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Growing Too Fast: A Cautionary Tale

Written by: James Chan

Article Overview: It is not your overhead but what's in your head that counts, especially when you run into a downturn in your business. Your ability and willingness to cut costs can help you stay in business longer to wait out the storm.

Growing Too Fast: A Cautionary Tale

I suppose you could say that the woman I~{!/~}ll call Amy was one of my early role models. I first met her when I was teaching at a college in central New York, and she was reinventing herself by starting a new business.

For more than 20 years, Amy and her husband had run a successful business together. The business continued to prosper, but eventually the marriage soured, and they were divorced. Amy had dropped out of college to get married, and she had nothing to fall back on. She clearly contributed to the success of her husband~{!/~}s business. However, after the divorce, though he gave her some money, he still had the business and the contacts and access to borrowing that went along with it. Amy could never amass the capital and goodwill required to start on her own, and besides, once she was out of the business, she came to dislike what they had been doing.

Suddenly alone in middle age, Amy had to figure out what in the world she could do. After a lot of soul searching, and a few false starts, she realized that she was a voracious and sophisticated reader of newspapers and magazines. She noticed by-lines and paid attention to what different writers and television reporters specialized in. Perhaps, she thought, this could serve her well in public relations.

Many publicists work in a scattershot fashion, sending out press releases hit or miss. Amy~{!/~}s was a rifle-like approach. She called specific writers and producers to pitch stories she felt they could hardly refuse. She did it relentlessly. If she was forced to take no for an answer, she had another good idea pretty soon. She came out of nowhere, with no credentials, and in short order was providing the most sophisticated public relations services in her market. I~{!/~}ve rarely seen anyone so good at what she does.

I first met her at a party she threw shortly after she started her firm. It was in a glamorous apartment, and there were waiters in white gloves serving champagne and Perrier. Guests didn~{!/~}t see her office, which was in a corner of her bedroom. After a brief apprenticeship, she was launching her own business, and a very impressive group of guests had shown up to wish her well.

We stayed in touch in different cities. By this time, I was in a job I didn~{!/~}t like, and I was, on a not quite conscious level, watching what Amy did. Her business seemed to be prospering. She was always asking me whether I had seen one or another of her clients on Good Morning America or in the Wall Street Journal. Her client list was growing, and, while she resisted adding to her monthly expenses, it was clear that her business had outgrown her bedroom alcove and her dialing finger.

Her first hire was astute. Amy always felt that her writing wasn~{!/~}t up to the quality of the rest of the services she offered, so she hired a good writer and continued to pitch most of the stories herself. But eventually the business grew large enough that she needed more people and a larger office.

Amy, a believer in projecting a good image, seemed to put more care into the office than into her staff. She believed that because she was offering New York-caliber services, she ought to have a drop-dead environment, and she hired a good architect to achieve it for her. But some of those she hired to work in this stylish, enlarged office couldn~{!/~}t deliver on her implicit promise of brains and sophistication. She was becoming more like any other PR agency.

At around this time, I began my own practice. Amy gave me a great launch present: She got my picture in a prominent magazine with a caption that identified me as an up-and-comer. But she also gave me advice that wasn~{!/~}t really relevant to my business. She told me that I needed to charge much higher rates, to demand long-term commitments and to lay out a strategy for growth. These were things that seemed to be working for her, but she was selling something that~{!/~}s widely desired~{!*~}fame~{!*~}while my China business practice appealed to a far smaller and more rarefied clientele. Fortunately, I found some clients soon after I started off, and I was soon very busy, if not very rich.

Suddenly, without explanation, things began to unravel for Amy. First one contract went unrenewed, then another, and another. They all told Amy that it was an internal matter, no reflection on the quality of her work. Soon her billings were down to where they had been when she was working alone in her bedroom, but now she had five mouths to feed and a fancy office to pay for. She had some good prospects. One always has, and when things are going bad, they seem to loom even larger and more golden than before. She told herself that she couldn~{!/~}t reduce her staff, and there was a lease on the office. Things were going to come along next month, then the month after that. But clients never seem to come when you really need them. She held out for eight months, and then she was bankrupt.

Shortly before the bankruptcy, I went to her home for Thanksgiving. (I brought the turkey.) Everything was festive, but after dinner, she called me into the bedroom where her business had begun. She lay on the bed, told me she had failed, and started to cry. I tried to hold her. She was trembling. She seemed about to explode. She could not be comforted.

To this day, I don~{!/~}t know why she lost those clients. Such things happen. But her downfall was not accepting what had happened, and not adjusting her circumstances to weather the storm. She recently told me that she feels her big mistake was to commit to too large an office while her capital reserves were so small. She said she always advises others to stay in their bedrooms as long as they can, and think long and hard before they sign an office lease. But at the time, she seemed to think that the showplace office and the staff were affirmations of her success.

Amy is doing fine now, but I still shiver when I think of what happened to her. And her story reminds me that it~{!/~}s not your overhead, but what~{!/~}s in your head, that enables the entrepreneur to prevail.

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Article Tags: apartment, champagne, credentials, divorce, gloves, goodwill, middle age, miss amy, perrier, press releases, producers, public relations services, publicists, role models, sophisticated reader, soul searching, starting a new business, successful business, television reporters, waiters



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