Should I throw in the towel?
OK so I'll preface this by giving some details about our business and what has happened to this point, there's a bit to say, so bear with me.
I started a company with a co-worker from another company about 7 years ago in 2014. We both left the company and formed our own, I was only 24 at this point and didn't know much about running a business but had a lot of technical experience. I'm a graphic designer/Web designer originally. We were both working in a garment printing company and wanted to do it ourselves as we had plenty of ideas the current owner didn't want to take on board. He was 30-odd years my senior and had the money, so he promised when we did well that he'd put me on a profit share agreement for putting in the work unpaid to get where we needed to be. I worked my ass off for the first 1.5 years unpaid and we were doing quite well by this stage. I eventually started getting paid (not much, a bit over minimum wage, but I was learning a lot of how to run a business and happy doing so). Fast forward to 2017 and we're doing quite well, over 1.5M revenue, 6 staff and finally turning a profit. I then asked about our profit share agreement and things quickly turned sour. He would ignore any discussions of it and then eventually offered to just sell me the business, which I definitely couldn't afford, so I started to take a back seat in terms of operations (only doing what I was paid to do, no more working until 2am or getting in early), the business quickly started deteriorating at which point I decided to leave and do my own thing (the company entirely collapsed about 6 months after my departure).
So I decided to start up a new garment printing company with my younger brother (who also worked at the previous company) and my older brother who had some extra money and wanted to invest and assist us (no prior experience in this field). So my older brother and I invested some of our own money, the equity was split as follows: Me - Invested, $10000 for 47.5% Older brother - Invested $18000 for 47.5% Younger brother - Sweat equity at 5%
So we all agreed to this and went on our merry way. I had a lot of connections from my past experience and got us a lot of contracts to begin with. I was also the tech guy, so in doing all of our SEO, Web, Advertising etc. was primarily responsible for the work we got and we were doing OK. From 2018 to 2020 my older brother and I occasionally needed to invest more money for things like down-payments for equipment leases and such. Ended up with my investment at around $20,000 and his at $40,000.
Fast forward again to March 2020, of course Covid hits but we aren't affected massively, with government assistance we can still pay our bills etc. and ourselves, which is great. Then my older brother advises we should get an unsecured business loan just in case things go south, as the banks are doing unsecured loans with less requirements because of Covid. I was very against it as we didn't need it, and the thought of debt just irks me the wrong way. Of course, I voiced my opinion but he and my younger brother were for it as much as I disagreed, so we ended up getting a loan for $100,000, of which once we got it approved, he paid himself back $30,000 of his investment, and me back $10,000 of mine (I wasn't overly concerned but after many tiring arguments this is where it went). At this point in the business, I was growing overly frustrated with both my brothers as it felt like I was doing the majority of work. I was still doing everything tech/web/marketing related as well as printing our orders as I was the only one who knew how it all worked, my older brother would come in when he pleased (maybe 10am, maybe midday) then leave a few hours later. He would sometimes do emails at night when it pleased him, he basically just did whatever he wanted. I brought this up on multiple occasions but it was always an "I do enough" kind of argument. My younger brother was a bit the same, never going the extra mile and only doing what he thought was adequate. Yet I would be in at 6am, work til late, then still work on the business at home.
Then in June 2020 I went through a sudden deep depression. I couldn't focus on anything and was quite frankly just wrecked. I was having suicidal thoughts, I was a complete mess and ended up seeking professional help. During this time I asked them to cover me for a week or 2 and I still went in during the evenings to print orders. When I was OK enough to return full time (about 2 weeks later), my older brother told us that he's been thinking about moving interstate for a while and will be doing so in 4 months, so he'll be leaving the company, but he still wanted to retain his equity.
I was very angered by this and whilst still recovering from depression, we had many arguments about the equity and what's going to happen to the business. It basically ended with me practically wanting to give up as it felt hopeless, so I resigned as Director and told them I would still work here, but they can both be in charge of the decisions from now on. About 2 weeks after that, he called me and told me that he'll be giving his equity to our younger brother and taking his additional $10k investment from the company and leaving, if I come back on as Director. I wanted him gone at that stage so I didn't argue.
He left in October 2020 and him and I haven't spoken since, although this saddens me a bit, I feel he was always trying to take advantage of our situation and only cared about money at the end of the day, which is fine, but shouldn't be at the expense of your own brothers. Anyway, I digress...
So now, cut to January 2021. I've been handling almost everything, my younger brother (who now owns 50%, like me) only does some of the production work, maybe 30% and has a lot of sick days and goes home early. We've had multiple arguments that he needs to do more work and help with other stuff rather than letting it all fall on my shoulders, but he doesn't seem to get it. My partner leaves her current job and I get her to come work for us so we can finally have someone do our bookwork, handle phones and quotes etc. At this time we also find our we're going to be having our first child (due in September). She's been doing great, but the last few months have been tough financially.
We had about a 4 month buffer in the bank so we could cover costs if things got hairy, however we've run through that with unexpected tax bills, equipment replacements etc. So we're down to maybe 1 or 1.5 months worth of costs to cover us. However we seem busier than usual as I'm always on the production floor now and barely have time to work on marketing etc. But quite frankly also I feel tired and exhausted, I just wonder if it's worth it anymore or not. The common saying of "working too much in the business and not ON the business" really makes sense here.
