Despite our monumental stupidity, we have been incredibly fortunate. For the most part. We have run into a bit of bad luck from time to time in business. And unfortunately, one time, it cost us a shitload of money.
Scott is a perpetual entrepreneur, and has been since his first adult job gave him a whopping $0.30 raise. He decided pretty much right there and then he was done working for other people. Just as soon as he could get his own thing up and running. (Side note, to hire someone to replace him at that job, they had to pay his replacement 50% more than they were paying him. He had only asked for a $1.00 raise, and it cost them more than 5 times that. Know your value.)
He started his first business in his very early 20s. His business partner, and a loan from a local business owner, financed the upstart. The business did fairly well. Not well enough to pay back all of the money that had been put into it, but it was profitable. Until, about 4 years in, when someone from another country ruined Scott’s reputation (which meant a lot in the particular industry he was in) by making up and publishing lies about him. And since they were in another country, their choices were to sue them here and hope the offending party was dumb enough to come here for the lawsuit (highly unlikely), fly to their country and sue them there, or let it go. Lawsuits are costly, especially when you have to fly across an ocean to levy one. So they chose to let it go. With a loss of over $50,000 (not including the equity that they had built up in the company over those 4 years).
But we’re just getting started.
After the loss of business number 1, they started business number 2. They both had a lot of experience in the industry, but it was gonna take a hefty initial investment to get the business up and running. The local businessman wasn’t about to give them any more money. So they borrowed money from the only place they could get it. Our parents, mine and Scott’s partner’s. To the tune of $85,000. None of us come from wealthy families, this was a huge amount of money to everyone involved.
Scott was fortunate to meet some incredibly smart people from the first business. So, with some much needed guidance from one of them, while they were in the process of getting business number 2 underway, they started their third business together (which is where the bulk of the income the money-wasting we will discuss in this blog came from). Business number 3 had almost no start up costs and was profitable from day one. Very profitable.
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It took them a couple months to get business number two really moving, investing another $40,000 of their own money into it along the way. But then it took off. The average business, if it’s not one of the 25% that shutters in the first year, takes 2-3 years to become profitable (need a source). It took them less than 6 months.
And less than a month after that, a random drunk asshole caused a terrible accident that completely destroyed it. The drunk asshole didn’t have any insurance. But that was okay, because they had business insurance to cover shit like this. At first, the insurance company was completely copasetic. And then, suddenly, they weren’t. Two weeks in, they started to fight against everything, except paying the employees who were abruptly unemployed through no fault of their own (unfortunately, Scott and his partner had never paid themselves a penny, so they got nothing).
During the fight, the business not only had to pay rent, but also had to pay the insurance premiums. If they stopped paying, the insurance company could just walk away from the whole mess. After being jerked around for a couple of months, Scott consulted a lawyer. The lawyer told them they absolutely had a case, and they would absolutely win that case, but that the insurance company could, and would, drag it out for more than a year (while Scott and his partner continued to pay them and the landlord), as they had lawyers on the payroll just for this (according to the lawyer, it is not uncommon for some insurance companies to refuse to pay unless they lose a lawsuit because it saves them a fuckton of money in the long run). It would cost a fortune in lawyers fees and it was the judge’s discretion on whether or not the insurance company would be made to reimburse them for those fees.
So, once again, they walked away. But this time, it wasn’t just their money, or the money of a wealthy businessman who knew the risk they were taking by loaning money to a couple of barely-twenty-year-olds. It was money we borrowed from our parents. And it was an enormous chunk of the money they had saved up.
So, they had to pay it back.
And they did. Through the money they made with the third business, which had fortunately been profitable from the first month.
2 businesses, gone. Total losses of $175,000. Personal loss of $62,500. Fucking ouch.