LESSONS LEARNED

When we started Amigo’s, I found a partner and we each put up $30k. on his credit card and my $30k which I borrowed from my mother in law. Within a few short months we starting taking a salary. By the end of summer we had $150k cash in the bank and I wanted us each to take $15k as partial return of initial investment and I wanted to return at least half of the money I borrowed. My partner said no. I asked him if we had $2 million in the bank if I could then take the $15k and he said no! 

I called my attorney. We went to arbitration. During negotiations Marlene called her mother and said “Mommy I need all your money so Michael can buyout that asshole” her mother replied “what time do you want to meet me at the bank.”  I bid $200k, ($125 cash and $75k over 12 months plus interest) to buy him out and he agreed. I didn’t have any money but an hour later the check for $125k was in my account. There is a point to this story and I’ll get to that in a minute. I borrowed that money from my precious mother in law and I wanted to pay that back plus incredible interest! Which I paid back in six months! So my strategy was simple, put all the profits back into the business. That was a mistake which caught with me I will explain in a moment. So the first year I did $900k in sales (profit margin was 65% which was incredible). Second year (after I bought out partner) $4 million, third $8m, fourth $16m, fifth $19m, sixth $22m. At this point I had $1 million in cash in the bank, 150 employees, 9 store locations and a 15k Sf corporate headquarters which I just signed 10 year leases on. I did all that starting with a small amount of seed money! 

My projections for year seven was $40m. Marlene and I bought a 6000sf house overlooking a wildlife preserve and a 5000sf home on the beach (mistake). My goal was to sell the business and I thought that by having 10 year leases to transfer to the buyer that would be plenty to get a nice return on their investment. I also was generous. I gave $30k to $50k in bonuses EVERY MONTH! I shared with everyone including warehouse employees.

It seems the moment the ink on those leases was dry the economy collapsed. Year 7 we did $19m but with the overhead of a $40m company.

So some of my many lessons was to have and maintain plenty of CASH RESERVES for a rainy day (like an economic downturn) and if and when you can afford it... purchase the properties. That way if the business drops you don’t have a mortgage to pay or if the business fails you can always lease out the property and have that income. I should have developed a franchise business and sell franchise to a franchisee.

So my point is I know how to creatively leverage cash through creative marketing to build something big. 

My biggest mistake was thinking I could just go all in and succeed every time. I made foolish assumptions. I overestimated what I could handle. What I would do in the future is this... once we get to a certain