No easy way to say goodbye

    One of the most difficult aspects of owning a business is learning how to accept a loss. And as soon as I learn, I will be certain to explain it.
    I do understand the general concept. Every business takes it in the shorts occasionally, some more than others. Mistakes are inevitably made, and it is the mark of a seasoned executive to realize the mistake at the earliest possible moment and take steps to correct it.
    The company that is slow to react is the company that is left behind as the marketplace changes.
    With the big picture I have no problem. As a retailer, Iíve dumped stores within a few months of opening, strongly suspecting they were losers. Maybe I was wrong, but I didnít want to find out. I cut my losses and survived to try again.
   Itís the little losses that get to me; They day-to-day operating decisions where you have to take a loss in order to realize a future gain Ė thatís not easy to swallow.
   The best example is dead merchandise. Iíve got merchandise that hasnít had a breath of life in over five years. Itís taking up valuable warehouse space that can be used to backstock fresh, lively merchandise that actually sells.
    So I should close it out, liquidate the dead stuff. And I will, as soon as someone offers me a fair price. The problem is that the parasites who will actually take the goods donít seem to care that Iíll lose money if I sell to them.
    For example, I happen to have a measly supply of 11,000 pair of sunglasses. Thereís little doubt I made a mistake or two when I bought the sunglasses in Taiwan five years ago. Some might suggest I bought too many. Others might imply I had no concept of style. All would be correct.
    They cost anywhere from $1 to $2 each, depending on the level of quality, which ranged from low to really low.
    We sold thousands through our stores and thousands more through some friends who had stores, some of whom are still speaking to me. But when friends and customers wised up, there were still 11,000 left.
    So it was time to liquidate, and for five years Iíve had every intention of liquidating. But no one will give me a fair price.
    Just last week I got a call from a liquidator in Minnesota. When I told him about the sunglasses, he asked me a few questions and then said the best he could do was 25 cents each.
    I was about ready to laugh in his face when he added that he would need to see samples before committing himself. I realized he was offering 25 cents because he thought my sunglasses were still in style. Once he saw them, the offer would surely drop to 10 cents.
    So the pattern continues. I say "no way" and the sunglasses sit for another few months taking up valuable space. I refuse to sell them at such a colossal loss. Iím unalterably convinced an angel will descend and offer me what I paid for them, since I humbly no longer expect to make a profit.
    In fact, Iím thinking of adding a codicil to my will, instructing my grandchildren to never sell those 11,000 sunglasses at less than their cost. That way I will surely be buried with them.
    While I have a personal interest in the sunglasses, having bought them myself, other dead merchandise is slightly easier for me to dissolve. Thatís why I reluctantly agreed when Ralph, my general manager, suggested we have a warehouse sale for a few days.
    "Great idea," I said when he explained the details. "What do you think youíll ask for my sunglasses? How about $3 each."
    "No sunglasses," cried Ralph, holding up his hands. "And another thing, please stay away. I donít want you anywhere near the warehouse when we hold this sale."
    I shrugged. "Fine with me. Just generate some cash."
    Ralph and his managers did just that. Over a few days he reported sales of almost $13,000.
    "Thatís great work!" I exulted when Ralph reported the figures to me. "I canít believe you got rid of that much merchandise. Thatís going to certainly help the old cash flow."
    Ralph put his arm on my shoulder. "The cost was $25,000," he said, as gently as possible.
   I gulped a long, hard gulp. It was clear why Ralph didnít want me around during the sale Ė it would have been far too painful for me to watch.



Home     |      About     |    Columns     |     Contact          

© 2006-2017 
All rights reserved.