Mar 192011
Landlord taken possesion notice in a restaurant window

The sign on an abandoned business announcing “Landlord taken possession” usually hides a pile of pain and distress.

It’s not cheap or easy for a landlord to take possession of a business premises and for most to do so it’s usually the end of long period of unpaid bills and broken promises.

Behind that sign is usually months, if not years, of stress and despair as a business owner has held onto a failing enterprise, bluffing their landlord, their suppliers, their staff, their own families and often themselves.

Almost every one of those signs has a story of failed relationships, destroyed friendships and ruined marriages.

Often they didn’t understand the cost of doing business and in many cases because they hadn’t consulted a bookkeeper or accountant earlier they didn’t understand their venture was always loss making despite what appeared to be a healthy cashflow.

When the truth about the businesses becomes obvious, life for the honest owner of a failing enterprise tries to bluff themselves and those around them that things will be okay, that the dream is still alive.

This is what worries me about many of the businesses that participate in group buying deals, they are desperate to keep their business afloat and believe the cashflow or publicity will save their failing venture. Even worse, many don’t understand how that “50% off” deal will affect their ability to pay staff and the landlord.

Even where the failed proprietor has been one the “two percenters” – the 2% of our society that runs their affairs with no regard for the pain and suffering of those they hurt – many people, particularly the smaller suppliers and low paid workers, have taken a hit as bills went unpaid and promises were not kept.

Most business owners though believe in their idea or vision and work long and hard in an attempt to achieve it. The majority of those who end up with the landlord taking possession are often those who ignored the signs and believed things would come good next season, next month or next week.

I’m always saddened when I see a “landlord taken possession” sign like the one near me in the window of what was an Italian restaurant until recently. What’s the saddest business sign you see?

  13 Responses to “The saddest sign you’ll ever see”

  1. Good post Paul – as a former landlord, there were two occasions when I had to get rid of cafe tenants. It was a long, expensive and draining experience – for the tenant and for me. The large equity many baby-boomers now have in their homes, or extravagant work payouts, create an itch that for many can only be relieved by ‘buying a cafe’…and the down-hill slide begins.

    Fortunately, the monthly Starting a Cafe or Restaurant Workshop I run in Sydney is very popular, and after we’ve gone through financial scenarios and a few dozen other challenges, most participants won’t ever be going down that path!

  2. Thanks for that comment, Ken.

    You raise a really important point about baby-boomers squandering assets and equity on poorly thought out retail and hospitality ventures.

    Hopefully your workshops won’t discourage too many, but rather give them a realistic idea of the challenges they need to plan for.

  3. It’s an interesting teaching challenge – no-one wants to be bombarded with ‘don’t to this, don’t do that’. But they DO want good information and a framework to make informed decisions. Hopefully that’s what I provide.

    We finish the day with an explanation of the ‘breakeven point’ and how it can be applied to an existing business for sale or to new premises. This is a very important breakthrough for many people – understanding how excessive fixed costs (like brutal Sydney rents) can mean no matter how hard they work, there will never be the profit margin they hoped for. Better to stay with the day job!

  4. Venturing into any small business is daunting & the restaurant game is no different.In my opinion it’s best to go work in the industry even cleaning bathrooms if need be. You must get an inside view. No book or course or movie can give you the experience or understanding of running a successful business. Sure they give you great tools & the government rules etc but it’s the hands on experience that will get you thru. Learning thru your mistakes can be costly, you MUST do your homework. I studied the industry for 2 years before I opened. Spoke to every Chef,restaurateur, waiter, dishy & worked the floor for free to learn. And if people think they’ll open a cafe or restaurant for a bit of fun with their growing equity they’re nuts. It’s not just fun. It’s huge sacrifice,damn hard work and long hours. My feet are unrecognizable, chafing powder & anti-persperant are my two new best friends. You will work a minimum of 60 hours a week so if you are going to invest your hard earnt pennies get ready for the ride of your life. Winning is the only answer for me (I used that line before Mr Sheen :-)) Last of all you MUST have cash flow. Any small business owner can tell you that this may be between 20,000 or 50,000 depending on the size of your business. My restaurant has been open 6 months now and I’m happy to say that it’s been an amazing, successful venture for us.It wasn’t luck that brought us here it was just a plain old, hard working team.

