Small business going bust...?

[CanuckAmok]

This is more of a rant than a search for answers...

About three years ago, I went into business with my work partner, building what is essentially a mobile audio postproduction dialog studio in a 5-ton truck. Our original projection was to spend about $40K between us, but costs spiraled, and the final tab for the building/equipping of the studio was 140K (do I sound like the Pentagon yet?).

A year ago, my partner could no longer keep up his end of the expenses, so I "bought him out", by basically 'forgiving' his unpaid contributions and reducing his potential share of the profits from 50% to 20%, and 5% after five years. And he doesn't get a dime until the company clears $30K, after which point his share kicks in.

Now, the industry in BC (where I live) was hit pretty hard by several factors, including September 11, the SARS and West Nile scares, contract negotiations, and some idiotic anti-Canadian sentiment in general.

So, in a nutshell, the studio has worked a total of 11 days since launching in Feb 2002, at $1500 per day. Out of that, I have monthly expenses of $1850 for equipment leases, insurance, and use of a secured parking facility. Of course, that doesn't include things like truck maintainence, accountant services, promotion, and stuff like that. Oh, and I pay a sound recordist $300 per day to operate the studio when it works. That leaves me with $1200 per day (sometimes less when I discount the studio for low-budget productions), with which to pay the bills.

Obviously, I need to have ths studio work at least two days per month just to keep in the black, and at that rate, it'll take 21 years and two months to pay myself back the initial investment.

So, small business owners, when the heck does one decide it's time to throw in the towel? I'm drowning in debt because of this white elephant, this former labour of love, and the monthly expenses are getting very hard to meet...

[Nullcron]

1. Freelance blues.

Your first error was in the beginning. 40k up to 140k is a flawed business plan.
Take 5 years of hard work and advertising and see where you are. If you are not getting anywhere then file for bankruptcy.

[CanuckAmok]

5. Yeah, well, here's what happened...

By the time the cost over-runs were obvious, much of the physical construction was well underway. We had to revise a few of the engineering points, fabricate a complete climate control system from scratch, etc...

At the time, my business partner and I were each earning about 90K a year, so a huge spike like that was easier to live with than a 40K investment in an incomplete project.

We revised out business plan, but my personal finances have changed to such a degree that financing the operation is becoming a real burden.

Adding to the problem is that is is so close to becomming a viable operation, but at this rate, I'll be an old, old man before it does...

[WhoCountsTheVotes]

2. I can sympathize

happened to me a few years ago, still have problems because of it. ah well, live and learn yadda yadda

[Bonhomme Richard]

3. Is it possible........

to keep the business going and get a side job to get you through the growth period? It seems to me that if 2 jobs a month are break-even that leaves quite a bit of time to work a side job, just to have money coming in, and not have to give up the dream.
I stared my own business just about three years ago and let me tell you that there were a lot of times I thought of giving it up for a paycheck. As it turned out I became a military contractor (yeah, I know!!!!) which was only because I was in the right place at the right time with the right answer. Now I am in the position that I am still not really making much money to speak off but I can really taste the potential to earn serious dollars for the first time. The bottom line is that I would not have been available for that opportunity if I had shut down the company therefore I would recommend doing whatever you have to do to keep the company going, even if that means taking a job in the short term just to stay ahead of the bills.
By the way. Becoming a contractor for the military was the furthest thing from my mind when I started. You never know where things will lead.

If I can be of any help you know where I am.

OZ

[ChompySnack]

4. I agree with Oz

Try to keep yourself afloat by other means, but also try to reduce expenses. I would suggest trying to lease less equipment, find a cheaper place to lease it or buy your own equipment (from ebay or some such source). Try to find a cheaper place to park your rig, or find a friend with a big property where you can park it (and secure the truck itself with good locks).

In the end there isn't much you can do to control how much business comes in, assuming you are advertising effectively. You can control costs however, and high expenses are always what finish off most small businesses.

[sangh0]

6. Look for new business

Don't limit yourself to mobile audio post-production dialog. With all that equipment, it seems that you should be able to handle some other business, like maybe radio commercials, or "pre-production dialog" (I don't know much about the industry, or did you already notice?), in-store broadcasting, etc. Look in your local yellow pages and trade papers for ideas.