| Can This Business Be Saved? |

Taking The Lead

With business coach and strategist Isaac Bardos

Prepared for print by Ilana Keilson


RECAP: After taking on a new partner and hiring a new manager, Michael’s online kitchenware business, Foodies, isn’t turning a profit, and Michael is falling deeper into debt.


“Michael, I see the money coming in from sales. Where is it going?”

I can tell from his expression that he doesn’t know the answer to that one.

We look at his monthly P&L — profit and loss — statements, and they’re all over the place. Michael’s expenses, including payroll, marketing, purchasing inventory, and other costs aren’t carefully recorded, making it nearly impossible to track overhead, predict costs, or plan future product orders. One thing is clear, though: Costs are higher than they should be.

“Who does your bookkeeping?” I ask.

“We do it in-house,” Michael responds.

“Meaning your wife does it?”

“Yes,” he says with a wry smile.

Hmm. Red flag.

Then we take a look at the overall business, and I can see why Michael is stressed. His day-to-day operations aren’t running smoothly, he’s unhappy with his manager, and he has no system for tracking inventory, managing employees, or increasing sales. No wonder revenue isn’t growing!

I lay it out as I see it: “You’re over $600,000 in debt, your money is tied up in inventory, you don’t see eye to eye with your partner, your employees are underutilized, and your manager isn’t doing her job.”

Michael shifts in agitation.

“When you put it like that, it sounds pretty hopeless,” he says.

It does.

“Aren’t you glad you came to this inspirational business coaching session?” I say with a warm smile.

Michael laughs and eases up a bit at the humor.

The only way to fix the problem is to get a clear sense, in dollars, of how the business is actually doing, I explain. Our next step is to see what Foodies’s largest expenses and debt are, and how many of the most popular products Michael needs to sell to get out of this financial ditch.

“Michael, how much are you paying your manager?”

“$6,000 a month,” he shoots back.

We crunch all the numbers together. The results?

Manager: $72,000/year

Employees/Overhead: $250,000/year

Advertising: $150,000/year

Michael and partner Salaries: $250,000 a year each

Credit Card Debt: $180,000

Investor Debt: $200,000 a year

Total capital needed to get out of the debt spiral and cover the rest of the year: $1,352,000

Michael’s face goes pale.

“That’s a lot of cash — how will I come up with that kind of capital?” he says blankly. “It’s almost triple our current revenue. How can I possibly triple my profit in the next year?”

Whenever a business faces a problem, it’s important to first simplify the issue by helping form a framework for how to view that problem.

“In a product-based business that’s struggling, I’ve found that the issue is usually one of three things: the product, the process, or the people,” I tell Michael. “Let’s examine all three and see where Foodies is going off track.”

We’ve looked at Michael’s product, high-end kitchenware: the quality, the consumer demand, how much he’s selling it for, how easily it can be combined with other products, and the profit margin.

The product is solid. It’s got proof of concept, it’s in demand, and the profit is good.

Then we look at the process: how customers are attracted to Michael’s website, how he brings them from cold to sold, how orders are filled, the warehouse management of the product, tracking and reordering inventory, shipping arrangements, and customer service.

“Overall, the process is great,” I tell him. “It looks like all the pieces are in place; things should be running like a well-oiled machine.”

There’s just one problem: It’s not.


The issue Foodies is facing is with implementation. The process isn’t being implemented properly, so there have been innumerable issues: Customers aren’t receiving their orders, and some are receiving shipments late or getting the wrong products. This, of course, causes an inflow of refund requests, which is choking profits. Even more telling, the number of issues has increased dramatically since Michael added more decision-makers — a new partner and a new manager.

All of this points to a people issue.

Michael had mentioned earlier that when it comes to implementing changes to make Foodies more profitable, it doesn’t always happen, and it’s not done efficiently. Most people assume that’s a process issue, so Michael mistakenly focused on fixing the process. But in growing businesses, it’s not uncommon to see efficiency issues as you bring on new levels of management and employees.

“Michael, you said you had frustrations with your manager, Samantha. What’s going on there?”

He takes a moment to collect his thoughts.

“I feel like she’s not on top of things,” Michael replies slowly. “When I ask her for updates on tasks, she’s ‘still working on it’ and she’s in a perpetual ‘will-get-back-to-you’ mode.”

That’s not good. As manager, Samantha should know what issues there are before they come to Michael’s attention — and have a plan in the works to resolve them.

“Gotcha. Have you discussed this with Samantha, to hear her side of it?”

“I’ve mentioned it in passing,” he says. “But she still doesn’t move and adapt to things at the pace I need. I think I should fire her.”

“Does Samantha know that?”

“No, I didn’t want to ruffle her feathers.”

Sounds to me like the feathers are already pretty ruffled!

“Nothing will ruffle feathers more than your business failing,” I explain. “Remember, this business is feeding her family as much as it feeds yours. You may think you’re not ruffling her feathers, but she’s going to have much bigger problems on her hands without a paycheck.

“You need to own your business; that means you take ownership of every problem. As President Truman said, ‘The buck stops here,’ right? ‘Here’ is your desk, and whatever money is made or lost in Foodies determines what you, Samantha, and even Josh take home. Your rewards are based upon your employees’ performance; theirs should also be.”

I let that sink in for a second before continuing, “Your job as the owner is to hold your manager and partner accountable.”

Speaking of which — “What about Josh?” I ask. “What does he do for Foodies?”


I advise Michael to set up three meetings: with Josh, with Samantha, and with Josh’s father. We’ll get to individual employees eventually, I explain, but first Michael needs to address the leadership issues, creating clear, measurable accountability from the top down.

He needs to have these conversations because everyone else is comfortable with the way things are. And why shouldn’t they be? They’re getting paid either way; they’re not invested the way Michael is, and they don’t have the same skin in the game.

Michael hasn’t confronted Samantha about her inaction, and she knows that Michael and Josh aren’t on the same page; with a 50/50 ownership in the business, both men would need to sign off on asking her to make procedural changes or firing her.

Michael looks worried.

“What if they get upset?” he asks earnestly.

“They’re going to be way more upset if this doesn’t get resolved,” I reply. “Keeping the peace is what brought Foodies to this point. Now you need to take action and turn it around. If you continue keeping the peace, you likely won’t keep your business.”

To be continued…


(Originally featured in Mishpacha, Issue 891)

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