The moment our business fell apart, we could hardly grasp it was true. Like a cruel joke, the wheels began to come off the very day we scored our most important win. It was a glorious morning in the fall of 2010 when we got word that a global retailer wanted to buy 1,500 units—20 times our typical order—of the product we had invented to help busy parents feed their babies. Our patented spill-proof water bottles for little ones were already selling out in small boutiques, but now they would be distributed by a big-time grocery chain. The deal would take Nourish, our scrappy little company, to the next level.
As business partners, with varying degrees of risk tolerance, we often jokingly refer to each other as “Yes” and “But.” Lara plays the eternal optimist. She’s a cheerleader at heart, with a sharp eye for business and a head for innovation, who sees the possibilities in every opportunity. Stacey, on the other hand, serves as the resident realist of our partnership, a cautious contrarian who is a stickler for thoughtful deliberation before we make any big moves.
But after her initial elation, despair had set in. Outwardly excited, Lara entered the office ready to high-five Stacey, but the celebration never materialized.
We knew we couldn’t manage the net 30-day terms, granting the customer 30 days to pay us after we shipped the 1,500 bottles, unless we had the cash needed to pay our manufacturers to produce the bottles and their labels; to pay our suppliers for the boxes, the brand tags, and the cap safety seals and to ship the product. All of these suppliers and vendors needed to be paid so they could pay their suppliers and employees, and we had to pay our employees.
Over the next few months, we scrambled to bargain with suppliers who hadn’t been paid yet for our previous factory runs. We called everyone we knew to find another company who might do it on credit. We groveled for more time to fill the order, and we begged customers to pay their invoices. In the end, we had to face the painful truth: We just didn’t have the cash to pay our vendors to make the product and deliver in the required time frame.
We had cobbled together $231,000 from friends and family to make the first run of product and had planned to use the profits from our first orders to make the next one. But as our customer base grew, they took longer and longer to pay; we were running out of cash while we waited for unpaid invoices to be settled.
Our emotions spiraled from triumph to angst to grief. As a last resort, we found a local bank and a factor, or company that would purchase the unpaid invoices from us at a discount, paying us 80% to 90%, and charge us high fees and interest until our customers paid the invoices. Yet, shortly after we signed up, the factor’s credit scoring model changed, leaving us in the lurch again. By May of 2011, the two of us would make the heart-wrenching decision to let the opportunity go and with it, Nourish, the company we had built from scratch.
Lessons come from failure
As much as the failure stung, it would prove to be our greatest lesson. We realized we had actually grown our company out of business.
It all came down to cash flow and leverage—neither of which we had. We knew there had to be a better way for businesses to get paid, a better way for business owners to manage cash flow, and a better way for small businesses to achieve their potential. We made it our mission to figure out how to help small-business owners like us change the game and level up.
Our journey typifies both the optimism of entrepreneurship along with the systemic hurdles challenging small businesses more than ever.
As soon as a firm gets a chance to rev up production, close a deal with that dream account, or finally hire people to take on more work, there often isn’t enough fuel in the tank to propel it upward. Instead, the opportunity to grow becomes an existential threat, challenging even the most optimistic entrepreneur. Businesses in this position teeter on a razor’s edge between living to fight another day or running out of steam and calling it quits.
Changing small business—together
It is time to shift the power dynamic. We can do it together.
We—two Southern women with two distinct leadership styles and personalities from two very different upbringings—improbably joined forces in 2006 to found and grow several multimillion-dollar enterprises. We even went on to conceive an innovative way to solve the very problem that defeated our company, Nourish. It’s a fintech startup called Now that helps small businesses across the U.S. get paid faster. Now has accelerated close to $1 billion in invoice payments to small firms. The idea was born out of the cash flow challenges we experienced and ignited our desire to change the game.
Perhaps the most important thing we discovered in our 15 years together is that some of the hurdles we came up against were far larger and more powerful than the two of us. We alone could not overcome the structures that dictate access to capital and commerce.
The revelation was both humbling and empowering all at once. We realized the only way to rise above these obstacles is to start talking about them. We want to shake up a system that for the past four decades has increasingly put small-business owners at the mercy of big banks, corporate America, and Silicon Valley startup worship. We want to help everyone better understand the often invisible and unexpected forces that hold back many small firms from unleashing their power to fulfill their potential.
Adapted from Level Up: Rise Above the Hidden Forces Holding Your Business Back to be published on Feb. 22 by Portfolio, an imprint of the Penguin Publishing Group, a division of Penguin Random House, LLC. Copyright © 2022 by Stacey Y. Abrams and Lara Hodgson.
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