Financial House of Cards

I started this blog to document our construction efforts, and business planning for the startup of Nemo's Coffee. Once that was finished, I continued blogging about operations and how things were going. I also spiced it up a little with events going on in our lives. Recently, though, I have been trying to dig a little deeper. I have been trying to convey the difficulties we have encountered, and how we are dealing with those difficulties. Tonight I would like to talk about finances.
First of all, Tracy and I are not business people. We know coffee and photography, but neither of us have ever taken classes in business. Knowing how to make great espresso drinks and knowing how to capture great images does not make a business. We have found out over the last year that so very much more goes into it. You have to know your product or service inside and out, obviously. But, there are other things that come into play. One of them is knowing how to juggle your finances.

You have two basic options when starting a business. The first is to be independently wealthy. If you have money lying around getting in the way, and lots of time on your hands, go start a business and have fun. If you don't like the hours or effort required, use one of your piles of money to hire a general manager.

The other option, which most of us choose, is to pour everything you have, and a few things you don't have, into starting your business. You then work incredibly long hours, sacrificing everything, to get your concept up and running. Everything goes well, maybe even better than expected for awhile, and then you find yourself constructing your financial house of cards. Basically, things get tight. You start figuring out ways to make do with what you have, to make do with less than you thought possible. You figure out how to balance one thing while keeping an eye on another wobbly area of your finances. Step by careful step, you build your house of cards, taking care to place everything just so, holding your breath in terror at the hint of a breeze, so to speak, hoping it doesn't come crashing down.

I have been talking with some of my friends who own their own business, or are beginning an entrepreneurial venture as we are. Since I don't know any people going with option #1 above, I'll describe what we are all experiencing with the favored option #2. It seems that everyone builds their own financial house of cards. They all look different, they all are made up with different types of cards, but they all have one thing in common: each and every one is fragile, susceptible to the slightest vibration or commotion. Some of these influences could be your own mistakes, self-created problems, or they could be outside influences beyond your control. A local business person invested $1,000,000 opening a Krispy Kreme donut shop here in town. What a great move, at least it seemed so based on the fact that people waited in line for up to an hour on a regular basis to buy Krispy Kreme donuts in Denver. You could go there anytime of the day, any day of the week and there would be a huge line. Krispy Kreme in Denver had to hire off duty police officers to direct traffic, daily! They were raking in the cash, quickly becoming one of the rare people who could start another business via method #1. The news channels and the newspapers talked about the Krispy Kreme opening here in Colorado Springs for weeks. The youth minister at our church had plans to camp out on the sidewalk the night before with some of the teens, and be the first customers when they opened. For some reason, that sounded like a lot of fun to us. We drove our Suburban over at 9:00pm and parked in the drive-thru, FIRST IN LINE. We camped out and slept in the car (well, the kids slept... I got no sleep). As the night wore on, more and more people showed up. Our church youth group was there, playing guitars and singing all night. Many others showed up and the line of 'donut campers' got longer and longer. At about 4:30am, police arrived and began setting up cones to create lanes for cars to go through. At 6:00am the television crews arrived and began interviewing people who camped out all night. When they finally opened the store, we were the first ones served, and we were interviewed by a local radio station at the order menu. They broadcast me ordering three dozen Krispy Kreme donuts all across Southern Colorado! You just would not believe all the hype and excitement about a donut shop opening. Cars lined up for blocks waiting to go through the drive through. It was an amazing sight. We didn't live too far from the store, and we noticed that people were there buying donuts at all hours of the day, everyday. It was an American success story... Then, approximately two months after they opened, people started talking about the Atkins diet, and other low carb diets. This diet fad took off like a rocket. Within a couple of months, there were no lines at Krispy Kreme. You could go over there anytime and buy donuts without having to wait. Within six months, they closed retail operations. They continued to make donuts there, and deliver them to grocery stores and convenience stores. Several months after that, they closed the doors completely. $1,000,000 wasted because of a new diet fad. Is Krispy Kreme as a franchise going to survive? Yes. Did the local owner go belly up, though? Yes... Does Josh remember camping out at Krispy Kreme all night? Yes, it is one of his fondest memories!

Well, anyway, I have no idea where I was headed with that whole Krispy Kreme story. I haven't had enough sleep and you are going to have to bear with me if I go off on a tangent.


Oh yeah, I was talking about influences beyond our control wrecking our financial house of cards. Anyway, our financial house of cards is made up of Nemo's, my photography aspect of the business, me working two jobs, us having two rental houses and one of them being empty, Ethan breaking his leg at the start of all of this, costing us $5000 out of pocket, etc. etc. etc... If I had to guess where our weakest link is right now, I would have to say it is our empty rental house. We have been making payments and covering utility costs for nine months, costing us about $10,000. Right in the middle of a brand new business start up is absolutely the wrong time to have a $10k hit on a rental house and a $5k hit on a broken leg. But, you place your cards where they need to be, adjust them to make them more stable after every little vibration or movement, and keep praying that your house will hold up to the many outside influences trying to knock it down. Some businesses make it though the difficult times, their business grows and becomes self sustaining, and their house of cards slowly turns into brick and mortar, and maybe even a castle or mansion at some point. Others barely build their house before a massive gust of wind not only knocks it down, but scatters it to high heaven!

Where do I think we are? Our house is built, and it looks very strong on the outside, but I know it is just a facade. My two full time jobs are giving our house a false sense of strength. Our business has done well, and it is maintaining an undercurrent of strength. Our product is excellent, our environment is considered the best in town by many, and our customer service is excellent. We know our customers by name, and the conversation and friendship flows effortlessly. We have established connections, rapport with our customer base. We will continue to do that, and continue to build our customer base and build sales in turn. The weakness in our facade is whether or not my two jobs will last long enough to let things turn to brick and mortar. We have authorized our realtor to accept an offer on the house where we walk away from it with no equity. The best thing would be to take some time and finish the remodel and sell the home with a $25k profit. But, that takes time, and our time is ticking away. My job at Intel is supposed to end March 31, although there is talk about extending us since there is a active buyer considering the facility. But, Tracy is all but begging me to quit my night job at Intel. She would rather let the rental house go into foreclosure than for us to continue on our current schedules. As hard as things are now, I think that would add unfathomable amounts of stress and difficulty to go down that road.
Anyway, for now our house of cards is still standing. We shore it up here and there when needed. It is a major juggling act to keep everything stable, or at least to take on an appearance of stability in a world of turbulence. I believe every successful business owner has been at this point. Does the house fall, or do you weather the storm and survive? Nemo's is an excellent concept and people love it there, and we are putting all of ourselves into it. I believe we are going to make it over the hump and survive, and then prosper. Right now though, we are praying for calm around our house of cards. I pray that God will continue to hold them up, and give us the strength and perseverance to continue on...

JD