Workout. Like the
words set or take, this word has more than one meaning. I wish this term meant
a route to personal fitness. Instead, for me, workout means a route to
shuttering an expiring business. It means a dire situation, not enough money to
pay the bills... ever. It means lawsuits and loans and the possibility of
bankruptcy. It means legal documents, harassing phone calls and rightful
creditors that transform into predators. It means finding a way to live with
your self, as the others involved hold a mirror darkened and smudged like a
brassy elevator wall. And, it means
getting on with your life – even when you have no vision of a future without
the business.
From a distance of ten years after closing a business that designed specialty resource centers - libraries and retail stores for health care and employers, I knew it should have closed much earlier than its final day. I prolonged
the inevitable
by generating new sales.
Each sale paid for the prior project. I watched the size of sales dwindle and
debt escalate. The bank continued to fund the line of credit because with each
influx of cash we paid it off, knowing that we would spend it down with the
next order of supplies. I felt a huge sense of relief when we won our largest
project followed shortly by devastation as the computer system melted down. The
cash earmarked for marketing evaporated into servers and software and the
computer geek’s time.
I knew the business needed to cease. The rise of Amazon and
the increasing ease of finding, scrutinizing and sourcing media diminished the
need for our services. Y2K, 9/11 gutted the discretionary dollars organizations
could spend, and patient's and consumer's reliance on the internet reduced the
original cause of our buyer's purchase. No product improvement or fabulous
marketing campaign could make a difference in our trajectory. Anyway, it wouldn't have mattered. I ignored the
facts.
Instead, I worked harder. I made more sales calls. I eliminated staff
like daisy petals to cut expenses. We gave away excess furniture,
sent boxes of books to Costa Rica, crammed the remains of seven
offices and 3000 square feet to a space down the hall, with two offices in 600 feet. I continued
doing what I had been doing. I talked to friends and strangers, experts and
idea generators to gain perspective and new thinking. Rarely… okay, never, did I
disclose the utter hopelessness of the situation. In other words, I knew the
truth and a future direction. And, I didn't "own it," as is said.
One Thursday, the accountant arrived for her twice a month visit to
run payroll and pay the bills. Her usual process included looking over the bookkeeper's inputs, checking the payable dates and coming into my office to discuss what got paid, when. That day, she came into my office without her usual
cheeriness. For the first time in seventeen years, the line of
credit stretched beyond where it was possible to make payroll. That signaled the end. If I couldn't pay staff, or myself, the work couldn't get done. In the recesses of my mind, that was the line in the sand that closed the door.
Within minutes, I informed my two remaining employees that we were done. The bookkeeper
hugged me and said she was relieved - the late payables were a dead give away to her. The other employee sobbed. And sobbed. She joined the company the summer she graduated from high school as part of our Random Task Force. She worked every school break with us. On her graduation day from Indiana University,
though she received a teaching certificate, she agreed to set it aside and work
for me. Seven years later she faced dusting it off.
My brother, a banker, put me in touch with Bob in Wisconsin
who worked with him settling bad loans. He
usually supported the bank’s interests. To my relief, he came to my office the very next day to
support my interest. His first act included
asking me to tell the story of the business.
That Friday in the office was Sunday-afternoon quiet, devoid of phones ringing, clacking of computer keys, and chatter. I started the narrative in humiliation,
embarrassment and fear. I
spoke of the bad decisions, the crumbling market, the early bankers who
visited, encouraged, suggested their family for jobs, and the recent bankers who only
knew the company by the its monthly financial statements. I told him about the big wins, a bank wanting materials for thousands of employees around the world - even after a surprise visit to our "headquarters" located in my basement, a computer manufacturer asking us to design software, a move to commercial office space, then to a larger one, a conglomerate wanting libraries for every single office they staffed. I described the successful
times, the great plans and the problems that occurred. I spoke or rather choked
out the names of the people who worked for me and who, the day before closed
the door behind them for the last time. I watched them go knowing we did good work. We offered a valuable product. Many customers bought from us multiple times. Though likely unintended, the process of telling the story was cathartic - remembering high points allowed me to face the slog toward the next task.
Bob filled a legal pad with notes asking me to provide
detail on every supplier we used and every bill and promise due. He reviewed
each source of revenue and every account – checking, savings, lines of credit,
credit cards and receivables. He divided the creditors, those with my personal
signature on the line and others where the company held the
accountability. The day the door shut,
we couldn’t pay for the supplies or the labor to finish one customer’s
project. Having spent time with the
customer and their team, I understood what they wanted and promised them that
we would deliver. We couldn’t. This unfinished project and the employees I
jettisoned were the most difficult items to add to the yellow legal
pad.
Filling the pad finished day one.
Bob returned. He proceeded to lay out a plan
of attack. He instructed that I get an unlisted phone number and a post office box in
a different town from where I lived or did business. He handed me three
handwritten pages with templates for letters for me to type and send to the
creditors by registered mail. One letter focused on the customer with the
unfinished project.
The first of the two letters for suppliers went to those who
did not have my personal signature as security. It explained that the company
closed and unequivocally no money remained to pay bills, nor was there any hope to
receive a cent from us through collections or a suit. We sent thirty-two of those. Surprisingly, we heard from fewer than ten of those vendors after ninety days. A few
sent collections notices then eventually stopped. I actually received a couple notes sympathizing with our situation and wishing me well.
The second letter went to those where my personal signature secured
the receivable. That group included the landlord where we had nine months left
on the lease, our two largest suppliers, and, two banks where we had credit and two
highly leveraged credit cards. That letter also stated that the doors were
closed, there was no money and we used stronger language that bankruptcy pended.
