Q: What do you do when you come in the office and it's a Monday morning and you know you have come to the end of the rope, and you say to yourself: "Oh Christ, are we in trouble!"
A: You sit there, and you try to raise money. You try to sell something and you find out it's the kind of market where nothing that you would normally be able to do, you can do. You've got real estate you think is worth something. Nobody wants to buy it. You've got plants that you might want to sell. You've got stores that you'd be lookin to sell which are doing okay, but there's no market for them. You go to venture-capital guys and they really don't want to invest in the furniture business because they look at the articles in the Wall Street Journal, and every one knows that the furniture business is on its ass.
Q: When did you start seeing problems? When did you start thinking that maybe the marketplace was starting to get away from you?
A: Well, what happened was...In '79 and '80 we decided to go for it. We had our five stores. We had an opportunity for a major store in Tyson's and we opened several stores in key locations. We had the chance to expand our Springfield store and open a store at Rockville. It all kind of came in to focus at the same time. We had a small [upholster] plant we started in '78. Then we outgrew it, and had a chance to pick up a very big plant in a bankruptcy situation -- which we did -- and that worked out very well. We really wanted to increase our retail base and we opened several major stores. We opened Columbia, we opened a store down in Atlanta. In 1979 we had the best year the company ever had. We had sales a little over $6 million and we made about a half-million dollars before taxes and we were rocking and rolling. And with the new stores on line, all the things we were doing, we figured 1980 should go to about $11 million and within two years we'd be up to $15 million in sales. Based on what we were doing in the furniture business, that was a realistic projection. And the banks agreed, and the board of directors. Everyone agreed. But nobody ever thought interest rates would go to 20 percent. The highest rate we ever saw was 12. So there we were -- moving out pretty fast -- and if the sales didn't hold, we had problems. We got through 1980 pretty well. We managed to break even and we hung in there. We figured we were through the '80 recession and we were coming out the other end. Things looked like they might get better. Of course we know what happened, things got worse. The whole entire furniture industry just fell out of bed. The people in the furniture industry that I talked to say it's the worst thing they've ever seen. The banks knew that it was possible [that the company could run into trouble]. We also had some bankruptcy counsel lined up. By the middle of January [of this year] it became clear that we were had. It just couldn't work. The checks were bouncing. It was really a mess. Suppliers weren't getting paid. It was serious to the point that something that to be done. I don't know when we made the decision. It was right about the end of January . . . the beginning of February. We put together a tentative plan.Went to the bank and told them what we planned to do.
Q: Who gets burned in a [Chapter 11] reorganization and how much does it hurt the business for people to think you're going out of business?
A: Well, as you go through one of these things, a lot of gallows humor creeps into it. But if you really look at it, it's a very unfortunate thing. In round numbers I guess before we're through, a couple million dollars will be lost by various creditors. Mostly trade creditors.
Q: What kind of hits do you have to take?
A: Personally? Well, if it doesn't work out then it's a wipeout.
Q: Of everything you've got in here?
A: Not everything here. Everything I have. Just a complete wipeout.
Q: Then what happens?
A: Start over again.
Q: Sell the house?
A: House, everything goes. The whole thing goes.
Q: That's a little incentive to keep the place going, huh?
Q: Have you ever faced anything like that before?
A: No. I really haven't. It's a very traumatic thing. It's not something that's very pleasant to deal with.
Q: What would you do if it happens?
A: Go out and get a job. I figure the guys I graduated with [from the Harvard MBA program] are probably making more money than me anyway.
Q: What about your family investors. How do they feel about it? Is there a lesson about not doing business with family and friends in this?
A: Yeah, that's probably good advice. It hasn't helped. It hasn't become a real serious problem but there are some animosities among friends and people who have invested in things.
Q: During that period, what did you do to get your mind off your troubles?
A: Drink a lot, take a lot of pills and sleep when you can.
Q: You couldn't get away for it all?
A: Not really, just like panic, it's really sick. I was really sick for a couple of months, I'd say.
Q: Colds, and all kins of physical ills?
A: I don't mean sick like I had a cold.
Q: But your stomach was unsettled?
A: Not my stomach. But it just totally destroys -- it was like going through a war, sort of going through having someone die who is very close to you. It's that kind of very traumatic thing, you just turn into -- it makes you turn into a vegetable for awhile. It is no fun at all.
Q: Were there days you wish you just hadn't done it at all, hadn't started this damn thing?
A: Yeah, it's been about a year, about a year-and-a-half of those days.I don't think it's a very good industry that we're in. One of my classmates at Harvard just sold his company to Eastman Kodak for 76 million bucks -- high tech, you know. The problem is you get into one thing and you evolve with it and you're gonna lock yourself into a lot of decisions that in retrospect turn out not to be good ones. Well, that's the clarity of hindsight. It I was doing it over again . . . . I should lecture up at Harvard. I'll probably get invited to one of these days -- to put some sense into those guys. I would not have attempted to do as much as we did with as little as we had, especially earlier on.
Q: But that's when it was working.
A: I know, but the tendency is to keep pushing and the trouble is, every time you do that, you could leverage ouut [borrow until] anything could screw it up. A lot of it was my own family's money, and these people were putting up a fair amount of friendly pressure to start seeing a bigger return on that investment. The problem was we could make some money but we could never pay those guys [investors] the kind of money they were looking for. It would be a constant pressure thing and so you'd say okay, let's got for it.And that was the last roll. I think entrepreneuring is an overrated enterprise. The success rate is very poor. The rewards are limited and fleeting in many ways and the cost is very high if it doesn't work. I think that a lot of people are running around with EIH syndrome. That's Entrepreneur In Heat. [They] should really take some cold showers because it's really a lot harder to do it than it would seem. If we'd kept the Georgetown store and not opened any other stores, just stopped there and worked that store and not taken any investors or anything else I don't doubt for a minute that I could have retired with two million bucks -- something like that -- and lived very nicely on dividends for the rest of [my life]. That would have been a realistic scenario. Sometimes you don't realize what's good when you have it.
Q: Isn't that greed in its own way?
A: Not greed. I honestly believe most people [who] will do what I do or tried to do . . . I don't think greed's the real motivation. If greed was the motivation I would probably have stayed there and milked that [Georgetown] store and counted the bucks. I don't think most entrepreneurs operate on greed. They really are interested in building, in growth, in going forward, [more] than they are in seeing how much money they can make. I mean I really believe that's true. Because a greedy guy -- he'll take something small and milk it and milk it. You've got to be willing to roll pretty heavy to do this kind of stuff . . . .The price is that to expand financially you've got to personally put everything you've got on the line. So that the costs of not making it are awfully high.
Q: How old are you?
Q: Young to be burnt out isn't it?
A: Well, 15 years gone into it, then this last year and a half with all that it involved and it's not over yet, it wears you down.
Q: Do you think your kids will not go into their own business because of this?
A: I'm hopeful. I'd like to see them make their money the old-fashioned way. Inherit it.