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Why a Washington Business Folded: The Face in the Mirror

My pal Jim called last week, with news neither of us ever expected. His business has folded after a 15-year run. No Chapter 11, no bailouts, no last-minute loans from his father-in-law. One day, he just looked at the books, saw a gallon of red, saw no black on the horizon and pulled the plug.

Jim asked me not to reveal his full name or the nature or location of his business. His reason is quibble-proof: He'd like to try again, as soon as he decides he's ready, and he doesn't want any potential partners, landlords or lenders to get the wrong idea.

But he's far from ready, and he knows it. It is just a business failure, not a personal one. Yet he can't help but see it as both. "And until I can, well, I'm just going to search my soul," Jim said.

Jim spoke with me so that my readers wouldn't get the wrong idea, either.

"My business did not fail because of interest rates, politics, paperwork or government regulations," Jim told me. "It failed because of me."

Jim said his biggest mistake was to spend most of his time on aspects of the business he did not know and not enough on aspects he did know.

"I suspect I was like a lot of people, especially in this day and age," Jim said. "I hated to pay for outside expertise. I thought a lot of the work was common sense. So I played Atlas. I took everything on my own shoulders."

That meant bookkeeping -- which is a special howl, because Jim can't even do his own income taxes (his wife does them). That meant purchasing ("I figured I could tell from a voice on the telephone whose deal on fax paper was better. I discovered otherwise.").

That meant maintenance ("I literally scrubbed the floors on Saturday nights to save $150 a week."). And that meant banking ("If it was my business, I figured I should be the one who made the deposits. Anyone else uses the mail or a courier. I would stand in line just so I could watch the stack of checks go into the teller's hand.").

Jim said it got so bad that he fired his lawyer over a $3.20 fax bill.

"I'm not going to tell you I was wrong," Jim said. "Any business lives or dies by watching the pennies. But it wasn't worth the time and energy I put into it -- 15 minutes on the phone, not even listening to the lawyer's side of it.

"When you fire someone over $3.20, you're not at the cracking point. You're past it."

Jim said the worst mistake he made is the same one that corporate America makes every day -- focusing on the short-term at the expense of the long.

"I would study the balance sheet on the 28th of every month. I don't know why I decided that a month was the right measure of how we were doing. It could just as easily have been a week, a fortnight, a year. But when I had three losing months in a row, I panicked. I cut prices, instead of doing what I should have done -- more expert marketing, better advertising, closer cost control, a fresh refinancing package."

I asked Jim whether his is a "Washington story." He said he isn't sure.

"I'm sure it happens in New York and Timbuktu also," he said. "But the failure to ask for help, the urge to do more yourself with less, yeah, I've heard that around the Beltway way too often."

When Jim flicked off the lights for the last time, it was a Thursday. He said he didn't even think about Friday until it dawned.

"I got up, read the comics, read your column, drank a second cup of coffee. I was all set to rush for the shower when I said, 'Hey, wait a minute, I've got nowhere I need to be.'

"So I drove to Mount Vernon and spent the day sitting beside George and Martha's house. I must have been out of my mind. It was about 20 degrees, and there I am, sitting on a bluff, overlooking the river, wind whipping all around me. I should have been thinking about who's going to buy my office furniture, and what about my tax picture for 1996? But I kept sitting there, because I just needed to clear my head."

After a month, Jim says his head is not yet clear, but clearing. He has begun to call old friends and old business associates. He has no timetable, no agenda.

He is guiltiest, he says, about the four employees who went down for the count with him. He has told them all that they'll be the first on board, if and when there's a new venture.

"But I'm not sure I want there to be one," Jim told me. "I'm not sure I've learned the lessons I need to learn."

So Jim has decided to take it gently and slowly, in the fashion of a recovering alcoholic. He will spend the first two weeks of March looking up old high school classmates in the small town in southern Indiana where he grew up. He doesn't even know if the classmates still live there. But he will drive around and hunt and see.

"You can't grow scar tissue if you're still not sure why you got wounded," Jim said.