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Generally speaking, in life we all want to hear about success and how others became successful, and we all want to be successful in our own life. Not to mention hearing about success motivates us makes us want to follow the same footsteps so we can get some taste of the similar type of success in our own life. We hardly ever want to hear about how someone failed in something because deep down we all know it is easier to fail than to succeed. In this episode, I want to share some of my biggest failure in business life. This way you may take a lesson in heart and know what not to do in business.
My very first failure was when I first started in Tampa; most of you may recall I shared that story on the very first episode. It was a much needed one, by not doing well, I had to learn the very basics of the gas station business, and I believe that is what gave me the strength, knowledge and confidence to go forward later in my business life.
The second one was not a good one; it came like a freight train and knocked me down. Okay, this is how it happened, back in 2000 I had a few stores, and I was doing really well. I was also the go-to guy with a local jobber, where they called me for help with any stores that were not doing well; I would go in take over the operation. I had a proven and tested marketing and merchandising plan, a great team of employees and the know-how to make a business profitable again. It usually took me about 6 months to get things handled and once I was done; we would then sell or lease that store.
One day the CEO of the company called and asked me to meet with them, at the meeting I found out due to two big oil company mergers, one of the companies have to sell out all their locations in Alabama (FTC requirement) and this jobber found a great deal to buy 2 stores in a city which is about 200 miles from where we live. One of the stores is a big truck stop with a gas station, and the other one is a decent size gas station.
I was reluctant at first due to the fact that these stores are 3 hours away from home, and I already had 5 businesses I was operating locally. But once I saw the sales volume of the truck stop I was sold. If I remember correctly the truck stop was selling around 350,000-gallon diesel fuel and about 100,000-gallon gasoline, they also showed good numbers for the merchandise sales. A quick calculation showed even if we pay what they were asking, after paying all the expenses including rent, utility and payroll we should make around $35,000 or more easily each month just from the truck stop operation alone. Well, to be fair the 2nd store was a marginal one, it wasn’t losing money but wasn’t making any either. My first thought was if I implement some of the marketing and merchandising strategies I use locally I should be able to make the 2nd store a profitable business.
I knew I won’t be able to manage all these stores just with a manager in each location; I needed to partner up with someone, so I found my childhood friend who at the time was working for a national chain of gas stations and offered him to join me. After two trips and some hard negotiation, he agreed to join me and move to that city to handle the two stores. We then started to negotiate with the seller and finally were able to make a good deal, and we took over the stores.
Once we took over the operation, I started noticing 60% of the truckers were bringing in credit cards(commercial fleet cards) that were issued by the previous company, but we were unable to process their in-house credit cards as we were no longer that national brand store. So I reached out to the seller and asked them to give me a list of all their in-house charge account holders’ information. A week later I received that list of names, I then sat down with my CPA and set up a way where we will be able to accept in-house charge account for each of those accounts. So essentially we were opening up our own in-House credit accounts. As soon as our set up was done, I started to call all those trucking companies and offered them a free in-house charge account with better terms and no interest for 45 days. The list had 87 trucking company’s name on them, I contacted each, and every one of their managers or their accounting departments explained them the new system and told them we are offering much better terms. Ask them to tell their drivers to keep stopping by, all they have to do is show their ID, and they would be able to charge on the company account like they did before. For this to work each company has to sign an agreement with our company agreeing to this in-house account deal.
With that, I faxed each company a letter explaining the deal, the terms, which was better than what the previous company had offered them and lastly a one-page document my CPA prepared where one of the owners or managers have to sign it agreeing to the terms. Once the documents were sent I was finally able to relax thinking the drop we saw in sales volume will pick back up in a week as I will have all the companies accepting our offer and why wouldn’t they, our offer had 15 extra days and no interest.
Sadly in next two weeks, I only received 7 signed agreements out of the 87 I sent out. I waited another week and received 6 more, and that’s it. I then got on the phone once again and started to call every company that didn’t return the signed agreement. After about 5 calls one of the ladies from a big trucking company’s accounting dept broke the news, she told me around the same time as I was contacting them, they also received a letter from the previous company (the company that sold us the stores) telling them to ask their drivers to go to another truck stop 2 miles from us which was a different brand but they said those credit cards will be honored at this other branded stores everywhere since they just reached an agreement with this other brand to accept each other’s credit cards!!!!
