8 ms·

The Dark Side of Entrepreneurship

73 points by asnyder 17y ago

DannoHung 17y ago
No liability for the negligent accountants?
- bonsaitree 17y ago
  Likely the financial (and social family) cost of "gross negligence" litigation would well exceed any measurable benefit. If the owner has a strong case, a private settlement for 30-50% damages is the most likely outcome. Even in the unlikely event the accounting firm broke/abused their fiduciary duties AND a circuit/general court tort verdict was in this owner's favor, it would take years for the funds to work their way through the system.
- fatdog789 17y ago
  Most courts resolve small cases like this within a year or two, including appeals. Indeed, a case that lasts more than 2 years is considered anomalous unless a huge corporation or very wealthy clients are involved. It would take about 1 week to 10 days once appeals have resolved for the funds to work their way through the system. Every state has a deadline for paying off judgments. The only reason payment of a judgment would be delayed is if the defendant declared bankruptcy.
- sho 17y ago
  Maybe the accountant, if he even exists, was doing exactly what he was told? By far the most likely scenario IMO.
kolya3 17y ago
Quick summary: Guy starts a successful business but outsources the accounting to his wife's friend's brother. The accountant books unfinished business as money in the bank. Economy sours and the truth comes to light. Guy goes out of business. So the "dark side of entrepreneurship" is losing your business because you outsource a critical component and don't bother to double check the results? I often wonder if the high 90% startup failure statistic is a result of negligence and lack of common sense. I hope to put my money where mouth is and find out on my own in the near future. Can anyone on the other side of the fence chime in on this?
- cmos 17y ago
  Chances are you won't make _this_ mistake, but if your company gets off the ground, you'll make a couple of big mistakes that lose you customers, cash and pride. And you'll look back on those mistakes and wonder to yourself, much like the hero of this story, how could I have let this have happen? It's embarrassing and humbling, even more so when it's written up in the New York Times.
  - nostrademons 17y ago
    Yeah - my experience is that most startups (including my own) really do fail because of the founder's stupidity, but it's very hard to avoid that stupidity even if you know this. There're so many balls you have to keep in the air as a founder, you're bound to drop some of them. It's only after you've practiced through a few failures and can instinctively avoid some of the more obvious failure modes that you start having a reasonable chance of success.
- sutro 17y ago
  If your business ever goes beyond a one-man operation, as this guy's did, you will find it necessary to trust other people -- partners, employees, vendors, lawyers, and, yes, accountants. Whether that trust is well-placed or mis-placed can be a very fine line. You seem to have the same deep understanding of what went wrong as this guy's wife does from her armchair in the living room. After your as-yet-uncreated business survives for 20 years, provides a living for 40 employees, and becomes a leader in its space, feel free to come back here and educate all of us on the meaning of negligence and common sense.
  - fatdog789 17y ago
    If he failed to look at the books in 20 years, or even once notice the shoddy numbers, that would be very strong evidence of negligence. Delegating an essential job doesn't take away the responsibility for supervising performance to make sure the job was done right.
    - 17y ago
boris 17y ago
This shows two important rules of running your own business very clearly: You need to understand every aspect of what's going on in your company. And don't hire friends and relatives. Had the subject of this story kept at least some basic track of his financial position, I am sure he would have been able to flag the problem much earlier and probably avoid the disaster. Something basic like how much money comes in, goes out, what's owed to you and by you.
- pg 17y ago
  Another important rule: don't borrow money.
  - asdlfj2sd33 17y ago
    Do you mean credit cards? In many places (like Germany) commercial banks are the main source of funding for businesses.
  - joez 17y ago
    Borrowing money is usually the best option. That's the whole reason for having limited liability as it frees up entrepreneurs to take high risks for large rewards. Part of any entrepreneurs job is to assess risk and reward.
  - bonsaitree 17y ago
    Some types of capital-intensive business models essentially require debt funding unless the founders are independently wealthy and/or are willing to trade equity for VC funding. A classic example is starting/owning a restaurant or bakery.
    - Shooter 17y ago
      Not necessarily true. I've helped several friends with less than US$1000 in startup funds open restaurants/bakeries...within 2 years of when they started out to do so. Ego, lack of creativity, and laziness are among the only impediments to starting most businesses. You just have to want the end result bad enough that you are willing to work hard on a smaller scale until you can fund your dream. (You can work as a caterer, personal chef, food delivery service, and/or sell your food on consignment at other locations to raise the funds for your own place. MANY restaurants will let you borrow their kitchens for 'free' in exchange for cleaning up or for doing prep work or cooking specialty items. Some may want you to cover the increased insurance risk, but you can still get started in a licensed facility for a small cash outlay. Most independent restauranteurs understand what it is like to start a new food-related business, and many are likely to help you out unless you're an ass or a direct competitor. Then, you can just build up a base of customers and cash until you can buy or lease your own place. If you have good products, and are smart with your cash, it doesn't actually take too long to get enough of a bankroll to go out on your own. It took one of my friends only 11 months as a 'virtual cupcake consignment company' to MAKE the funds she needed to open her own bakery, and she even bought her real estate outright.) Side note: One of the ladies I assisted in starting her own bakery ended up closing it and going back to bakery consignment and catering because it was less stressful and more lucrative for her than retail. Some of these "ramp up" businesses may be better in the long run than actually owning your own retail/restaurant space.
