The Day I Nearly Lost My Business: A Story of Tragedy and Triumph

by Marcus Sheridan

This post is going to be a little different than most of the sales and marketing 2.0 themes that I’ve written so much about here on The Sales Lion, but notwithstanding I do hope it does, at least in some way, inspire a few of you as it is certainly an experience that has had an incredibly profound influence on my life.

A Forgettable and Cold Meeting

I can remember the meeting like it was yesterday. A very plain and unemotional lady was coming to meet with me and my two business partners. Our anticipation and anxiety was extremely high, as this lady was from the IRS and nothing from our previous conversations with her on the phone indicated that she had an emotional bone in her body.

small business climbBut finally the lady showed up. She asked a few questions about our predicament and then proceeded to tell us something that would change our lives for many years to come. Simply stated, the IRS was putting leans on our 3 houses and we had a zero tolerance policy. This meant that if by any chance we were late on any of our normal tax payments, they would come in and shut down our business. And along with shutting us down, they’d take everything they possibly could other than the clothes on our back so as to ‘get their money’.

As I heard these profound words and threats leave this lady’s unemotional face, I turned to my dear friend and business partner Jason. He did not look well. In fact, he looked rather ill. I’d later come to find out that he almost passed out when he heard such debilitating news.

A Blaring Weakness

Now I’m sure you are wondering how we managed, as a small business, to get to such a point with our company. Well believe it or not, we were asking ourselves the same question that unfortunate day.

It all started a few years previously when my two business partners and I decided to go into business and open a swimming pool construction company. We had many qualities going for us—hard work, dedication, sales and management skills, construction skills, moral values, shared integrity, etc. But despite the fact that there were many positive attributes to our little group, we had one terrible weakness.

You see, none of us three really knew anything at all about accounting. Heck, we barely knew how to balance our check books and so the idea of running a business and dealing with all the laws and regulations that come with such a career path were utterly beyond our realm of scope.

A New Employee

After about 18 months of floundering around as well as outsourcing much of our bookkeeping needs, we decided to hire a full-time bookkeeper. With hopes high, we were thrilled with the idea that we would now be able to solely focus on the business without worry about all of the accounting variables that put each of us in such a foggy state of mind.

Shortly after we started the hiring process, we decided to go with a gal we’ll call ‘Janet’. And after Janet started, we were not at all regretful of our decision. In fact, Janet was as hard working of an employee as we ever had. With unbelievable dedication, she proved to us that she was a team player and willing to do whatever it took so that our business could achieve success.

It was also during this time that our business was growing by leaps and bounds. Typical for guys that don’t really understand how to ‘own’ a business, we were running around like chickens with our heads cut off. Sales were strong. Money was flowing in. We thought everything was great.

Reality Sets In

But in life, reality has a strange way of hitting you in the face sometimes. It hit me in the face about 8 months after Janet had been with us. One of my field employees called me up on a Friday evening and told me his paycheck had bounced.  Obviously, I was shocked, perplexed, and embarrassed with such a call. I then immediately called Janet and she told me she had made an accounting error and that she would get it straight right away. But notwithstanding, neither me, nor my business partners, had a good feeling about such an embarrassing event.

Over the next few months, more and more financial red flags started popping up. Vendors were calling about past due accounts. Janet kept saying she needed more money and naturally our solution as business owners was to work harder. In fact, it was during this time that my partners and I were working 65-75 hours a week. Because we weren’t smart enough to see what was going on around us, we simply sold more pools, worked longer hours, and hoped it would be enough.

But things weren’t getting better. It was almost as if we were hamsters on a wheel—running as fast as we possibly could but making no progress whatsoever. The stress, the frustration, and the bills only mounted.

The Moment of Truth

And roughly about 12 months after Janet started working with us, the moment of truth and reality finally came one day when I was sitting in my store, pondering all of the problems we were having. Janet was also there, sitting at her desk, looking focused and diligent as always. My cell phone rang.  I saw it was the bank. A nervous feeling entered my gut as calls from the bank were never good in those days. Here’s the conversation as I remember it:

Bank Manager: Hi Marcus. I need to talk with you privately for a minute. Are you alone?

Me: (feeling like I wanted to barf in trepidation of what bad news might be coming next) Ok, sure. (and I walked outside in front of my store)

Bank Manager: Marcus, you’re not going to believe this, but a company out of Canada has been funneling thousands of dollars out of your account.

Me: What? Are you kidding me? What’s going on?