I was spellbound; I was shell shocked and angry all at the same time. I called the sellers and notified them of this unethical business practice and asked them to stop immediately, but nothing happened!
In the meantime the very first month we took over, our diesel volume went from 350,000 gallons to 275,000 gallons and was declining at a steady pace. With the help of our jobber’s company we again reached out to the seller but this time we had 2 attorneys that represented us but again after about $11,000 attorney fees I found out there was not much legal action we can take against them as there was no such agreement between us to transfer their credit card based clients.
Now let’s fast forward 6 months, our sales went down to 75,000-gallon diesel and about 40,000-gallon gasoline while the inside merchandise sales just dropped to half of what we did the very first month.
As for the 2nd store, it was doing little better than before, but the loss we were taking in each month at the truck stop was climbing in the 10’s of thousands, and I knew we won’t survive there much longer.
With the help from the jobber, we were finally able to find a group of buyers who were willing to take over the stores for 60% discount on rent, we were desperate, so we agreed to their offer. We were there for only 9 months, but in that short period of time, we lost little over $150,000 from our pocket, not counting the price we paid to buy those two locations.
By the time we go out, my partners and I lost all our savings, and one of my partners had to file for bankruptcy protection. But just 10 months ago he had a very good life, he was the area manager for this large oil company, making good money, driving a company car, and now following my bad advice he lost everything. I felt personally responsible and I should because I should have done more thorough due diligence, so it was my fault entirely.
One good news is, after that he moved to our city and became a partner is my other businesses and was able to get things back to normal in a couple of years.
Lessons learned:
- If it seems too good to be true, it probably is.
- When negotiating, look at each deal from all different angles.
- Always think about what the worst that can happen and then have a backup plan
Now the 3rd lesson came just 6 years later; it was 2006 when I started thinking about diversifying my business and started looking into other businesses but not gas stations or convenience store businesses. I started looking into dry cleaners, coin Laundromats, fast food restaurants even looked at a fresh fruit and vegetable market.
Every business I looked at, I asked for their financials and then analyzed them, then did a thorough area and market research, talked to local people as I was not ready to make another mistake again. But after all the research I was turning down most of what I found other than one fast food sandwich shop call Quiznos, this was the only Quiznos in Mobile at the time.
I never ate at a Quiznos till I found this one for sale. At my first visit, I was impressed with their food quality. But I was more impressed with their sales numbers and most times if you ever find a franchise restaurant for sale, you will see they have a very good bookkeeping system that is hard to fake, as every day all the sales data gets pulled from the registers and goes directly to the home office. So it is hard to fudge or make fake sales figures, again I analyzed everything and spend time researching the area, the customers and came to the decision that the asking price of $180,000 was very reasonable for the business as it was generating around 5,000-6,000 profit each month.
After some negotiation with the seller, I bought the business with a loan from a local bank at a very good rate, not a bad deal at all. Unlike the disaster we faced 6 years ago, this time in just 3 months with some of my marketing efforts the sales increased by 33% which according to Quiznos Corp. Was not seen often, so some of the big bosses including the CEO came to congratulate me and to see my operation. In a one to one meeting the CEO asked me what exactly I was doing to increase sales that rapidly so he can share the story with all other franchisees.
For next one year, I was enjoying the huge increase in business; things were just booming, then in one meeting Quiznos asked me if I was interested in more stores, seeing what I saw back then I readily agreed and said yes I want to open more locations. I went and talked to my banker; they assured me loans won’t be an issue, so I went ahead and signed up for two new locations. One would be in the heart of downtown and another one in the new outdoor mall across the bay they were building back then. The ball started rolling, and we were in the process of building two more stores, and right around that time, Quiznos offered me a closed down a store in south Mississippi area which was about an hour from me. It was closed due to Hurricane Katrina and never opened up afterward as the owner got ill and never recovered. It was a deal I could not refuse so I went ahead and opened up that store as well. But since it was an hour away from me, I took in a partner who was running another Quiznos nearby and made the deal where he would run the day to day operation.
