This chain of 33 grocery stores, that began as a delivery app, filed for protection under the Federal Bankruptcy Laws a couple of months ago. Employees showed up for work last April 23rd to discovery that they no longer had jobs. They were instructed to kick customers out of the stores, and lock the doors.
The idea for the company began when two of its founders decided that it was too difficult to get beer, wine, and ice cream delivered to a hotel room while they were on a ski trip back in 2012. So the two University of Chicago B-School kids borrowed $50,000 from their parents and began Chicago’s first grocery delivery service.
They opened their first location, then a couple more, and on and one. The two founders began raising money, and got really good at it.
The first million came in 2015, another $6M in 2018, then $17M in 2020. By 2022, another $100M came in from the VC’s, but there was only one basic problem.
They never turned a profit. Never as in ever, and people kept giving them more money.
I’m writing this as a cautionary tale. Many entrepreneurs think that they can’t turn a profit because they don’t have the money necessary to turn their businesses in financial successes.
We’ve all seen businesses that needed substantial amounts of capital in order to turn the corner to profitability, but most of the time it isn’t the money. If you have a business that’s been unprofitable for a longer period that doesn’t require millions in equipment, warehouses, inventory, and infrastructure, then its probably not the money.
It’s probably just a fatal flaw in your business plan.
Fatal Flaw
Entrepreneurs aren’t magicians. There are only four things that we can control, which are Product, Price, Promotion, and Place.
That’s it. That’s all. The so-called Four P’s are the only choices we can make. Every other problem we have in business is external to our enterprises.
These are called the Five Externals which include Laws, Technology, The Economy, Our Competitors, and Morays or Views. We don’t control these issues and can only respond to them.
My point is that if there’s a Fatal Flaw in your business plan you need to fix it. Borrowing more money will only prolong the agony and make it worse.
If you can fix the problem, great. Get to it now, and enjoy milking your Cash Cow. But if that problem can’t be fixed, then it might be time for a pivot.
The Concept Of A Pivot
One of the things that I’ve learned over 34 years of entrepreneuring is that its always easier to start one business out of your existing enterprise. You aren’t beginning from scratch. You already have a location and customers. You already have people who believe in your ability to deliver a product or service.
Find something that your current customers keep asking for that you aren’t selling, and either add it to your existing entity or turn it into its own business. If your customers have unfulfilled needs, then there probably aren’t a lot of competitors out there that will give you problems and you might be able to make some money.
Let me leave you with this.
If the Foxtrot Case teaches us anything, its that all the money in the world can’t turn a bad idea into a good one. Amazon, Doordash, and Uber killed them.
A blind man could see that coming from a couple of miles away. If anything, entrepreneurs who have failing ideas who continue to get financed, never fix the problem and the mess just grows.
Some of these entrepreneurs are obviously much better at raising money than they are at learning how to turn a profit. They tell fanciful stories while building castles in the sky, and its believable until you look at their financials.
If you find yourself in this position, many make the mistake of hiring consultants and life coaches to help fix the problem. But if these individuals have never solved these sorts of problems in the past, do you really think that they’ll be able to do anything other than help empty your bank account?
If they could actually solve these problems, then why are they still consulting or doing life coaching sessions when they could actually make millions doing it for themselves?
If you do go this route, demand a proven, verifiable history of turn around success in these individuals. Reading about it in a book and passing an exam doesn’t get it done.
Don’t Beat Up On Yourself
We all find ourselves in these positions from time to time during our careers. Nothing lasts forever. Problems in our businesses and business plans become common over time. Handle your own problems or at least be smart enough to go to a person who has actually solved problems like this before if you need help. Remember what P.T. Barnum taught us.
Charlatans abound. All of a sudden, everyone’s an expert.
Again, be objective. If you’re having consistent cash flow problems, that means you’re probably losing money somewhere in your business plan. Look for the flaws in your plan and do something about them.
But if those flaws are outside of the Four P’s, then it might be time for a pivot.
Either way don’t beat up on yourself, only trust advisors with a proven track record, and solve the problem rather than just borrowing more money.
If you need help, I’m one of the guys who’s actually solved these problems for the last 34 years. My number is easy to find. Don’t hesitate to call.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.