Wait… What?
I doubt anyone here is in the toy business… I don’t think you're building brick and mortar stores. What the hell does “Toys Waz Us” have to do with Indie Hackers?
Hear me out…
First, let’s look at why Toys R Us went down. Amazon is part of it, but it’s not the complete picture. If you didn’t already, check out this article from CNN.
Did you read it? Of course you didn’t. No worries. I’ll sum it up for you:
The internet didn’t kill ‘em. Debt did.
Toys R Us was already in trouble back in 2005. Due to their heavy debt they couldn't update their stores. They didn’t have money to invest in the shopping experience.
Debt immobilized them. They kept lumbering along until the weight got to be too much.
So what does this have to do with us? Well fellow Indie Hackers… Debt doesn’t just kill big businesses… It kills small ones too.
…And yeah, I know most companies have debt. Organizations like Apple take out loans because, when the money’s cheap, it makes sense to do so. Before you type out an indignant response, keep in mind you’re not Apple.
This should probably be common sense but…
DON’T FINANCE YOUR BUSINESS USING YOUR CREDIT CARDS!!!
For that matter, think LONG and HARD before you go get a small business loan. I wouldn’t do it.
Story time… I used to co-own a small business with a family member. I’ve mentioned this before on the forums. She took tens of thousands of dollars out that she shouldn’t have. I was an idiot, didn’t do proper book work, and didn’t notice it for SIX FREAKING YEARS…
…Anyway, the business was always broke. I kept buying company stuff with my credit cards since the bank account was empty.
You can probably guess how this ends. I ended up having to declare personal bankruptcy. It’s one of the things I’m most ashamed of in my life. I made a promise that I’d pay money back. I didn’t. That still keeps me awake at night and I’m not proud of it.
Here’s the thing… As the years wore on my debt got worse. I made increasingly desperate decisions. I took customers that I knew were a bad fit because I needed to pay the bills.
Desperate people make desperate decisions. Desperate decisions almost always end up biting you in the butt. Throwing more money at a business that's failing (for whatever reason) is rarely the solution.
The best gift you can give your business is financial stability... Both with your personal finances and your company finances. Don't quit your job or tap your savings unless you have a cushion in case things don't work out.
In other words... Don’t let your hustle become a Toys R Us kid…
Thanks for sharing a difficult experience in your life and a cautionary tale to the community.
I see this as a really common pattern among small business owners. They don't know their numbers and it hurts them and their business really badly. Marcus Lemonis always asks business owners their numbers at the start of any dialogue and a stunningly high percentage of them cannot give an answer. That's a very troubling data point and it matches my own experience attempting to buy an established sushi business only to find every business we looked at not be able to produce numbers that quantified what we were buying. We didn't buy a sushi business.
When I told this story to my co-founder he shared with me a tale of a friend of his who did purchase a business of a similar nature on the same quality of information and is now suing the seller in court because the real performance doesn't match up to what he was told. Go figure.
Oh yeah... Absolutely... By the end of it my mantra became "God is in the numbers!" Had I known what the numbers actually were I would have gotten out ages earlier.
That's the thing though... Debt did a great job of helping me pretend that there wasn't any problems. It's kind of like the meme of the guy who's sitting in a burning house and he's saying "This is fine".
Know your numbers and be wary of debt. Those were two of the biggest lessons I took away. :)
I don't blame you for not buying a sushi business! Knowing what I know now I wouldn't buy one without solid numbers either!
I think there is another lesson here, and that is, do not let unscrupulous people take over your company -- a great portion of that debt was used by Bain itself to take over the company, which sounds absurd on its face.
If it was only as easy as not letting unscrupulous people take over the company. I was all ready to write about how Bain and the leveraged buyout was the cause of Toys 'R' Us's downfall but it comes down to the fact that there may not have been any other options other than this leveraged buyout. Another example of this is iHeartRadio, also a company that had a leverage buyout from Bain. If you are to the point that unscrupulous people are looking to take over the company then you may have had issues for quite awhile.
Quite true! Don't get me started on Bain. They almost bought a company I worked for several years ago. It was... Utter disaster...
Working a full-time job (security), dedicating mornings, evenings and weekends for a side hustle (discipline, opportunity) and then still keeping the full-time job, reinvest all the profits (from the side-hustle) back into the business, is a framework I consider that has a higher chance of success.
The longer you can hold off from jumping ship to your side-hustle and paying yourself, the more investment will go in the business, the higher the chance of success.
Not to mention all the benefits and character traits that come with learning to work within constraints, both time and financial ones.
Thanks for sharing @MatthewJones517 ! Agree 103%!
Thanks @JulianSamarjiev! I think you're absolutely right. The full time gig + side hustle is the path I'm taking this time. It's a sensible route, it just takes dedication. I think it's worth it though. :)
I think so too 🙂
Good luck with it!
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Part of the reason the UK is so polarised right now is the constant name calling. The people who voted leave no doubt don't like being called idiots, just as much as the people voted remain like being accused of moaning. Try listening to the other side, as there are legitimate concerns about the effects brexit will have on business, coming from business leaders themselves no less, instead of just sneering.
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Yeah... You can't blame the fall of Toys R Us on Brexit. They were just straight up a poorly run business. :\