Weird phrase coming from an Entrepreneur, I know!
But, my business really needed to fail for us to learn some valuable lessons!
If you have been following my blog for the past few weeks, and if not, you can read all the backstory here; we suspended operations at my restaurant company in Summer of 2016.
My business partner and I have done the official post mortem of the factors leading up to, and the ultimate causes of the failure. These are our findings:
Finding 1: We were growing too fast
It is ironic how much of a conundrum the factor of growth is in a business. Something that should make you can also break you. We were both young entrepreneurs in our early twenties when we started the business in 2013, and we went from 1 to 3 stores in three years, averaging one per year. Our business model was one that offered some form of uniqueness in our niche and we had our goals set on becoming the next big thing on the food scene. We started off very small in a little pop up stand at a Flea Market and grew to our own brick and mortar locations in a matter of months. We had big dreams, but the truth was the sudden growth stunned us. Without any experience in the food business, we started a brand that was burgeoning, catering to big Fortune 500 companies, serving thousands of customers in our stores and employing dozens of people. Unfortunately, in the end, the fast growth that built us also contributed to our demise.
Finding 2: Lack of experience
When most people start a restaurant, they do so after a few months or years of experience in the business. Maybe as an employee, learning the ins and outs from the ground up. For us, we had not worked a day in a restaurant before we started ours. We just knew we had a great idea and decided to run with it. We did not take the time to fully understand what this type of business involved before diving in, and a lot of it took us by surprise. The constant employee turnover rate, formulation of great recipes, the keen attention needed to food safety and quality, the amount of regulations involved in operating a restaurant, the sleepless nights, and the endless marketing, promotion and branding work needed to stay on top. We were unprepared and lacked the necessary experience and thought we could learn as we went along, but it proved too much.
Finding 3: A Hands Off Approach
As our business grew we started to step aside more. Not because we were giving up, but because we had loyal employees in place who had been in the business for months and we thought were able to handle the operation smoothly. As the months went by we had put managers and supervisors in place at our locations and left them in charge of the daily operations. At the end of the day they would let us know the happenings through a daily report. We slept in longer, sometimes did not go into the office or the restaurants for days (we just supervised on cameras) and we were taking almost weekly trips out of town scouting other location sites. We had somewhat neglected the daily handling of the business. As we realize now, communicating with employees via phone and FaceTime in a business that needed a very hands on approach was a big mistake. We left the fate of our company in the hands of our employees, and even though they had the company’s best interest at heart, they just were not equipped for the magnitude of work it required.
Finding 4: Lack of Capital & Proper Money Management
As I mentioned in a previous article, the biggest reason our business failed was due to lack of working capital. The business was bootstrapped from the start, with my business partner’s personal income from his previous job and our credit cards footing most of the startup expenses. As the business grew, we were able to secure one or two small loans, but nothing sustainable. With any company, your expenses are relative to your growth. Utility bills are bigger, more locations more rent, more employee wages and taxes, more inventory, more maintenance, etc. We began to reach a point where we just could not keep up, and unfortunately due to the bad wrap restaurants get from lenders due to the high closure rate (70% in NYC alone), loans were not forthcoming. Coupled with that, our money management was not the best, we bought unnecessarily both in business and personal lives. We did not learn how to effectively manage the the little that we had when we were making a profit in the early days.
In the end, we have come to the undeniable conclusion that our business needed to fail. To teach us the valuable lessons mentioned above and for us to see what was really happening. The fact is, if it had not happened this past summer, we were heading down the path where it was not if but when anyway. If we had struggled to keep the business afloat we would be in even more debt, a lot of stress and our head clouded in the unapparent reality that we can make it work. Sometime shit has to hit the fan for you to wake up, smell it and avoid having it happen again.
Have you done a post mortem on your failures?