On the Brink of Bankruptcy

Article by:
Mark Moses
EO Orange County

As an entrepreneur, you learn new things about business every day. One of the biggest lessons I’ve learned is that no matter how much success I have, unplanned events can derail everything, undermining my confidence, my ability to look after my employees, and once, my ability to care for my family.

Growing up, my father owned a men’s clothing store. In my last year of high school, he went bankrupt. This created huge pressures for my family - stress on my mother, lowered self-esteem for my father and insecurity for everyone. I remember thinking how I never wanted to experience that kind of crisis. As I grew up and pursued my own entrepreneurial path, I tried everything to avoid that financial fate … but it didn’t work.

I started my first successful business in college. I was 19 at the time and making good money. Upon graduating, I moved to California, USA, expanded the business and eventually sold it. Soon after, I co-founded a mortgage company, which became the fastest-growing company in Los Angeles. Life was great, but then fate stepped in. In 1998, responding to a perfect storm of global financial crises, Wall Street decided not to securitize our loans anymore, and pulled out of the market. My industry collapsed and my business was over. We went from making US$1 million in net profit per month to losing uS$1 million per month overnight. Within a week, I laid off 240 of my 275 employees.

Over the next few years, we suffered badly, desperately clinging to the small areas of the business that were making money. In 2000, we decided to make a last stand and re-invent ourselves. Our plan was good and it was working, but we eventually ran out of cash. We had raised more than uS$1.5 million—including US$350,000 of my personal credit card debt—but it wasn’t enough. We could no longer make payroll and decided that bankruptcy was our only option. I remember going home that night to my wife, who was nine-months pregnant at the time, telling her about the impending bankruptcy. We would have to make even more sacrifices, including selling our dream home and moving into an apartment. My childhood fear was coming back to haunt me.

On Tuesday, just four days before we were set to file, my business partner went to an EO event and met a speaker who had just sold his company for uS$350 million. He managed to grab a few minutes with the speaker, explained our situation, gave him a copy of our plan and asked for help. Over the next few days, the speaker asked us critical questions about our company before wiring the money we so desperately needed. With mere hours on the clock, we were saved!

That Friday, we re-evaluated our circumstances and decided that while we no longer needed to file bankruptcy, we did need some immediate relief. Our company’s net worth was negative US$2.5 million and we were US$3 million in debt. Knowing we’d lose our credit lines if we formally began the bankruptcy process, we instead decided to act like we were going through bankruptcy in order to negotiate with our creditors. We filled out all of the schedules and went to our creditors, telling them what it was going to take for us to survive. They agreed, and we ended up settling our debt for US$300,000. That gave us the lifeline we needed to rebuild our company.

Since then, I’ve grown the business even bigger than before, creating 65 offices nationwide and netting US$1.6 billion in annual volume. Still, I’ll never forget those dark years of trying desperately to stay financially afloat. In that time, I realized that “cash is king,” the importance of raising more cash than you need, and how growth eats cash. It’s amazing that you can be profitable in business, yet still run out of money and be on the verge of bankruptcy. I also learned to never give up. There’s always hope, and rescue can come from the most unexpected places. Most importantly, I learned how fleeting success can be and how to value what’s truly important.

Mark is a coach, speaker and ironman tri-athlete who uses his experience with crises to educate business leaders around the world. He has won Ernst & young’s “Entrepreneur of the year” award and the Blue Chip Enterprise award for overcoming adversity. E-mail mark at mark@markmoses.net.


Conditions of EO Membership Application and Renewal:
Every member who applies or renews their membership agrees to comply with the Policies and Procedures, Bylaws and Code of Conduct of Entrepreneurs' Organization. Current members must complete the online renewal form acknowledging review of the organization's Policies and Procedures, Bylaws and Code of Conduct.

Stay Connected

Fill out the contact information below to receive EO's newsletter.