It’s Not Your Kid

 

Call it a coincidence if you will but after attending the Singapore Insolvency Conference hosted in the ParkRoyal Collection MarinaBay, an old friend of mine, whom I had once worked for, called me up to ask about liquidating a business of his.

 

 What struck me about this conversation was the fact that this friend of mine seemed relatively at ease with what he wanted to get done. If anything, talking about liquidation seemed like a relief. His once successful enterprise had been bleeding and he pumped in his own personal funds into the business to keep things afloat and he had reached the point of no return. Enough was enough.

I described this entire conversation with my friend as being “unusual” because I’ve found that in the last decade of being in the insolvency trade; I’ve found that many business owners tend to leave closing down a business to late and liquidation is forced upon them.

I’ve noticed that it’s usually the Asian business owners, specifically the Chinese ones in the old-fashioned business-like retail and construction who tend to leave it late. I guess a good part of the reason for this is cultural. For the traditional Chinese businessman, the business is inevitably more than a vehicle to make money – its part of the family legacy. Hence, liquidation is a taboo topic because you’re not talking about ending an entity but your very existence in the community. I still remember Gina’s father being upset with me for taking the PPO against her for the simple reason that the court sent someone to serve her and when he opened the door it was “people think I owe money.”

So, I get the reason why people fight tooth and nail to keep things afloat even when the signs are clearly obvious. However, the sad reality that economic waters are increasingly choppy. Despite the “rosy” image of entrepreneurship that gets sold to every young person these days, the statistics for being successful and staying successful as an entrepreneur are pretty grim. According to Clarify Capital, some 80 percent of businesses fail within 20 years:

https://www.google.com/search?q=Chances+of+succeeding+in+business

 

 This basic fact is before you take into account the current geopolitical climate where governments go out of their way to make things difficult for businesses to function, let alone make money.

Everyone loves venture capitalist. They threw glamorous parties and everyone sucks up to them in the belief that they hold the keys to a glorious future. By contrast, insolvency practitioners (IP) tend to stick to their own kind, mixing occasionally with insolvency lawyers. Let’s just look at the medical analogy of gynecologists (my stepfather being one) being more socially acceptable than morticians.

Yet beneath the glitz of new business launches, the truth is more nuanced. The rough statistic is that venture capitalist lose money in nine of ten ventures backed – it’s just that the one that succeeds does so in a manner that covers the losses of the other nine and ensures the venture capitalists success. The IPs whilst occupying a less glamorous space have a more consistent flow of work.

If you take the statistics about business failure, the one key element of a successful entrepreneur is inevitably one who can accept failure. Successful entrepreneurs view failure as part of the learning curve and will look at the IP as a source of knowledge rather than a person to be avoided. The very nature of being in the insolvency trade means one is going to see a lot of business failure and develop certain insights that most would not have. Its one of the reasons why prominent characters in our judicial system are being invited to speak at insolvency conferences:

 

 One of the key insights that the average IP should have, is that the business is not your baby. It’s merely the vehicle from which you operate. Allot of business owners get attached to the company like it’s a family member. It’s not, it’s something you use. Think of the company and the business like a car. It gets you to where you want to go.

Its this simple, when things turn south and look like they’re never going to get better, it’s best to cut one’s losses.

Firstly, there are laws against insolvent trading. In layman terms, when the hole is getting deeper – stop digging. This is something that few if any outside the insolvency business will be aware of. However, just because one isn’t aware, doesn’t mean it doesn’t exist.

Secondly, there’s the fact that I’ve often said to a few bankrupts – you still have your brains and contacts. Business failure provides one with the opportunity to understand one’s weaknesses. Hence, the adage that one not starts from nothing but from experience. Letting go of an old business gives one more time to work on starting again.