Since the start of my blog I have mostly written about general finance knowledge that you could truly get off of any of the hundreds or even thousands of personal finance sites out there.  So, with this post I decided to change it up and write a more in-depth article about my business failure.

The Beginning and the End

“Before success comes in any man’s life, he is sure to meet with much temporary defeat, and, perhaps, some failure.”

- Napoleon Hill “Think and Grow Rich”

In my debt story I described, very minimally, a martial arts business I ran from 2003 through 2009.  The martial art was called Capoeira (not many know what it is or how to even pronounce the word) and I had been involved with it for about 13 years.  I had started training in 1997 with a friend in my parents’ basement and eventually found a Capoeira group at Buffalo State College where I attended school.  I practiced there for some time and eventually started to teach the classes.  Later on, around 2000/2001, I became the leader of the classes and the group simply because all the other advanced members had moved on. 

That was the turning point.  I wanted to start to grow this art form I loved, cherished, and was downright obsessed with, probably at an unhealthy level. I wanted to spread it as far as I could and I believed with all my heart that once other people started to see how amazing Capoeira was they would jump on board with me and the group.  In 2003/2004 I began to build a business.  Now keep in mind I have had no business experience, no financial education, and/or any knowledge of how things work in the real world.  I was just a kid in his early 20’s with a burning passion to make things happen. 

So, away I went with my fiancée, now my wife, looking at rental spaces to hold our classes and create a Capoeira school.  We looked at a few places and settled on a 2800 square foot free-standing building.  It was a great space for what we needed.  We took out a $25,000 SBA loan from a local bank and maxed out my two credit cards to renovate the space…yikes!  Credit cards as I think back now….no financial knowledge at all! 

My wife, about 10 super dedicated students, and I began to renovate this space.  We did all the work except for the electrical and plumbing ourselves.  We sanded trusses, framed it out, insulated it, hung and finished all the drywall, painted it, installed a hardwood floor and carpet, tiled the bathroom, hung doors and trim, and painted a huge mural.  This was no small construction job.  We pretty much rebuilt an abandoned hot dog restaurant from scratch. 

Jumping ahead; the location was set and we are open for business.  We gained a few new students in the first couple months, then a few more throughout the year, and the next couple years, but we never had the explosion I was dreaming of.  After some time the amount of students settled around 40-50 per month and the income from the sale of classes and products was just barely paying the bills.  In fact, I never received a pay check!  I had never taken any money for myself simply because we couldn’t afford it and at a certain point I was paying $600 of my own personal money from my full-time career to make this business survive and that didn’t last long. 

In 2007 the building we had been leasing was offered to be purchased from the landlord.  We had the option to purchase the building through our “right of first refusal”, but we just didn’t have any money to make that happen.  In the end the building was purchased and we had to move out.  We took out the hardwood floor we installed just 3 years earlier along with any other things we could.  The building is now a Laundromat….yeah!

After leaving we reverted back to holding classes at local community centers and karate studios.  That only lasted until the summer of 2009.  From 2007 through 2009 I had been losing interest in running the business and even practicing my beloved martial art.  The group was slowly dwindling, no money was coming in, the debt was growing, and the idea of continuing life this way was impossible to bear.  I had a growing family and a full-time job to also take care of so enough was enough and I let it all go.  I quit on a hot summer day in July just after washing my car.  I remember it very clearly. 

That was the start of a new life for me and being lost in time and space I needed help.  I started looking for financial help; reading lots of finance books and articles.  I also started looking for answers as to what happened with the business, so I started to read business books (I should have read those earlier!).  I then changed my financial life completely, got on a budget, changed our spending, and began destroying our $40,000 in debt.  By the way that debt will be paid off in just a couple of weeks as of writing this article. 

So, why did the business fail you ask?  Because in reality I had no clue what I was doing!

Reasons My Business Failed…I Think?

When I first started trying to figure out exactly what went wrong I was putting the blame on things that had not been the root of the problem such as: 

• Too many expenses, costs too much
• Did not advertise enough
• Instructors not being good enough
• Not enough students (customers)
• Too much work to be done by one person

Those listed above were not the direct cause but rather the negative outcomes of a whole different set of problems.  I figured most of that out by reading a really good book called “The E Myth” by Michael E. Gerber.  And, I guess if I had remedied some of the negative outcomes above things would have been better but only by a small amount and the business still would have closed. 

The Real Reasons My Business Failed

• I never saw the business separate from myself – meaning I could not make and did not make a mental, emotional, and physical separation between myself and the business.  I did not set the business up in a way that when things started to go wrong I could have just walked away with no regrets.  I poured everything; heart and soul – not just money, into the business.
• No primary aim for myself, therefore no primary aim for the business – I was young and didn’t know where I wanted to go with myself, let alone this business I was starting.  It was something I just decided to do one day and that was that.
• Strategic objective wasn’t fully realized and planned out – not having a primary aim was bad enough, but also not having any strategies on how to make the business successful was another thing entirely.  Again, I didn’t think I just did.
• Market research was not done at all before or during the business – I didn’t even know this existed until well after the business was closed.  If I had looked into this I would have learned what I needed to know about the market I was entering.
• Organizational strategy was not strong because my “technician” was in charge (the “technician is what Michael Gerber’s book describes as the “worker” inside all of us) – I really needed to balance the three “business people” inside me.  The technician, the entrepreneur, and the manager.  They were not in balance at all as explained by “The E Myth.”
• All other strategies (management, people, and systems) had not been developed.
• No path to profit – it was a fun thing to do (a hobby) that wasn’t turned into a systems business machine, but rather a hobby that a group of people kept as a hobby and nothing more.

Realizing the above had taken a long time, lots of thinking, and tons of emotional stress, but it was something that I needed to figure out and move on from.  I had also learned a few truths about failure, which if I had known those truths earlier I may have been able to stay with the business and possibly moved on to great success.

The topic of failure is so great that I will be writing more about it in the future but in short two major truths about failure are:

1. It is temporary
2. It is absolutely necessary for success