I know we can do more, I just dont know if I can continue and just feel like throwing the towel in. Regardless of our debt, I often think it may be smarter to just give it up, go get a secure job doing graphics again and work on supporting my partner and soon-to-arrive baby. Apologies for the rambling, I'm just at a complete loss as to what to do and am not sure where to turn. Any advice would be greatly appreciated.
Yep, very challenging.
1 - If you walked away, what else would you do? Graphics... ok ya...
2 - With the benefit of hindsight... "If it's nnot in writing it didn't happen..." in regards to agreements on work hours, profit share etc.
Dear Anonymous, your story rang true for me because I have been in a similar situation on a couple of occasions. :( Yep I should have learnt the first time... alas I did not.
If you can find a suitable other position, then think about what the losses may be if you walk away and would you be happy with that?
Could you sell what you have to someone with fresh drive, enthusiasm and or $$ to make it work again?
Hope that helps.
Unfortunately the situation is very common in business. Creative people especially struggle with the structured requirements of business. Its not in their skill set.
Where did it all go wrong (again) ...
1. No shareholder's agreement. Every business should have one.
2. No recovery of sweat equity. The unpaid years should have had the minimum untaxed wages paid which is currently $18,500 which could be repaid tax free later when cash flow allowed.
3. No employment agreeements. Working with familiy. You can choose your friends.
4. No loan agreements. Would cover loan terms, repayment arrangements, interest paid.
5. Poor communication. Older brother clearly had a hidden agenda.
6. No business plan or strategy. You can aim at nothing and hit it with accuracy.
7. No independent external experts - accountants, manager, CFO etc as required.
Everything could probably have been avoided.
Where are you at? Burnout. Depression. Sense of failure, No motivation.
Having been there previously you fear a repeat performance if you put the effort in to turn it arround. Doing the same thing and expecting a different result is crazy. The business (and your mindset) has to change.
Implement points 1-7 above so you don't have a repeat performance. If the turnover is over $1.5m there is the Business Growth program (following from Business Roadmap https://business.gov.au/grants-and-programs/growth-roadmap ) that can provide a free business evavuation and $20k to implement recommended changes. There are other support programs like Business Connect in NSW (www.business.nsw.gov.au/support-for-business/businessconnect) Most states have someting similar. Take advantage of them
Engage business experts. People who have previously been successful in their own business and are available to help others.
Clearly you do not want to give up or you would not be asking for help or say "I know we can do more".
You just do not know where to turn or how to do it differently.
Regroup, strategise, fresh start, ensure you will receive the benefits of your effort and success.
Make sure you take time to enjoy your expanding family because that is the reason you work.
This all sounds like a difficult and challenging time for you. However in business, like in life, the obstacle is often the way forward. No one talks about how Elon Musk slept on his office couch and showered at gyms because he couldn't afford an apartment, before striking it big with his first venture Zip2.
A lot of what you are describing are your emotional reactions to events. Anxiety and depression are actually emotions designed to protect you from something, as weird as that sounds. Anxiety is a prolonged and chronic "flight" response; depression is a prolonged and chronic "freeze" response. Someone with anger management issues may have a chronic "fight" response. What has this got to do with your situation? Well, a lot of things.
It doesn't allow one to step back and make a rational, discrete decision. The anxious among us may have a "ruminating brain" (myself included) that keeps spinning and spinning with no logical end point. It's the endless spiral of "what if?" scenarios in which we all end up in ruin. Ugly conversations with people that never happened; but you're convinced they did because whatever your brain tells you is true.
The great advantage of being human is you can hook up your brain to other people's brains thanks to language and communication - what we're doing now.
"However we seem busier than usual as I'm always on the production floor now and barely have time to work on marketing etc"
From what it looks like, just because you have a marketing background doesn't mean you shouldn't outsource your marketing. You are running, not simply working for, a garment company; having someone post social media and write blogs for you would help create buzz and bring in leads. If I started running a product company I don't think I'd be sitting around all day writing blogs, even though that's what I'm trained in; I'd be too focused on the operational side of the business. I wouldn't beat myself up about that.
But if that's not what you envisioned yourself doing, then walk away. If you are a designer first and entrepreneur second, this could be causing you undue stress. You have to do what's right for you and your new family.
Thank you for sharing your story.
I am hearing a lot of emotion and frustration in your words. To me, both experiences should alike.
In life, we face many situations and often fail. If we do not learn the lesson and grow, you will face the same challenge again and again. It seems there are some lessons your are not learning from.
1. Always get everything in writing.
2. Always write up a business plan/agreement for each individuals role, expectations, exit plan, investment return and have all parties sign.
I would like you to ask yourself a series of questions.
What mistakes in the first business did I make?
What same mistakes have I made with my family in the current business?
What have I learnt about my personal strengths and shortfalls in this journey?
What could I have done, to avoid the mistakes I made in the first business?
How could your current business with your brothers been structured, to have avoided the problems past and present?
Why did I allow myself to work for "free" with no formal written agreement for so long?
What personality, experience and low self esteem caused this to be acceptable?
ASK THESE TOUGHER QUESTIONS
Am I still passionate about what I do?
Is staying the cause affecting my physical/mental health?
"The difference between average people and achieving people is their perception of and response to failure." ― John C. Maxwell
Self examination will give you the answer to make the right decision and ensure you do not make the same mistakes again.