The idea conveyed that they would receive little or nothing. I was instructed to preemptively call them prior to the
delivery of the letter, so we could stay in the driver’s seat for as long as
possible. Cumulative debt topped one hundred thousand dollars. The workout had
begun.
Bob instructed me to hire a bankruptcy attorney to ensure I worked
within Illinois laws. All the research Bob put together, the attorney pushed
aside and did his own assessment, charging me for many hours. He eventually
came to the same conclusions as Bob. I reminded myself that if the topic was
the possibility of brain surgery, there is no doubt I would seek a second opinion. At this point, to say the least, a lobotomy sounded pretty
good. The attorney reviewed my personal financials along with the company’s and
recommended I stop paying my mortgage and taxes. I was to show that I was
personally destitute.
For the suppliers and one credit card, we arranged to pay
them with the cash we had in reserve. I left my unique antique furniture for
the landlord. While not of equivalent value to the rent owed, it proved
attractive enough to quickly recruit another renter. The landlord did not pursue further
legal action. The banks and the one customer did.
One Saturday about 5:30 pm, eight months after the workout
began, as I was dressing to go to a black–tie birthday celebration, the
doorbell rang. Like in the movies, I descended the stairs enamored with the
elegance and rustling of my aqua silk skirt as I approached the door. A man in
a navy blue police uniform stood a step below looking up at me, as I pushed out
the storm door to talk with him. He asked my name, confirmed it on a clip
board, declared that I had been served and walked away. My elegant evening
plundered. That doorbell rang twice more over the couse of the workout. It took several
months, but Bob and I worked out an arrangement to pay a portion of the amount
owed to the bank, and we settled the second suit with reserves and incoming
receivables.
The third suit, from a bank covering the other line of
credit and one of the credit cards was brought eighteen months after we settle
the first bank suit. By then, I felt complacent, maybe even hopeful that the
bank wouldn’t come after me. I remember thinking that if I didn't bring any
visibility my own financials, it
would be ignored.
By then, because I heeded the attorney's recommendations, my
house was nearly in foreclosure. As soon as the bank case was decided, I paid
the mortgage and brought my mortgage current. I doubt that stand made any
difference in any of the court outcomes. The consequence to me however, meant
that my credit rating took a terrifying dive. I couldn’t find a bank to
refinance my adjustable rate mortgage due to my tanked credit score… just as
interest rates soared. My mortgage
nearly doubled over the course of the workout process. A few years later, sitting in the theater watching The Big Short, I realized that mine was one of the toxic mortgages at the crux of that movie. In one of my last ditch efforts to save the company, the banker/friend extended the line on the stipulation that I refi into a new mortgage, so he could show a transaction. I left the theater stunned, and once again aware that every action I took to prolong the life of Longe Life was a self inflicted wound.
Though the suit loomed, Bob advised that I shouldn’t pay the entire amount without
the bank coming to the negotiations table. None of the players expected
that I would have to pay the full amount owed.
I found a new attorney, one who was less anxious to use bankruptcy
as an offense. It took several months of negotiations and two court appearances
- one which I was told to stay in the hall as the attorneys talked to the
judge. The other person in the hall was the banker who gave me the loan
initially. He wasn’t friendly.
The judge ruled I owed money… dollars that I didn’t have
available in the time frame stated. Though I didn’t have the cash, the bank
could see my retirement funds. each attorney assured me that a bank couldn't go after my 401k and other
retirement dollars, but, I learned, they could pressure to borrow against them. I didn’t want to lose those dollars nor pay a
premium for releasing them. Bankruptcy was now a real option. The good news
was, the judge apparently didn’t think much of banks and the money they make.
He set my payment at twenty-five cents on each dollar I owed and ruled that
they forgive the credit card.
Even with the significant discount the judge arranged, I did
not have the funds to pay the amount. No public institution would extend a loan
to me in the wake of the 75 percent loss the bank wrote off. It took a lot of
teeth grinding, but I asked a family member for a loan. We signed a formal
agreement using Excel sheets, interest formulas, a monthly payment plan and the
promise to sell my home – once my son was out of school.
In the meantime, I returned some of the deposit the
customer paid, provided all on-hand materials and supplies in inventory, as well as
consultation to complete the project themselves. The outcome remained far from
ideal, but the customer appreciated and accepted the attempt to make the project whole.
My son graduated from Indiana University, May 4, 2008, two years
after the last court appearance. I'd sold our home as promised, moved May 13 to a rental, and paid off my family with the proceeds.
It took four years, humility, courage, stoicism, and integrity, and the enormous help of workout King Bob, two attorneys
and family help for both moral and financial support to complete the
workout.
Last weekend, a friend asked how long it took to get over closing
a business. I never got over it. I got through it and I learned so much from having a business and closing it. It's like laboring to
deliver a baby. You can’t stop the momentum. You must push on to deliver that new life. And since? The bookkeeper went to work for the accountant, and the other employee went with the sale of our software to one of our suppliers. I found meaningful
work and I own a home again. Every day, I use the learnings of leading and closing a business. I've worked out reality and peace of mind.
Posts
Mary
Longe is a creative and a mighty curious learner. She is a plein air (completed
90% onsite) painter and a published writer with many articles and book chapters,
five health care management books. She has a novel for middle graders on
dealing with parent financial concerns and starting a business in final edits. She
facilitates executives and volunteer boards, through live and virtual events to
innovate for transformational change. For both large and small companies, Mary
Longe facilitates “strategic visioning” sessions to take new solutions into the
health care market place. Mary work experience spans three years working with Head Start
and families in poverty, students and community relationships at the Medical
Schools at Michigan State University, new and commercial ventures at the
American Hospital Association, as well as founding a successful business
designing specialty health resource centers for hospitals and employers. 