Bank Manager: Well, I’ve had my suspicions for some time now, but now I know of everything for certain. Marcus, Janet has been stealing money from your account. I’m not sure as to how much, but I think it’s a lot and I think it’s been going on for quite some time now.

Me: Janet? Seriously? I’m stunned?

Bank Manager: Well it’s true. Now I need you to invite her to leave immediately. The police have been notified. We’ve got a big mess here to clean up.

It was in that moment that I clearly recall looking through the large glass windows of the front of my store and seeing Janet at her desk. Still working diligently. Still ‘dedicated’ as ever.

For the sake of time, allow me to simply sum up this story in a few sentences—

Damage Done

After piecing the entire puzzle together, my business partners and I soon found out that our financial situation was much, much worse than we had initially understood or anticipated. It turns out that Janet had a record of embezzlement and had stolen from other companies in the past. In our case, she had attempted to literally but our company out of business, hoping that if we had to close our doors, the trail of debt and money mismanagement would never lead back to her. Luckily, the bank realized what was going on before she could complete her mission. But let me assure you, Janet got about 99% there.

In fact, it turned out that Janet had an on-line gambling addiction. She used a company out of Canada to handle her ‘gaming’ and gave them complete access to our banking accounts. So during the course of 12 months, we eventually learned that she had literally blown about $150,000-$200,000 on this awful vice. And not only had she blown all of this money, but she hadn’t paid any state or federal taxes either (She actually filed them each week but never paid them, crazy huh?). These debts alone to the State and the Feds added up to about $250,000.

So there we were—Debts that accumulated to about $450,000 and no recourse to get any of it back. 12 months of grueling work, barely seeing our families, and sleepless nights—all for nothing. It was utterly depressing and unbelievable.

Yes, We Were Dumb

Now I know many of you readers and business owners are asking, “How could you guys have been so stupid? Don’t you look at your bank statements?? What a bunch of dummies!”

And if you’re making such statements and judgments, you’re likely quite accurate with your words. You see, the problem that my partners and I had was two-fold:

  • We knew nothing of accounting
  • We trusted people implicitly

In hind-sight we should never have even hired Janet. But did we have the common sense to run a background check? Nope. And should we have picked up on all the signs within a few months of her employment? Yep. But we didn’t. Thus, we paid a terrible price, as did Janet.

End Results

When it was all said and done, Janet, a mother of two little girls, went to jail for about 2 years. As for us, we found ourselves in this meeting with the IRS lady. And after she finished with her cold assessment of our situation, we literally felt like we were at the bottom of Mt. Everest. Except in our case, we were going to try and climb it in a wheel chair.

No doubt, the cards were incredibly stacked against us. In fact, we went to financial advisers who pleaded with us to close our doors and cut our losses. Anywhere we turned for professional help, everyone recommended the same thing—

Just Quit

As you’re likely well aware by this point, we did not quit. We did not give up. And in a future article, I’m going to fully explain how we managed to eventually get out of debt as well as the joys we felt after no longer having the IRS in our lives, with their name attached to our homes and properties.

But for now, and to close this little story, I want to discuss something completely different than how our business survived. I want to talk about acceptance, forgiveness, and the incredible lessons of this thing we call life.

Powerful Lessons Learned

Despite the fact that our business was set back years due to the actions of Janet, as well as the fact that she put major strains on our lives and families, I do not harbor negative feelings towards this lady. In fact, I only feel sad for a woman who obviously has some serious issues. I also feel a compassion for her two young girls that for all intents and purposes, did not have a ‘Mommy’ to turn to for two years when they needed one most.

Because of the urgency of our situation, my business partners and I were forced to learn and embrace certain strategies that have now lead to the successful business we have today. Our reaction to this problem in many ways has become the foundation of who I am as an entrepreneur and marketer. I’ve also been blessed to travel around the country and share our story with others. Frankly, the entire experience is one long roller-coaster ride of highs and lows, despair and elation, as well as tragedy and triumph.

Perspective

Having such a perspective allows me, as I sit down here at my kitchen table this morning, to actually feel a gratitude that I was chosen to go through such a series of events. I have no doubt that as my writing and speaking career grows, and as I’m able to touch more and more businesses, the trials and struggles that I’ve passed through will always be a foundation of reflection and advice as I’m able to bless others to get through similar valleys in their lives and businesses.
Well that just about does it for now. If you’ve managed to make it through this long post :-) , I’d be very grateful if you shared your thoughts and comments below. I receive tremendous joy hearing from you all and hope that this experience has had, in some way, a positive influence on each of you. 

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