Right when all this was going on, Quiznos Corporation started facing lawsuits from franchisees, and they were also having some serious internal management and financial issues and in next 3 years, they replaced their CEO at least 5/6 times.
After opening the Mississippi Gulf Coast store we realized the whole demographics have shifted after Hurricane Katrina, the store that was doing $50,000 monthly sales before the hurricane now only does around $28,000 despite all our marketing and merchandising efforts. Even 6 months after opening the store was not at the breakeven point, so we were losing money every month. Now to make matters worse the new mall location I signed up for, half way through our construction, I found out Circuit City had filed for Bankruptcy, you may wonder why that would affect me, well in this new mall I chose a location which was directly across from the new Circuit City store, and since they closed their doors, 9 other retail stores that were going to open around me, all but one backed out of the deal. But my case was different; I was already neck deep into it. But I knew if open the store where I was; no one would see me, so I stopped the construction and asked my landlord to relocate me to the front of the mall. After 2 months of hard negotiation, I was able to move to the front, and again started the construction from scratch, in this process, I again lost $70,000. But as we neared the finish line we started finding out some of the other big name retail chains that were supposed to come and open up near me, all were backing out of their deal, and it was 2008, and the recession finally hit me big time.
Since I had bank loans to worry about, I had no other choice but to open all by myself in that huge mall and I went out every day spent 4-5 hours marketing to all local homes and businesses, I bought radio and TV ad spots, ran weekly ads in the local newspaper. Even with all those efforts, my sale never went over $900 a day; I was devastated. The only bright light was my first store which was still doing decent but being in the worst recession since the 1930’s I lost 35% sales in that store too.
As for the downtown store, it was barely surviving on its own; it too never reached 50% of its projected sales figures. I knew I was sinking but wasn’t sure how fast.
Fast forward again to 2011, I ended up closing the store in Mississippi; next, I closed the store at the mall just 2 years after opening. I still kept my first store and the downtown store open, but then I read news that the Carnival cruise line was moving away from Mobile. It was big news for me because most of the cruise ship passengers were staying within 2 blocks of my restaurant in downtown. Once they left our sales in the downtown store went down about 25% and put us in the red all the way. By then I had no extra money to add to the business, so I closed that store as well.
Another 6 months later my wife who operated our first Quiznos, started complaining that our sales were declining steadily due to no advertisement from the Quiznos corp., and at one point it too went below the breakeven point, but it was our baby, so I borrowed funds and kept it alive till I could not anymore. My hope was that things will get better, and the store will come back strong. But in the last 6 months, I noticed two more fast food restaurants come within a block of us, and the sales went down even more. So with a heavy heart, we closed the last one as well.
Looking back, I wished I never looked to diversify my business and should have just stayed with what I know. But it is always live and learn I suppose. I lost everything I ever worked for, but we are building it all back up again. My theory is and always will be to look forward and not backward.
One word of advice, stick with what you know, don’t jump into every shiny object you come across.
Enough sad stories for one day, hope I didn’t make you scared about getting into the business. My goal for sharing this stories with you is not to create fear in your mind but to create caution, so you look and examine everything twice before signing on any dotted line.
Lessons learned:
- Don’t try to duplicate success too fast
- Don’t bite off more than you can chew
- During economic slow down go to survival mode and not expansion mode
Okay, time to tell you about a book, I am still reading this book call The Coaching Habit: Say, Less, Ask More & Change the Way You Lead Forever by Michael Bungay Stanier, I am little more than half way through it now, but so far it is one great read. I believe the name of the book explains it all. Read it and you will thank me for recommending it.
Lastly, one humble request, if you enjoy listening to this show, please give me a review on iTunes as it will help me gain more listeners and reach more people. If you haven’t signed up for my newsletter yet, you can do so by following this link http://www.gasstationbusiness101.com/subscribe/
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Take care and I will see you soon.
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