my business failed (but not for the reasons most think it failed) | by Ai Peng, Lee | November 2022

4 hard lessons learned in entrepreneurship

Image: Unsplash

Nobody likes to talk about the time they failed. And for a long time, I was one of those people. My failure affected my confidence, permanently altered my perspective on life, and left me questioning every decision I made subsequently. That is not something that anyone would like to convey in public.

It has been 4 years since my last foray into a traditional restaurant business. The experience left me with such indelible scars that I swore not to open another one. Recently, a relative brought up the subject. While she made some valid points about what it takes to run a successful business, I found that none of it applied to my personal experience. The conversation COULD have gone awry when I opened my mouth and started to clarify some of the points she brought up. Instead, she inspired me to channel my energy into writing this.

Just like success, failure comes when you least expect it. I had my first taste of success when I was 25 years old. I had recently opened my first cafe with my brother. It was in a dark place, with no elevator or escalator, and almost no foot traffic. I went to work one morning and realized that we had barely made $100 the day before.

Everyone told us that we would fail before we even opened.

One day, an influential food blogger took a chance on us and wrote us a rave review. The success was almost overnight. The cafe thrived and continues to thrive now, 10 years after its inception and long after I sold my stake.

When I was offered the opportunity to open a restaurant in an up-and-coming strip mall within a well-established neighborhood, I jumped at the chance. The space was beautiful. It was a corner lot with high ceilings and lots of natural light. It was located right next to the main entrance and had an outdoor area right in front of a man-made stream and garden. Yes, the rent was a bit more expensive than we would have liked, but based on my calculations, we were able to make it work. As I stood admiring the space in front of me, I said some famous last words:

There is no way this place can go wrong.

So what went wrong? We had opened with great fanfare. The reviews, both for the food and the cocktails, were excellent. We had long waiting lists, especially on weekends, and a reliable team. However, while the money poured in, the bottom line said otherwise. Looking back, here are 5 of the mistakes I wish I hadn’t made and that I think could have significantly altered the outcome of my business.

I learned all of this while running a restaurant, but now I apply these lessons to all aspects of my life.

In simple terms, I was bummed out by the unfavorable terms of the rental agreement. And it wasn’t for a failure to read the fine print. I hired a reputable business attorney to review the contract before I signed it. He said it was a standard deal. I compared the terms and conditions with other mall contracts and agreed.

It’s just a lease. How could I have ruined my business?

Before I made the decision to sell my business, I was desperately trying to find a way around these terms. These terms included payment of the mall’s marketing and operating expenses. Before signing the lease, he had asked what these expenses were. The management told me it was to market the restaurant. They asked for a lot of information to put on their website. They made a promotional video and then… nothing. We were tenants there for two years, paying roughly $10,000 to $15,000 a year for these services.

The lease agreement also required the company to pay the liquefied natural gas bill. Nobody thought to question this (it was a restaurant business, there would be a gas bill to pay). Halfway through our 2 year lease, our gas bill doubled to $5,000 per month. I wondered why our gas bill was exorbitantly priced compared to similar tenants in other malls. I later found out that the mall management had entered into a long-term contract with an outside gas utility contractor. They had passed on any price increases to the tenants, not caring that they themselves had signed up for a bad deal.

Reading the fine print requires you to ask a LOT of questions. And if you don’t get the answer you’re looking for, prod, prod, and probe until you’re satisfied with the answers. This applies to any contract signed with an employer, business partner, supplier or investor. It could mean the difference between the survival or death of the business. In my case, I could have saved thousands of dollars that were critical to survival at the time.

Many restaurants suffer the fate of having terrible cooks and terrible food. Mine was not the case. I was fortunate to have hired a stellar operations team early on. Our team was made up of chefs previously from 5 star hotels who had a deep understanding of the local palette. There were hiccups from time to time but they always served delicious hot meals to a full house crowd.

Here’s a hard-learned lesson on how not to fix something that isn’t broken:

As an entrepreneur, he had an uncompromising vision of what he wanted to achieve. And some of these objectives were linked to my training as a ‘chef’. Having culinary experience allowed me to work closely with the head chef. For about 2 years, we had a good working relationship. We both came up with menu ideas that he would then ask his team to execute. The whole team would taste the dishes. He would buy the inventory and I would approve it. However, this synergy would not last.

As mentioned above, I had a vision. And this dream of mine involved constantly raising the bar by inventing and innovating new items without breaking the bank. So he was always asking to try new items and pushing the team for more, more, more. In the midst of this, I failed to see that my chef was stressed, overworked, and headed straight for burnout. This vision of mine was an extra pressure that no one could bear.

Meanwhile, food costs were a bit high. In a weekly meeting, I voiced my concerns and offered to discuss food cost and inventory management. I even offered to find suppliers who could offer us better prices. In essence, I offered to do his job for him. It was the straw that broke the camel’s back.

There was no going back after that. I had lost my chef’s trust because he thought I had lost my trust in him. My poor decision to micromanage a situation had severely affected his morale. And with that, it took the team’s enthusiasm and commitment levels down. It showed in the work they produced. Which simply does not bode well for a restaurant.

Did I mention that my chef was exhausted and I had no idea? I was also severely burned at the time, but I had no idea. My head was in the middle of contracts, profits, losses, and HR issues, and there was simply no time to breathe. Oh, did I mention I was pregnant too?

I remember being afraid to go into the restaurant. Seemingly minor issues: a late employee and an improperly closed account irritated the hell out of me. I used to look forward to our weekly staff pep talks and monthly team birthday celebrations, but now I approached them with trepidation. Behind the revelry, tensions simmered and I knew my employees weren’t happy. Meanwhile, the restaurant’s less than satisfactory financial performance ate at me every day. Our social media stats were up; we had just been featured in several reviews and won that award, why didn’t our numbers go up? We were able to pay our rent this month, but what about that pesky gas bill?

At this point, I recognized that I had lost the race because I didn’t give a damn.

There were a lot of should haves, would haves and could haves. Maybe things would have worked out differently if he had a winner’s mindset, maybe this, maybe that. There was only one important thing he should have done: decelerate.

There is an unforgettable scene Friends in which Ross (with the help of Rachel and Chandler) was trying to get his couch up the stairs. It was a monumental task, and Ross can be heard yelling ‘Pivot, Pivot, Pivot!’ much to the annoyance of Rachel and Chandler. The friends quickly realized that spinning so many times wasn’t working. Later, they went back downstairs and had to start from scratch.

In startup parlance, the term ‘Pivot’ was coined by Eric Ries of The lean start-up fame. It means changing the direction of a business when some of the existing products just aren’t selling¹.

I was a big fan of The lean start-up philosophy of that time. I even had my business associate read it and apply it to my business religiously. Perhaps she had misused his philosophies. However, I found that spinning too often created more headaches and confusion instead of helping me save time and make more money.

In my case, I was looking for a way to increase our weekday lunch crowd. I did everything I could on this: change our core concept multiple times, alter price points, and offer deals. The service suffered as my employees were often confused by the many changes, and the quality of the food deteriorated due to lack of direction. More telling is that instead of attracting a larger lunch crowd, some of our loyal customers stopped coming back.

Sometimes the correct course of action would be not to pivot in a crisis. These three companies successfully employed “stay the course” strategies during the Covid 19 pandemic. They waited, properly evaluated all possible scenarios, and decided to make some minor adjustments that eventually catapulted their growth.

Sometimes a winning strategy involves simply tweaking a product’s messaging or continuously tweaking a core product (eg Apple).

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