Sam_Odio 17y ago
We need more articles like this on HN. Pursuing a career in entrepreneurship & startups is a long, hard, and unglamorous road. If you're prepared for that at the beginning it won't make things much easier but it might give you the resolve to not give up. I've see too many founders (myself included) quit this lifestyle because they weren't an instant success. Beware the "trough of sorrow."
asdf333 17y ago
i think the key is the last sentence: "Was it worth it? It comes down to deciding what horrifies you more: the possibility of waking up one day and realizing you never took a shot at your dream or the possibility of losing your house."
- endlessvoid94 17y ago
  absolutely. it amazes me how many people there are (that i meet) who fall under the umbrella of fearing for themselves rather than proactively pursuing their passions and gaining invaluable experiences in the world. better to live at home and minimize risk so you dont die. fuck that.
  - shard 17y ago
    I think it changes things a bit when there are two kids with you in said house. Living at home and minimizing risk so your two kids don't die suddenly doesn't seem so amazing.
mr_luc 17y ago
The end of the article is overdoing it: > "Was it worth it? It comes down to deciding what horrifies you more: the possibility of waking up one day and realizing you never took a shot at your dream or the possibility of losing your house." For him, it came down to that. Okay, granted. But this: > "That’s what entrepreneurship is really about." Is it? I'm starting a web-based service business, and my fixed costs are well under $100 per month ongoing, and under $500 to start up. I'm financing it by working 3 months per year doing blue-collar work, and spend 9 months per year doing volunteer work in the third world. I'm right and the New York Times is wrong. #
- robryan 17y ago
  Obviously a one person web based start up that doesn't pay wages is going to be a lot less risky than a 40 employee business that is buy supplies in advance for each job.
  - cmos 17y ago
    Perhaps more tragic is that in his industry he often get's a down payment of 30-50%, which is often enough to cover the costs of the equipment. Scaling up to 40 people in the custom home installation market is very difficult. Cash flow is a big deal, and the number of rich people who won't pay you the final payment, often for reasons that are outside of your control, is staggering. (i.e. I paid you $100k and my satellite dish keeps going out on me) There's not much you can do about it when your customer has 5 lawyers on retainer. You can make a lot more money with 2-4 talented people. This is an industry with 0% margin on flatpanel TV, 50% margin on wire and 70% margin on inwall speakers.
  - mr_luc 17y ago
    I don't understand the downvotes here. I mean, obviously, you're correct. But the NYT just said that entrepreneurship means caring more about your dreams than a house for your family. Really? That's the decision people have to make to start a business? If you don't do that, you aren't an entrepreneur? It's a great cautionary tale, but as you yourself point out, not all kinds of business have that risk. And as others point out, his problems were avoidable. So, the NYT is wrong. Right?
emontero1 17y ago
We all know entrepreneurship entails huge risks. However, that's no reason to not forge ahead. Most people can't seem to understand that entrepreneurship is not about money, fame or power. Those are all secondary things. Entrepreneurship is about an idea and its development. It's about developing a thought, a concept only you and maybe the 2 other people starting the venture with you understand. It takes balls and passion. It takes courage. But more importantly, it takes unrelenting love. Love for the idea behind the venture, love for the concept of creating something valuable out of just abstractions, and, ultimately, love for the better world you're helping shape with the economic impact of your plan. I'm not downplaying the importance of following sound economic principles (e.g. do NOT put your house as a collateral for a loan). Nonetheless, if you're going to be deterred by the economy, your wife, this article, or a friend, then you clearly don't have, and probably never had, what it takes.
- shard 17y ago
  Of course, sometimes "what it takes" involves a degree of ruthlessness which allows you to put not only your finances, but you marriage and your guardianship of your children at stake. Different individuals have different scales on which they decide whether that kind of ruthlessness is worth the reward, even if they did have the capacity for it.
  - emontero1 17y ago
    I agree. Tolerance for risk is another big aspect of all this. I'm not married. I don't have kids. So my real only concern is myself right now. Others aren't as lucky.
    - shard 17y ago
      Hah, I think a large number of people would disagree with you that not being married and not having kids is lucky.
      - emontero1 17y ago
        In the context of starting your first startup while you're still young and single: yes, you'd be lucky. Life in general: that's actually unfortunate. =)
