WHEN Alex Meisl’s telecoms business, Taotalk, failed, the first thing he did
was personally to tell everyone affected, either face to face or on the
phone.
“I’m a great believer in what goes around comes around,” he said, “and the
idea of sending out a text message or e-mail to everyone, saying ‘Sorry, we
screwed up’, didn’t appeal. It was important to speak to everyone and
explain what had happened.”
The firm failed after a potential investor had a last-minute change of mind.
For Meisl, who personally lost £500,000, the hardest part was telling his 12
employees.
“I felt huge guilt towards the staff. They had trusted me because I said it
would be all right. They missed out on their last month’s salary and they
didn’t get any redundancy other than the statutory minimum.”
Tony Walford at Results International, a business consultancy, said Meisl did
the right thing.
He said: “If you are looking to start up again and want to maintain a
relationship with your creditors, the best thing you can do is be open and
honest with those creditors. Explain what has happened and why it has
happened.
“Be quite composed and reasonably humble about the situation. If you can, just
front it up because it stops gossip. What you don’t want is a load of gossip
going round the industry, you want the facts out there. These things happen
and it is not always your fault. You are not the first person this has
happened to and people respect you more when you put your cards on the
table.”
Walford added: “I always feel in life that it is best if you put your hands up
and say this is the situation rather than try to duck it. Your creditors are
going to know what has happened in the end because the administrator is
going to write to them.”
If possible, you should try to talk to all those affected, Walford said.
“Try to speak to as many people as possible about it. It will be incredibly
hard, but the person on the other end of the phone will thank you for it –
at least, they might not thank you for it when you make the call, but inside
they will thank you for it.
“When a business fails, especially if you have put a lot into it, it can be
quite tempting to say, sod it, I’m going to pack my bags and go and sit
somewhere quietly for a bit and lick my wounds. We all need to do that, but
the first thing to do while the business is going through the process of
being closed down is not to stick your head in the sand.”
Once you have made those difficult phone calls, the best thing you can do
next, said Walford, is to lie low for a while and try to analyse what
exactly went wrong. He said the most important thing about experiencing the
failure of the business was to understand why it happened.
Bryan Wilsher, chief financial officer of Loewy, a marketing-services group,
agrees that you should be open about the fact that your business has failed
and not worry too much about what people think.
He said: “Honesty is the best policy. A little bit of contrition goes a long
way. In truth, I think people overworry about that. When they hear about
somebody else’s misfortune most people say ‘oh that’s sad’ and then they
just move on.”
He said that people would often be prepared to offer free advice, something
you should take advantage of. The most useful people to talk to, he said,
were your former clients. “Ask them what was it that you were doing before
it stopped them buying from you. Ask them what you can do to make the
business or the product more attractive to them.”
However, Wilsher warned strongly against promising to make it up to creditors
financially when you get back on your feet in business again. “You shouldn’t
get too guilty and hung up on that because the next thing you know you will
be burdening your new business with obligations from the past. It will
exacerbate the situation. Most people in business know that from time to
time money they were owed can’t be collected because somebody goes bust. It
doesn’t come as a surprise.
“The reality is that if you give it a year or so, everyone will have forgotten
about it – they will have all moved on.”
Wilsher said the best way to avoid failure next time round was to have a
mentor to whom you could talk to in confidence.
He said: “I would advise any owner of a small or medium-sized business to have
somebody who is a confidant, who understands the business and who will make
you stand back from your passion and just look at the business facts. Most
people get into difficulties because they ignore the signs – either because
they don’t want to see them or because they don’t have information at their
fingertips.
“If any reasonable person looked at it they would say, ‘you are heading in the
wrong direction’.”
David Gilbert, business restructuring partner at BDO Stoy Hayward, the
accountant, warned that it could be easy to make the same mistakes again and
again – so if you are going into business a second time, take active steps
to ensure that you do not fail a second time, too.
He said: “A lot of people will make the same mistakes again. The way to break
the cycle is for management to recognise their failings. They really need to
be honest about what has caused the failure of their business.”
That might mean recruiting a stronger management team and a better financial
director, for example, and putting a proper business strategy in place.
It took a whole year for Meisl to feel confident enough to start up another
business, Sponge, which provides mobile services, and this time round he
made several key changes in his approach.
First of all, instead of trying to go it alone, as he did with Taotalk, this
time he has brought in a business partner to help him.
He said: “It is one of the best things I have done. Our skills are
complementary so we bounce off each other. If one is down, the other is up.”
Second, he sat down and wrote a proper business plan. “There was a time
between 1998 and 2001 when rational approaches to how to run businesses were
thrown out of the window and I got suckered into that to a certain extent,”
he said. “So at Sponge we now focus on every single deal being profitable.”
The changes have paid off. Sponge has a turnover of £5m at present.
Meisl said that experiencing the failure of his business had changed him. “It
hardened me and it made me slightly more cynical, in a constructive way. If
someone comes through the door and says I am sure we have got a deal with
company X, I don’t believe it until I have seen the signature on the bottom
of the document.”
