I couldn't sleep. The elephant on my chest was planted firm. The deadline was approaching, where I had to make a crucial business decision. Do we stay or go? My thoughts were like a moving Ping-Pong ball in competitive play. How much debt do I have? If this happened, then this could happen, or this. The relentless options, possibilities, tragedies, would not shut off. Oh to be 21 and single again. I could shrug off any losses, have a beer and find a sofa to crash on. Instead I had millions invested, a family, employees, and one gut feeling.
Have you ever had to make a tough decision that made you feel uncomfortable at the time? How many nights have you laid awake in bed worrying about the events that happened that day or the ones that will occur tomorrow? Do you spend a lot of time thinking about your future? If you said yes to these questions, you have built gut instinct within yourself.
A few years ago, my manufacturing company, EZ Grout Corporation (EZG), entered into a partnership with a large manufacturing company to become the exclusive distributor of EZG’s equipment. With the bigger company having so many distribution channels, our team felt partnering would reduce our marketing expense and increase sales. After we signed the contract with the other company, I learned a big lesson the hard way: Never make a deal without considering the repercussions of things not going the way you planned. In EZG’s case, our plan to work on tighter margins only worked if the sales volume increased.
The hammering of the Great Recession shattered EZG sales by over 60%. Also, in 2007 we invested millions retooling and moving into a larger manufacturing facility to gear up for the increased sales volumes we thought were coming. We got the opposite: a larger facility with less equipment to build. The tighter margins, due to the discount we gave our exclusive distributor partner, along with lower sales volumes, led to major losses. We hit a snag in our predictions and were taking on water like a small boat with a hole in it the size of a softball.
The agreement we made with our partner included an option that allowed either company to discontinue the partnership after the first three years if certain criteria were met. With a few grains left in the hourglass, I went to my top managers for advice. Do we continue the partnership or get out and try and make it on our own? Funding years of losses, we had burned through all of EZG’s cash reserves and my personal savings. How could we possibly go on without big brother? Not to mention that EZG was still losing big money by the day so we desperately needed the quick cash big brother would provide for their orders to continue to build equipment. My managers came back with the opinion that, in our current condition, continuing our partnership was the route to go. With all this information at my fingertips something still didn’t feel right. My gut still told me to discontinue the partnership.
It was a time of sleepless nights and despairing thoughts. Yet my gut feeling and the spirit within me kept jabbing me. I told the management team we were discontinuing the partnership. It was embarrassing since other than what my gut was telling me, I was unable to give a good explanation to back up my decision. I felt we were probably screwed either way, so why not go down swinging?
Our partners had made some promises that were broken. With the recession, I gave them the benefit of the doubt. Yet one must wonder did this play a part in my gut feeling? It did make the decision to “get out” easier, as the personal connection with them, wasn’t what it once was. Furthermore, I had made a promise to myself that no matter what, I would keep fighting the battle, and never give up. Management supported my decision.
Once our partnership was gone, we started doing things that a street kid with no big brother would do. Our options were, die or find a way to survive. I devised a plan and called a special meeting with management and factory operators to lay it out. Putting all the cards face up on the table, I explained to them that we had six months to get back to break-even or the manufacturing operation may die. We went straight to work. We bought back the equipment our ex-partner purchased at the same discount we gave them. This actually helped cash flow since now we had equipment to sell with no current cost to build it. We quickly diversified our product line, started doing shop work for local plants, and took on specialty work that I wasn't even sure we could build. All this led to sales increases, with better margins on those sales. To even my surprise, the plan worked almost the way it was laid out. Six months later we were breaking even. Since then, we have remained profitable and I am sleeping much better.
I am sure there was a lot of luck involved in our survival story, but let me tell you this. If I never trusted what my gut was telling me to do, our company would not be where it is today. Regardless of where you are in your career, you have the most chips on the table during your decision-making process, so your gut will most likely tell you what you should do. Listen to your team. Get as many opinions as possible. Consider the advice. Trust your gut, and make the call!
Damian Lang owns and operates four companies in Ohio, including a masonry contractor. He is the inventor of the Grout Hog and several other labor saving devices and is the author of the book RACE—Rewarding and Challenging Employees for Profits in Masonry.