lionhearted 17y ago
Some decent points in there. But also the most misunderstood and misrepresented business statistic of all time: > Some 70 percent of businesses fail within seven years, according to the Small Business Administration. Wrong. Very wrong. 70% of businesses are not going concerns within seven years. Doesn't mean they "failed". They might have been acquired, or closed, or a different project might have taken the entrepreneur's focus. If a guy starts two companies as small side projects, and one takes off, he closes the other. That'd be reported as a "50% failure rate" for people who can't get their head around the statistics. But they didn't fail - they served the entrepreneur during that part of his life, he learned lessons, hopefully made some money, and then moved on to bigger and better things. Starting a business is hard, but it's not this impossibly bleak predicament that people make it out to be.
- alex_c 17y ago
  Another thought occurs: What percentage of jobs "fail within seven years"? I wouldn't be surprised if it's a comparable percentage. Yet, somehow, no one ever says "Are you SURE you want to be looking for a job? X% of jobs are terminated within seven years, you know".
  - caffeine 17y ago
    Yes, but: you rarely put up your house as collateral on starting a job.
    - dan_the_welder 17y ago
      Yes, but: you often make financial commitments on starting a job.
brown9-2 17y ago
First of all I have to admit that that I'm pretty clueless when it comes to startups, entrepeneurship, running a business (of any size), etc. Zero experience or first-hand knowledge. I have two questions that are likely pretty basic after reading this article: 1. If the company was successful enough to be around for 20 years and have 40 employees, isn't that "successful enough" to be able to incorporate the company or form a LLC so that all debt is taken out in company name, and that the owner was on the line for debt personally? 2. Is there no recourse for hiring accountants (especially a firm) that completely failed at it's job to properly book revenue?
- gscott 17y ago
  And instead of just shutting it down cold-turkey why not try to see if he could borrow money from the employees to keep the business afloat. I believe the article writer, his friend pushed him too fast into closing the business down especially when he had customers already and a robust work force that he could have paired down.
  - brown9-2 17y ago
    I don't know if that would have been a viable solution - sounds like the owner might just have ended up losing the employee's money too in the end.
skmurphy 17y ago
More background http://www.cepro.com/article/baumeister_goes_out_of_business_after_19_years/ http://www.cepro.com/article/baumeister_goes_out_of_business... His average contract was about 100K, he lost control of his cash flow in the worst recession in at least three decades, perhaps six. He must have done a lot of things correctly to run a well respected business for 20 years, I don't understand the strongly negative tone of the article. His conclusion "He is no longer a business owner, but I suspect he is doing what he should be doing" implies that someone who ran a business for 20 years with 40 employees wasn't cut out for business.
- rjurney 17y ago
  He focuses on the negative because most businesses fail, and as entrepreneurs are eternal optimists, many don't fully consider the downside of starting a business. Right now MANY small businesses and startups are failing. Its important to understand the potential negative consequences of starting a business. Most people, and especially around here, are in denial about this basic fact: by the numbers, your startup or small business will most likely fail. Thats ok. Your job is to do everything you can to beat those odds. Also, most people don't have the luxury of 'capital light.' When small businesses fail, families usually suffer. That is part of the game, and its worth talking about once in a while, in between articles about guys that hit it big.
  - jacquesm 17y ago
    Think of it as farming, if you sow a lot of seeds some will never come up, some will come up, wither and die and some will come up and grow to great height, then whither and die. Everything has a lifecycle, businesses do too. Any business that has generated money over its lifespan and has employed people and paid them is by some measure a successful business. The timescale at which that cycle plays and the size of the business are not relevant.
  - MicahWedemeyer 17y ago
    Very true. We constantly hear the "I woke up rich the very next day!" type stories, and it skews the perception of what running a business is like. I have a lot of sympathy for old-school businesses that need a lot of operating capital. Putting your house in danger to support your business is a choice I hope I never have to make. In my case, that would essentially be the same as putting my marriage on the line.
acangiano 17y ago
There is a second moral to this story: the person you marry will significantly determine your success or failure as an entrepreneur. In my opinion, a nagging wife who is quick to judge and blame you is one of the worst threats to your startup/business.
udekaf 17y ago
This is a very informative story. I'd like to give it a summarization so that the rest of us would not go into the same trouble. 1. Keep a very keen eye on your customers and selling. Mr. Baumeister sold high-end products. With economic downturn, fewer people spend money on luxueries. He should predict that when economic was going down. 2. Pay constant attention to cash flow and balance statement. 3. As a startup, don't outsource critical component. If you have to, always double check it. Seems the incompetent accounting firm played a significant role in failure of his business.

