As I had said in October 2008 when the banks began failing, we are in for a long recession and a serious failure rate among small business owners.  I listen to the economists every day and understand that the current (Q2/2009) uptick in the stock market is a “leading” indicator to recovery.  This means it is at least 6 months before we see the beginning of a “general recovery” and even longer before any economic recovery trickles down to affect small business. 

This is my 5^th downturn, counting both general economic downturns and technology-sector crashes.  Looking back over more than 25 years of consulting to technology entrepreneurs, I can review many strategies my clients and I have used when planning an end game. 

The primary lesson

The primary lesson is this:  the failure of your business does not mean you are a failure as a person, or as a player in business.

One of my favorite long-term clients is hitting the wall.  Last week we began the painful planning of his end game.  Sometimes the current situation of no capital, arrears to vendors, and the threat of bankruptcy and loss of his personal assets, like his house, is so extreme as to be ludicrous, and we laugh wryly in the midst of thinking through our next steps.

Entrepreneurs are brave, or they wouldn’t start a company in the first place, or sustain it when it hits the first road bumps.  The investment already made – in capital, time, promises to family, friends and investors, and other sacrifices – seems impossible to abandon until there is no other choice.

And they are, as he commented, “nearly eternally optimistic.”   This is why they persist when the early signs of trouble occur, and why they continue to risk everything to turn the company around.

The entrepreneur is identified with his company – it is part of the definition of who he is at this moment in his life.  So letting go of the business is more complex than making a rational business decision.

Each endgame is different

Each endgame is different, depending on the condition of the company, and especially on the opportunities for the CEO to re-create his or her life.  

• One client survived personal bankruptcy and moved directly on to a Vice Presidency in a major company in an adjacent market space. 
• One lost several million dollars over 3 years from his startup attempt, but was concurrently running his first business, which continued to succeed. 
• Another found a partner to absorb her company into his, and relieve her of her debt load.
• Another was betrayed by his partner, losing his family farm (the collateral), but continued on with other work, taking 17 years to pay down the debt.  On that day 17 years later, drinking coffee in his kitchen, we spoke the name of that partner for the first time since the end of the company, acknowledging the long road we had taken from those early times.

This week and next week, we will explore various strategies for the endgame, for the entrepreneurs and for the consultants who support them. 

• Stay tuned for parts 2, 3 and 4.