If Your Plan Doesn't Work, Cut Your Losses and Get Out as Soon as Possible
It's Dec. 21, 2014. Tomorrow morning I will announce the shutdown of one of my businesses, Watertown Steel. There is never a good time to shutter a company. We plan to give the departing employees severance pay to get them through the close. In its ending will be a new beginning for everyone involved. I have to believe that, for I am ending what is a constant in the lives of the employees. Doing so three days before Christmas is tough, to say the least. However, what time would be a good time? It is well past due – four years, four Christmases past due. Watertown Steel LLC taught me a big lesson, the hard way: "If your plan doesn't work, cut your losses and get out as soon as possible."
I started Watertown Steel 10 years ago, believing it would be a great addition to our masonry business. Our masonry crews were already at many of the jobsites, where our crews erecting the steel would be. By using the same forklifts, job trailers, tools and some of the same people that we used on the masonry jobsites, costs would be reduced all around, I felt. The plan never worked the way I envisioned.
Watertown Steel Safety - Quality - Production
Watertown Steel lost money the first year. Then, with a booming economy, was profitable in '06 and '07. During that time, we purchased a large facility in Somerset, Ohio. With a new location near Columbus, we felt we could tap into a larger market more efficiently. We remodeled the facility, and set up offices, equipment and manpower. The managers of the steel business moved from their offices at our headquarters in Watertown, Ohio, to work in Somerset.
During the next few years, Watertown Steel lost more than $1 million dollars. Now every business owner out there knows that losses tend to occur at the gate. So, let's keep going. As time ticked by, I was told by my consultants, peer group members, banks, and my bonding company that I should shut the company down.
I didn't shut it down. I moved the company back to our main headquarters in Watertown, Ohio, in an attempt to fix it. We lost more money as we finished poorly estimated projects. Finally, we brought the company back to slim profits, but not enough to continue the risks involved with keeping the doors open.
Ten years – or, rather – 3,650 days tend to produce some hard core lessons.
- Unless you really know the trade yourself, stay out of low-margin, high-labor-intensive businesses
- It is easy for a company to make money when the economy is good and people are begging you to do their work
- If you are working on slim margins during the good times, as soon as the economy slows, you will lose your tail
- Before you jump into a business, find out what the success rate in the industry is by those who tried it before you
- Listen to your advisors, for that is why you have them.
I can't say I am ashamed I started the company, but I am ashamed that I never listened to others, shutting it down when we discovered that it is very difficult to make money in the steel erection business. Now I must swallow my pride, and close it down. What makes sense isn't always easy.