2008 – Running A Company During Economic Collapse
I haven’t been through enough economic cycles to know if these men are just marketing themselves or if they truly see something that the rest of us are missing. But as a member of the class of 2008 I can tell you that when the next economic down turn does come, it will will leave a devastating impact on everyone
Four years into my first company at the time, the nightmare of 2008 has forever shaped the leader I will become. It has left a mark on my entrepreneurial journey that I can’t translate into words. Both grateful it happened and terrified of when it will happen again, the experience of 2008 is something I will never forget.
To all the entrepreneurs that haven’t been through this, I hope my story helps to prepare you.
It was 9 in the morning on a cool October day. I was siting in my office still staring at the same excel spreadsheet. Nervously drinking my coffee I kept hoping that I would find a mistake that would make this all go away. How could we be running out of money?!
As I heard Mike and Steve coming down the hallway I new this wasn’t just a bad dream. What was about to happen was very real.
There was hardly a good morning between us. Instead there was a nod and a separation. Steve was heading to one room while Mike and I were headed to the other. Having already split up the team, Mike and I were on our way to tell 1/3rd of the company that they no longer had a job.
That walk was the longest of all walks in my life. A simple right, left, and left it felt like an eternity. My hands sweating and my heart pounding, any attempt to practice what I was about to say was wasted. All I could really do was take one step in front of the other.
Sitting down with 7 people, I felt like a child among adults. It was as if they could see right through me as the CEO I wasn’t.
I proceeded to tell them that they no longer had a place at Contour. The shift in the economic climate meant that we couldn’t keep everyone, which meant that we had to cut the crew to save the ship.
One of them cried, one was very angry, and a few said they understood. But none of that changed how horrible I felt in the moment. Watching each of them pack their desk, it was as if time stood still. It was if I was there to forever internalize the impact of what I had done.
Even though I was making a leadership decision during one of the worst eonomic downturns in the history of our country, this felt very personal. I had asked these people to join us on a mission and here I was telling them that the vision I sold wasn’t real.
Unfortunately what I didn’t realize is that fateful day wasn’t even the bottom. It would get a lot worse before it ever came close to getting better.
When we started Contour as twenty something year olds we didn’t have anything. The measly $1,500 per month we paid ourselves was than we made in college, but significantly less than what our friends made getting real jobs. It didn’t matter because we were happy. We were two kids in a warehouse with no heat and no expectations. There were no employees to worry about or investors to satisfy. It was just us.
By 2008 things were very different. Now we carried a team full of expectations. It made the pressure to perform infinitely more stressful. And yet their expectation heightened every primal instinct we had ever developed along the way. Having come from nothing, we now realized that everything was on the line.
The fateful day of cutting the team from 19 to 12 was just the first step. With retailers no longer calling and customers no longer purchasing we spent the next two months selling every camera we could to anyone who would buy it. Creating friends/family programs, consumer direct initiatives, and amazon deals we focused on bring cash in the door.
What made this even more challenging was the realization that we had a massive quality problem. Dealing with a 20% defective rate we were quickly running out of quality product that we could sell. With the economic world melting down around us we had one choice. Find a new supplier or die.
To this day I still can’t imagine a supplier taking on a nearly bankrupt customer at the height of an economic collapse. But that’s exactly what happened. Not only did we find a new partner, but we took a massive gamble in developing the first HD action camera, which had the risk of blowing our schedule and running out of money before the camera ever saw the light of day.
With each proceeding month, we continued to get more aggressive.
By January we started taking returns rom retailers who hadn’t sold their inventory and resold it to those who could move the product. We provided the returning retailers a credit towards the new camera we were making, while we asked the purchasing retailers to pre-pay so we could keep the lights on.
By February I was so used to vendors calling and asking for payment that I got numb to the fact that I was paying $100 a week on a multi thousand dollar bill. Not having money was the new norm and facing that head on was the only existence I could remember.
By March we had a few hundred dollars in our bank account. The only thing that prevented checks from bouncing was the fact that a few of us didn’t cash our checks. Asking my dad to help cover my mortgage was a humbling experience.
What I also learned in March is that during an economic collapse the IRS is hypersensitive to anyone who is late in paying their taxes. It turns out we were one of those companies. Barely able to make payroll we were neglecting the payment of our employment taxes, which is something the IRS doesn’t appreciate.
