My last blog post on cutting expenses made me think about how hard it was for me to listen to objective criticism when I owned my first entrepreneurial venture.
Prior to the market falling, I had obtained a Small Business Administration loan for my logistics company. Most of the proceeds were in the company's bank account when it became evident that the market was going through a permanent changed.
When my logistics company started to falter, my father offered to look over my financials and give an objective opinion of what I should do. My father was a successful entrepreneur in the construction industry in Nashville in the 60's and 70's and I valued his opinion. So I agreed to hear what he had to say.
Upon looking over Justice Freight System's financials and hearing how the market had changed because of the new federal trade agreements, he made a some tough suggestions. In particular, my father recommended that I let all my employees go, move my company to where I was living, and concentrate on rebuilding my customer base and revenue. He felt that I should not add employees until I had revenue to support paying an employee.
I didn't want to hear what he had to say. Part of my problem was ego and part was over-confidence in my ability as a sales manager and salesperson. I had cheated death three times in my business and I had faith that I could do it a fourth time. If I had listened to my father, my company may not have survived but I probably would have had enough cash in reserve to avoid bankruptcy by negotiating cents on the dollar with my vendors. Instead, I used the SBA loan primarily for payroll when the company's revenue didn't support having employees.
I learned the hard way that it's good business to listen to objective parties insight into your business and operations. Employees and vendors will often tell you what you want to hear because they want to keep their jobs or your business as a customer. It's best to have an independent third party with business experience provide this type of feedback (i.e., been there, done that, lost a lot of money). It could be a professional such as a CPA (I offer this service at CPA for Small Business) or management consultant who has owned a small business. Constructive criticism may also come from a good friend has lead or owned an entrepreneur business.