As a 30-year veteran of the Automotive Industry, I was sure I had seen it all and confident that by now, I had it all figured out.
But over the last four years, that feeling of confidence and my financial portfolio has eroded nearly to the point of financial collapse, causing me to rethink what I know and change my ideas about debt and expansion.
The housing crash and the changes in the local and national economy nearly took me down. The economic changes along with the choices I made cost me most of the cash and assets I had acquired over the past 10 years.
I am sharing this story with you in hopes that I might help you make better decisions and help ensure your success.
I believe in life lessons and I never cry over spilled milk. Now that I have experienced the economic meltdown, I can look back and clearly see what I should have done better to protect my financial future. I have learned several lessons during my time as a repair shop owner—lessons that will help me achieve the goals I set for myself long ago.
In our business we work diligently; things are fast-paced and we work hard to get it all done. When I made the decision to expand, I didn’t give enough consideration to saving money. I didn’t put together a written business plan because the phone was ringing and it felt like it would never stop.
In the middle of trying to get it all done, I often had to stop to answer a phone, a question from an employee, or deal with a customer. Time flew by so fast most days that I forgot to take a break or eat lunch.
This scenario played out for days, weeks, and months. I thought it was awesome and that it would go on forever. I had money in the bank, and I was finally getting to buy those things that I always wanted.
And then … it all stopped. Business slowed to a crawl, the phones were not ringing, customers were not stopping in and those that did didn’t want to spend anything. The bills were still coming in, employees needed paychecks, and the account was running on empty. Here’s what I learned:
If and when you are ready to expand, be well prepared, have the finances to do it and have a good, solid business plan. Just because business is good right now, doesn’t mean it’s time to expand or add another location.
Never think that a good economy will last forever or that business will always be there. Do not do what I did—I bought a much larger building, remodeled it, purchased more equipment, hired more employees, and stretched myself as far as I possibly could. Business was booming and I believed that the cash flow would never stop.
I started a construction business to go along with my automotive empire. I was building and selling homes, and making loads of money. Then the recession hit and the bottom fell out of the real estate market and my construction company.
Keep enough cash reserves to cover at least three months of operating expenses (six months is better). I tried desperately to get the houses sold while they still had value and I could still recoup my losses, but before long my financial safety net was gone and so were my properties.
Be careful expanding in a community that has little or no economic engine. When you consider new locations, choose areas with a diverse customer and income mix. When construction stopped, my automotive service business was greatly affected, and I had spent all my money trying to save my construction company.
Do not overextend yourself financially. The overhead from my overly expanded shop was eating me alive. With no cash left I was maxing my credit cards to cover payroll, leases, rent, and everything else. I was headed for bankruptcy and it was time to make some hard decisions.
Leave your ego at the door when making important financial decisions. Based on the fact that the economy was still lagging and there were no signs that it would recover any time soon, and after some soul searching, I came to the conclusion that downsizing was my best option.
The final lesson: Learn to walk before you run. Take the time to think things through. Your financial security and future is at stake!
B.J. Lee has worked in the automotive repair industry for more than 30 years. He is an industry consultant and trainer for Automofo.com and owner of Stellar Performance Inc. in 29 Palms, Calif.
