Would You Like Some Help...

I recently received a phone call from a woman, who wanted to thank me for helping her save her business. It was an interesting phone call, one I enjoyed very much receiving. The most interesting part of the story, however, was that this woman was never a client.

She had called me several years ago, asking for help in her candy business. Rowena was an excellent saleswoman, and had several large wholesale accounts, but struggled to scale up her process for making the delicious candy treats to meet the demand.

Her equipment was in many respects worn out and inadequate. She was trying to fix it and modify it. She had employees that were not much help. She was working very long hours to keep her company afloat, because she knew she could sell her candy, if she could only get it made. She was treading water. Her manufacturing costs were too high. Her equipment was both too small and too old. As her employees were not much help, Rowena did most of the work.

As she looked at her problem, she concluded that she needed to borrow money. Money, she thought would solve all of her problems. She could by the equipment she needed and get the manufacturing process running efficiently. In short, she saw this as a capital problem, and yet, no one would lend her money.

I did not see this as a capital problem or a money problem. I saw this as a management problem. Rowena was a great salesperson, but not a great manager. I suspect the banks that looked at lending her money, also saw that this was a management problem. That is why they would not lend her the capital she thought she needed. Until Rowena learned how to manage her business, until she gained the management skills to run her business profitably, any money lent to her, would quickly be lost, leaving Rowena with no ability to pay it back, and leaving the lenders with some very expensive caramel making equipment that they now needed to liquidate.

I met with Rowena only once, as I laid out a strategy to the management problems she was facing. Not surprising, my approach was not as appealing as the very attractive alternative of borrowing money, so she did not hire me to help her.

Unable to borrow the capital she wanted, she eventually sold 10% of her company to an investor, who promised to bring in new capital and some management experience. She told me on the phone that it was a disaster and did not work. The investor, unable to make a difference, had moved on to other things, leaving her no better off than she was before, but now the owner of only 90% of her company.

Without alternatives, she decided to implement the very rough plan I laid out for her a year earlier. She did what I suggested, and it started to work. After a year of working my plan, she called me to thank me. It was a management problem after all, and management problems are the easiest ones to fix.