-error challenges of opening up a business.
We secured a line of credit.
We had a perfect location.
We hired an interior designer and bought top-of-the-line equipment (after countless, tiresome trips to Home Depot and many days living off coffee).
But there was one CRUCIAL thing we overlooked…
At first we had to focus on paying rent — and fast. Our rent was $4,000 and we had less than $2,000 in the bank.
At some level I knew that building the clientele would take time. But we had used every penny to build out the spa and buy inventory.
If we didn't start selling, we would have had to close the doors before we had a chance to service anyone.
I was anxious to say the least. I had a swirling feeling in my stomach, a fast heart beat, a huge sense of urgency and some fear...we were hustling every day, thinking there was nothing we could do but keep going.
We eventually hired 2 girls through an ad agency to stand outside the spa and approach women on the street. The cash flow soon started, but it was a constant hustle. Every month we started the month at $0 and had to keep selling — it was exhausting and stressful and I had many sleepless nights wondering how we were going to make it.
Soon, our cash flow dried up, and I was bringing in zero dollars a month. I felt scared, and that it was time to let go. I felt like a failure. Part of me felt defeated and wanted to leave and part wanted to fight for the spa and part of me knew there would be bigger opportunities and now was the right time. I had learned everything there was to learn. The spa gave me insight that working for an hour and getting paid for an hour and having people want and need me to do the service was like a jail sentence. I was 30 — I went bankrupt in March 2006.
1. We didn’t take our overhead into account.
When we launched the spa, we took out a $250K line of credit and my partner got a $70K line off her house. Between the monthly loan payments and the high costs of rent, we couldn’t afford any slow times.
2. We went too big.
We took out the large line of credit so we could buy new equipment and have a large facility with eight treatment rooms. We would have done better with a smaller loan and fewer treatment rooms.
3. We didn’t have a shareholders agreement.
Meaning, my partner and I didn’t have a legal binding agreement outlining how we would deal with differences of opinion or if one wanted to quit. My partner and I had fundamental disagreements on what to do with the spa when business slowed. Since our partnership was a 50/50 verbal agreement, we couldn’t come to consensus when we disagreed
Since my chances of reviving the business alone were slim, I felt my best course of action was to declare bankruptcy.
Paralyzed, my guts riddled with anxiety, self doubt, and confusion.
After a discussion with my lawyer I decided to go bankrupt. The minute my lawyer suggested this I took the advice; I had been thinking about doing it, teetering back and forth — should I, or shouldn’t I?
My lawyer finally gave me the push and “permission” I was seeking. Finally, someone could offer me a way out.
A piece of me felt relieved and free. Filing for bankruptcy created a lot of peace. The creditors stopped calling and harassing me, the bills stopped piling up. Finally, I had a way to gain some control back, get myself back on track and moving forward.
My partner decided to make a go of it on her own, she lasted 6 months. I’ve never heard from her since. Unfortunately, I was ready to move on, BUT I felt I killed my partner’s dreams.
I eventually learned that bankruptcy can be a tool to help you close one chapter in your life so you can start another.
At the time I believed I failed. Since I interpreted, “I failed”, as in Sophie herself is a failure and not this project failed, I I carried a lot of guilt and embarrassment for a long time.
Curious? Take a peek & discover a new you.
Take a peek inside and discover lots of free training tailored just for you. In Chapter Three of this series, we learned that sometimes the best you can do, can be the hardest.