73 points by asnyder 17y ago

DannoHung 17y ago

No liability for the negligent accountants?

bonsaitree 17y ago
Likely the financial (and social family) cost of "gross negligence" litigation would well exceed any measurable benefit. If the owner has a strong case, a private settlement for 30-50% damages is the most likely outcome. Even in the unlikely event the accounting firm broke/abused their fiduciary duties AND a circuit/general court tort verdict was in this owner's favor, it would take years for the funds to work their way through the system.
fatdog789 17y ago
Most courts resolve small cases like this within a year or two, including appeals. Indeed, a case that lasts more than 2 years is considered anomalous unless a huge corporation or very wealthy clients are involved. It would take about 1 week to 10 days once appeals have resolved for the funds to work their way through the system. Every state has a deadline for paying off judgments. The only reason payment of a judgment would be delayed is if the defendant declared bankruptcy.
sho 17y ago
Maybe the accountant, if he even exists, was doing exactly what he was told? By far the most likely scenario IMO.

kolya3 17y ago

Quick summary: Guy starts a successful business but outsources the accounting to his wife's friend's brother. The accountant books unfinished business as money in the bank. Economy sours and the truth comes to light. Guy goes out of business. So the "dark side of entrepreneurship" is losing your business because you outsource a critical component and don't bother to double check the results? I often wonder if the high 90% startup failure statistic is a result of negligence and lack of common sense. I hope to put my money where mouth is and find out on my own in the near future. Can anyone on the other side of the fence chime in on this?

