In our present-day culture, successful entrepreneurs are idolized. The Mark Zuckerbergs and Elon Musks of this world are looked up to by multiple generations. However, what is usually hidden from public view is the fact that many ultimately successful entrepreneurs had to struggle in the beginning with mounting piles of debt and the sense that their enterprises might soon crumble.
Small Business Statistics in Canada
It might seem encouraging that 85% of small businesses survive their first year. However, from this point on it’s all downhill.
After two years 70% are still surviving. But this number falls to only 51% at the five-year mark. That’s a big number of Canadian entrepreneurs who have failed and who generally end up with a mountain of debt instead of business success.
The Difficulty of Achieving Entrepreneurial Success
As those who have tried it know, starting a company from scratch is tough. It takes a toll both financially and psychologically. If you are dreaming of quitting your regular job and becoming an entrepreneur, it’s best to face up to the financial risks you will be taking on. Let’s look at a couple of examples of the entrepreneurial experience.
John had been working for a company running digital ads for clients, but had always dreamed of starting his own business.
So, relying on his savings and based on the fact that he was a good credit risk, John started his own search engine marketing company. However, attracting clients proved to be more difficult than John had anticipated and after three years John seemed to be heading for almost certain financial ruin.
John had found it necessary to max out a $30,000 line of credit and cash in his RRSP. He was even forced to sell his truck and buy a much older used car.
It had gone against the grain, but he asked his father for help. However, he was so desperate that he accepted a loan from his father of $20,000.
To keep his existing clients and to attract new ones, John made a big effort to project a calm demeanour and an aura of optimism towards his sub-contractors and his clients, but the reality of his situation was taking an enormous mental toll on his life.
Fortunately he was able to confide in his wife, but then the pressure on John increased when he discovered they were going to be parents. John remembers staring at the ceiling unable to sleep. John endured endless months of anxiety before finally turning to the Licensed Insolvency Trustees at Hoyes Michalos for help.
Dave is an example of a highly successful entrepreneur who was undone by events over which he had no control. In 1992 Dave launched a successful management consulting firm. He was on top of the world, happy, and prosperous.
However, in 2008/2009 the global financial crisis happened, and Dave’s phone stopped ringing. His former and prospective clients didn’t have time for anything other than focusing on their own survival.
The bottom fell out of Dave’s business – consulting fees plummeted by 75%. Dave was forced to lay off his five employees, which was very painful. Some of them had been with him from the beginning, and had helped Dave build his business.
In addition to those losses, in a short space of time, Dave exhausted all of his financial assets and had sold anything that would bring in money. This included personal items like cards and his wife’s jewelry.
Needless to say, Dave’s self-image suffered a major blow. He had thought of himself as one of the masters of the universe, and suddenly he saw himself as failing. He had a severe confidence problem – he felt that he shouldn’t have let what happened happen.
Dave stopped leaving his house and gained fifty pounds through overeating. His main source of temporary relief was provided by an old enthusiasm, playing the guitar. Alone in a room in his house, he practiced solos by Chet Atkins and Stevie Ray Vaughan. The guitar was a lifesaver and provided some short-lived peace.
However, Dave had sunk so deep into debt that he finally realized he needed to step out of his isolation, and get some help. This is when Dave turned to a Licensed Insolvency Trustee at my firm.
How a Licensed Insolvency Trustee Can Help
You’ve poured the last several years of your life and your savings into your business venture, but it isn’t working out as you expected. Now all you have succeeded in doing is amassing a big pile of debt, and you are unable to pay your employees, your investors and your bank.
Licensed Insolvency Trustees are debt management experts who have helped countless entrepreneurs like John and Dave dig their way out from under massive amounts of debt. Contact an LIT for a free consultation.