Receiving a knock on my door at 8am on a friday morning, the two women in front of me weren’t smiling. In their long trench coats they asked if this was Contour and if I was Marc. Not sure if I should lie, run, or say yes, I said yes to both questions. The following 90 minute meeting ended up becoming a six month ordeal as we begged the IRS not to shut us down while we got back on our feet.
The only thing that really saved us was the IRS’s requirement that everything be handled through the mail. So sending and receiving letters took weeks at a time, providing us the window we needed to keep surviving.
By April we asked the existing team to take a 33% pay cut. Even without being able to guarantee our survival, everyone agreed and no one quit.
By May we were on life support. Despite our situation we asked the sales team to do the unthinkable, to pre-sell our new camera, sight unseen. Our goal was to bring in $30K so we could make payroll for the month. Not only did they reach $30K, but they added another $120K on top of it. This still gives me goose bumps.
By June we shipped the world’s first HD action camera.
By July we were profitable again.
But it wasn’t until September that I realized we had made it.
Sitting in my office, nearly a year since we cut the company, I saw the bottle of champaign that I had been saving. Having received it some 18 months prior from one of our early board members I had never opened it. Although it was a gift to celebrate the launch of our market leading camera back in January of 2008, I had yet to believe I deserved to drink it. Until that day.
In Seattle there is a spot called Gas Works Park. It is one of the most memorable places to watch the sun fade away. With the old rusted pipes on my left, the emerald city resting on the water in front of me, and the golden sun peering through the Fremont bridge on my right, I proceeded to drink the bottle of champaign. Fighting to hold back the tears, I just sat there.
I can still feel the weight of that green glass bottle in my hand. With it’s rounded curves and distinct label I took every sip she had.
The Personal Struggle
2008 was the hardest year of my life. And in the end there were only two reasons that I survived.
The first was my Mom. Losing her to cancer that same year, was devastating. Despite watching her battle the disease for 15 years I still wasn’t prepared. At 5’2” and barely 100 lbs. I watched her stand in front of that the mirror every day and choose to fight. She never backed down. She never quit. Her fight for life put the importance of everything else into perspective. In the end, the only thing that really matters is who’s sitting around your bedside when you pass away.
The second was my wife. Call it ironic, but we met at my lowest point during that 12 month ordeal. Ignoring how hurt I was from my Mom passing and denying how tired I was from surviving, she just listened. What started through a friend’s introduction became my saving grace. Spending every day together she was the emotional outlet I never knew I needed. Her smile, care, and ability to listen saved my life. Without her, I would have run myself into a brick wall.
What I Learned.
I carry a lot with me from 2008. None more important than these three lessons.
1) Don’t Quit
It’s true, you will be tested the most when the deck is stacked against you. The risk of losing everything combined with the embarrassment of failing are two fears that will haunt your dreams. The struggle to survive an economic down turn will wear on you to the point that all you want to do is quit. But don’t.
There is a path out, just not always the path you want to take.
2) Be Real
Most entrepreneurs are optimists. But with optimism comes denial of the present. Hoping that the bleak numbers of today change into better numbers tomorrow is ripe for failure. Missing your plan doesn’t mean you can make it up down the road. Running out of cash isn’t a reason investors give you money. Keeping more people than you should because you are afraid of the cultural impact, doesn’t mean you are making the right decision.
Selling the vision is an important aspect of being a great leader. Just remember to make decisions based on the information you have today, not the information you hope you’ll have tomorrow.
3) If You Let It, Life Will Unfold In Unimaginable Ways
As entrepreneurs we like to control every aspect of our companies. But as people, this is a fast way to miss out on the most important moments in life. When my Mom passed, I didn’t let it happen. I didn’t talk to her about dying. I didn’t talk to her about her fears. I was so afraid that I never even said good bye.
Meeting my wife was the first time I let life unfold itself. Despite telling myself before we met that I wasn’t going to date anyone, the connection we shared was undeniable. Six years later and more in love than ever, she has taught me that the only way to live life is to let it happen.
I now believe that everything happens for a reason.
*Image Credit: “Run on the Seamen’s Savings’ Bank during the Panic of 1857” by Unknown – w:Harper’s Weekly available at Library of Congress. Licensed under Public domain via Wikimedia Commons –