cmos 17y ago
Chances are you won't make _this_ mistake, but if your company gets off the ground, you'll make a couple of big mistakes that lose you customers, cash and pride. And you'll look back on those mistakes and wonder to yourself, much like the hero of this story, how could I have let this have happen? It's embarrassing and humbling, even more so when it's written up in the New York Times.
- nostrademons 17y ago
  Yeah - my experience is that most startups (including my own) really do fail because of the founder's stupidity, but it's very hard to avoid that stupidity even if you know this. There're so many balls you have to keep in the air as a founder, you're bound to drop some of them. It's only after you've practiced through a few failures and can instinctively avoid some of the more obvious failure modes that you start having a reasonable chance of success.
sutro 17y ago
If your business ever goes beyond a one-man operation, as this guy's did, you will find it necessary to trust other people -- partners, employees, vendors, lawyers, and, yes, accountants. Whether that trust is well-placed or mis-placed can be a very fine line. You seem to have the same deep understanding of what went wrong as this guy's wife does from her armchair in the living room. After your as-yet-uncreated business survives for 20 years, provides a living for 40 employees, and becomes a leader in its space, feel free to come back here and educate all of us on the meaning of negligence and common sense.
- fatdog789 17y ago
  If he failed to look at the books in 20 years, or even once notice the shoddy numbers, that would be very strong evidence of negligence. Delegating an essential job doesn't take away the responsibility for supervising performance to make sure the job was done right.
  - 17y ago

boris 17y ago

This shows two important rules of running your own business very clearly: You need to understand every aspect of what's going on in your company. And don't hire friends and relatives. Had the subject of this story kept at least some basic track of his financial position, I am sure he would have been able to flag the problem much earlier and probably avoid the disaster. Something basic like how much money comes in, goes out, what's owed to you and by you.

pg 17y ago
Another important rule: don't borrow money.
- asdlfj2sd33 17y ago
  Do you mean credit cards? In many places (like Germany) commercial banks are the main source of funding for businesses.
- joez 17y ago
  Borrowing money is usually the best option. That's the whole reason for having limited liability as it frees up entrepreneurs to take high risks for large rewards. Part of any entrepreneurs job is to assess risk and reward.
- bonsaitree 17y ago
  Some types of capital-intensive business models essentially require debt funding unless the founders are independently wealthy and/or are willing to trade equity for VC funding. A classic example is starting/owning a restaurant or bakery.
  - Shooter 17y ago
    Not necessarily true. I've helped several friends with less than US$1000 in startup funds open restaurants/bakeries...within 2 years of when they started out to do so. Ego, lack of creativity, and laziness are among the only impediments to starting most businesses. You just have to want the end result bad enough that you are willing to work hard on a smaller scale until you can fund your dream. (You can work as a caterer, personal chef, food delivery service, and/or sell your food on consignment at other locations to raise the funds for your own place. MANY restaurants will let you borrow their kitchens for 'free' in exchange for cleaning up or for doing prep work or cooking specialty items. Some may want you to cover the increased insurance risk, but you can still get started in a licensed facility for a small cash outlay. Most independent restauranteurs understand what it is like to start a new food-related business, and many are likely to help you out unless you're an ass or a direct competitor. Then, you can just build up a base of customers and cash until you can buy or lease your own place. If you have good products, and are smart with your cash, it doesn't actually take too long to get enough of a bankroll to go out on your own. It took one of my friends only 11 months as a 'virtual cupcake consignment company' to MAKE the funds she needed to open her own bakery, and she even bought her real estate outright.) Side note: One of the ladies I assisted in starting her own bakery ended up closing it and going back to bakery consignment and catering because it was less stressful and more lucrative for her than retail. Some of these "ramp up" businesses may be better in the long run than actually owning your own retail/restaurant space.

Sam_Odio 17y ago

We need more articles like this on HN. Pursuing a career in entrepreneurship & startups is a long, hard, and unglamorous road. If you're prepared for that at the beginning it won't make things much easier but it might give you the resolve to not give up. I've see too many founders (myself included) quit this lifestyle because they weren't an instant success. Beware the "trough of sorrow."

asdf333 17y ago

i think the key is the last sentence: "Was it worth it? It comes down to deciding what horrifies you more: the possibility of waking up one day and realizing you never took a shot at your dream or the possibility of losing your house."