    • Carmel, I think you’re spot on about it being any small business, although I think hospitality is tougher than most given that you have to employ staff (or rely on conscripting relatives and friends) and there’s no choice but to lease and fit out premises.

      The cash flow though is paramount, this is why I think Ken’s so spot on with his comments. Too many people sink their retirement funds or property equity into a new business and that allows them to ignore their lack of income until their savings run out. It’s tough and heartbreaking to watch.

  5. Food for thought Paul + Ken. It get’s me thinking on the other side of the fence, about how to support small businesses like restaurants and cafes too. When I hear a chef owner grumble about a table that booked and didn’t turn up on for example a busy Saturday night, it’s time to remember that even for a viable business that’s profit straight off their bottom line.

    Good point Ken on understanding and educating before entry. Also, good point on healthy cashflow also not necessarily equating to profit (and of course vice versa too).

    The visual really helps to tell this story Paul.

    • Thanks Rebecca, the problem with some businesses is the owners simply haven’t done their sums.

      Much as we support them with our business, the only way to really help them is get them before they sink a lot of money into their venture, slap in them in the face and yell “WHAT ARE YOU THINKING!!!!”

      Probably the saddest ones are those where the proprietors really are excellent chefs, plumbers, hair dressers or computer techs but have little, if any, of the skills required to run a business.

      Much as I don’t buy into the hype around the E-Myth books, I think Michael Gerber nailed this when he pointed out that most small businesses are really technicians who have bought themselves a job rather than nascent business empires.

  6. Great post Paul and the comments are a good conversation.

    It is interesting timing for me. I’m just finishing a podcast series with a quartet because I’ve been interested in the unique business issues they have. They can’t adopt the eMyth model of systemising and getting staff to be the technicians. Also, quartets seem to take a long time to consider themselves businesses and therefore ignore the basic business issues for them to succeed. They believe if they are great musicians that is enough.

    On another tangent – I’ve run an exercise with people wanting to start a business where they put themselves in the business they want to start and the rest of their life. Some walk away realising that while having their own business sounds great, they’d prefer to work for someone else. One said that their goal for the year was to get pregnant and start a consulting business. I said, so by the start of next year you will have a baby, want to take some time off and all your income will be from new clients wanting to see you and pay for that time. How is that going to work? Needless to say, she didn’t start her business, has a child celebrating her first birthday, has a part time job and is very happy.

  7. Great post Paul, and informed comments from Ken, Carmel, Kate and Rebecca. My uncle ran several successful cafes and restaurants and I marveled at the seeming ease with which these those businesses ran, and the profits made. I wanted a cafe! To Carmel’s points (which are spot on) then I went and worked some shifts. Ouch! Incredibly hard work, some 430am starts to Flemington markets to pick up supplies, then days on end, on your feet, working the floor and kitchens. A far cry from the cafe culture I so enjoyed as a consumer. “Watch the pennies” was my uncle’s key advice in these businesses: he personally picked up the supplies from the markets to save on costs. He negotiated on everything else, from drinks to butter.

    My uncle actually enjoyed those trips to the markets (I struggled) and he provided employment for friends, family and the community. This was inspiring, but as he stepped away, the businesses struggled. Without strong management, passion, hard work and “watching the pennies” those cafes wouldn’t make it. They were sold.

    I have great respect for small business owners who work their passion and make a success of their business, but it’s certainly not for everyone.

    • It certainly isn’t for everyone Tony and, as I’ve discussed with you previously, it’s one of the reasons I get angry with the people who advocate everybody should throw in their job and start a business sometime in their lives. Some people simply aren’t disposed to the life of running a business.

  8. Yes Paul, its a very sad sign. Heartbreaking. Great post. And sometimes even the most savvy and experienced owners have problems that become a sad sign. For every success there are dozens of failures. I have had over 26 years worth of experience, and if you add my childhood with my parents its a lot closer to 40. I have pretty much seen it all. Its never easy, its never without problems. But I wouldn’t have it any other way.

  9. Every small business must be aware of that sign.
    I run a small consulting practice with about 10 staff members. Running a business is an emotional activity whether its a restaurant, retail store or a professional services company. It consumes every part of my day and night.
    And … failure sometimes isn’t about ignoring the troubled signs. Some businesses see the signs, make changes to their product and process and hope that the changes improves sales, revenue and ultimately profitability.

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