endlessvoid94 17y ago
absolutely. it amazes me how many people there are (that i meet) who fall under the umbrella of fearing for themselves rather than proactively pursuing their passions and gaining invaluable experiences in the world. better to live at home and minimize risk so you dont die. fuck that.
- shard 17y ago
  I think it changes things a bit when there are two kids with you in said house. Living at home and minimizing risk so your two kids don't die suddenly doesn't seem so amazing.

mr_luc 17y ago

The end of the article is overdoing it: > "Was it worth it? It comes down to deciding what horrifies you more: the possibility of waking up one day and realizing you never took a shot at your dream or the possibility of losing your house." For him, it came down to that. Okay, granted. But this: > "That’s what entrepreneurship is really about." Is it? I'm starting a web-based service business, and my fixed costs are well under $100 per month ongoing, and under $500 to start up. I'm financing it by working 3 months per year doing blue-collar work, and spend 9 months per year doing volunteer work in the third world. I'm right and the New York Times is wrong. #

robryan 17y ago
Obviously a one person web based start up that doesn't pay wages is going to be a lot less risky than a 40 employee business that is buy supplies in advance for each job.
- cmos 17y ago
  Perhaps more tragic is that in his industry he often get's a down payment of 30-50%, which is often enough to cover the costs of the equipment. Scaling up to 40 people in the custom home installation market is very difficult. Cash flow is a big deal, and the number of rich people who won't pay you the final payment, often for reasons that are outside of your control, is staggering. (i.e. I paid you $100k and my satellite dish keeps going out on me) There's not much you can do about it when your customer has 5 lawyers on retainer. You can make a lot more money with 2-4 talented people. This is an industry with 0% margin on flatpanel TV, 50% margin on wire and 70% margin on inwall speakers.
- mr_luc 17y ago
  I don't understand the downvotes here. I mean, obviously, you're correct. But the NYT just said that entrepreneurship means caring more about your dreams than a house for your family. Really? That's the decision people have to make to start a business? If you don't do that, you aren't an entrepreneur? It's a great cautionary tale, but as you yourself point out, not all kinds of business have that risk. And as others point out, his problems were avoidable. So, the NYT is wrong. Right?

emontero1 17y ago

We all know entrepreneurship entails huge risks. However, that's no reason to not forge ahead. Most people can't seem to understand that entrepreneurship is not about money, fame or power. Those are all secondary things. Entrepreneurship is about an idea and its development. It's about developing a thought, a concept only you and maybe the 2 other people starting the venture with you understand. It takes balls and passion. It takes courage. But more importantly, it takes unrelenting love. Love for the idea behind the venture, love for the concept of creating something valuable out of just abstractions, and, ultimately, love for the better world you're helping shape with the economic impact of your plan. I'm not downplaying the importance of following sound economic principles (e.g. do NOT put your house as a collateral for a loan). Nonetheless, if you're going to be deterred by the economy, your wife, this article, or a friend, then you clearly don't have, and probably never had, what it takes.

shard 17y ago
Of course, sometimes "what it takes" involves a degree of ruthlessness which allows you to put not only your finances, but you marriage and your guardianship of your children at stake. Different individuals have different scales on which they decide whether that kind of ruthlessness is worth the reward, even if they did have the capacity for it.
- emontero1 17y ago
  I agree. Tolerance for risk is another big aspect of all this. I'm not married. I don't have kids. So my real only concern is myself right now. Others aren't as lucky.
  - shard 17y ago
    Hah, I think a large number of people would disagree with you that not being married and not having kids is lucky.
    - emontero1 17y ago
      In the context of starting your first startup while you're still young and single: yes, you'd be lucky. Life in general: that's actually unfortunate. =)

lionhearted 17y ago

Some decent points in there. But also the most misunderstood and misrepresented business statistic of all time: > Some 70 percent of businesses fail within seven years, according to the Small Business Administration. Wrong. Very wrong. 70% of businesses are not going concerns within seven years. Doesn't mean they "failed". They might have been acquired, or closed, or a different project might have taken the entrepreneur's focus. If a guy starts two companies as small side projects, and one takes off, he closes the other. That'd be reported as a "50% failure rate" for people who can't get their head around the statistics. But they didn't fail - they served the entrepreneur during that part of his life, he learned lessons, hopefully made some money, and then moved on to bigger and better things. Starting a business is hard, but it's not this impossibly bleak predicament that people make it out to be.

alex_c 17y ago
Another thought occurs: What percentage of jobs "fail within seven years"? I wouldn't be surprised if it's a comparable percentage. Yet, somehow, no one ever says "Are you SURE you want to be looking for a job? X% of jobs are terminated within seven years, you know".
- caffeine 17y ago
  Yes, but: you rarely put up your house as collateral on starting a job.
  - dan_the_welder 17y ago
    Yes, but: you often make financial commitments on starting a job.

brown9-2 17y ago

First of all I have to admit that that I'm pretty clueless when it comes to startups, entrepeneurship, running a business (of any size), etc. Zero experience or first-hand knowledge. I have two questions that are likely pretty basic after reading this article: 1. If the company was successful enough to be around for 20 years and have 40 employees, isn't that "successful enough" to be able to incorporate the company or form a LLC so that all debt is taken out in company name, and that the owner was on the line for debt personally? 2. Is there no recourse for hiring accountants (especially a firm) that completely failed at it's job to properly book revenue?

gscott 17y ago
And instead of just shutting it down cold-turkey why not try to see if he could borrow money from the employees to keep the business afloat. I believe the article writer, his friend pushed him too fast into closing the business down especially when he had customers already and a robust work force that he could have paired down.
- brown9-2 17y ago
  I don't know if that would have been a viable solution - sounds like the owner might just have ended up losing the employee's money too in the end.

skmurphy 17y ago

More background http://www.cepro.com/article/baumeister_goes_out_of_business_after_19_years/ http://www.cepro.com/article/baumeister_goes_out_of_business... His average contract was about 100K, he lost control of his cash flow in the worst recession in at least three decades, perhaps six. He must have done a lot of things correctly to run a well respected business for 20 years, I don't understand the strongly negative tone of the article. His conclusion "He is no longer a business owner, but I suspect he is doing what he should be doing" implies that someone who ran a business for 20 years with 40 employees wasn't cut out for business.

rjurney 17y ago
He focuses on the negative because most businesses fail, and as entrepreneurs are eternal optimists, many don't fully consider the downside of starting a business. Right now MANY small businesses and startups are failing. Its important to understand the potential negative consequences of starting a business. Most people, and especially around here, are in denial about this basic fact: by the numbers, your startup or small business will most likely fail. Thats ok. Your job is to do everything you can to beat those odds. Also, most people don't have the luxury of 'capital light.' When small businesses fail, families usually suffer. That is part of the game, and its worth talking about once in a while, in between articles about guys that hit it big.
- jacquesm 17y ago
  Think of it as farming, if you sow a lot of seeds some will never come up, some will come up, wither and die and some will come up and grow to great height, then whither and die. Everything has a lifecycle, businesses do too. Any business that has generated money over its lifespan and has employed people and paid them is by some measure a successful business. The timescale at which that cycle plays and the size of the business are not relevant.
- MicahWedemeyer 17y ago
  Very true. We constantly hear the "I woke up rich the very next day!" type stories, and it skews the perception of what running a business is like. I have a lot of sympathy for old-school businesses that need a lot of operating capital. Putting your house in danger to support your business is a choice I hope I never have to make. In my case, that would essentially be the same as putting my marriage on the line.

acangiano 17y ago

There is a second moral to this story: the person you marry will significantly determine your success or failure as an entrepreneur. In my opinion, a nagging wife who is quick to judge and blame you is one of the worst threats to your startup/business.

udekaf 17y ago

This is a very informative story. I'd like to give it a summarization so that the rest of us would not go into the same trouble. 1. Keep a very keen eye on your customers and selling. Mr. Baumeister sold high-end products. With economic downturn, fewer people spend money on luxueries. He should predict that when economic was going down. 2. Pay constant attention to cash flow and balance statement. 3. As a startup, don't outsource critical component. If you have to, always double check it. Seems the incompetent accounting firm played a significant role in failure of his business.