Going bankrupt was one of the most difficult things I ever went through.
As painful as the experience was, I’m honestly glad it happened, especially when I was so young. It taught me incredibly valuable lessons.
Let me set the scene. In 2006, I successfully scaled from owning a single kiosk in a shopping mall in Atlanta to 13 kiosks. In December of that year, I made $300,000. This was more money than I knew what to do with—I felt invincible.
I was eager to go out and double or even triple my earnings.
So I bought a brand-new car and invested in some real estate in Florida. I moved to Las Vegas and signed an expensive lease at The Venetian hotel for my new jewelry venture. Unfortunately, this was in 2007, right before the housing bubble burst and triggered a global recession.
Things got ugly fast. My real estate was losing value, and I was struggling to pay the rent for my jewelry business.
But I thought things would turn around, so I kept feeding the business with more and more cash. The harsh reality, however, was that it was failing. In less than a year, I lost all the money I had ever made.
I had to declare bankruptcy.
Being forced to liquidate my car, close my business, and be broke again was the worst feeling in the world.
To generate some cash just to survive, I began cleaning carpets. After two years of this, I had saved enough money to get back on my feet and co-found Yogli Mogli, the first self-serve frozen yogurt shop on the East Coast.
Here are four lessons I learned from going bankrupt that can help you run a better business.
1. Hold on to your money
Making money is great—but you also have to protect that money once you’ve earned it.
My biggest mistake in 2006 was that I hurried to reinvest what I had made, hoping to turn it into even more cash. To build a solid business, you don’t necessarily have to start very small, but you need to take the time to make an informed decision.
Because I immediately jumped to the next venture, I didn’t take the time to think. If I had, I could have been one of the people who actually made a bunch of money in the recession rather than losing it all.
Sometimes the right decision is to sit on your cash and wait for the right opportunity.
2. Value what you have
Going bankrupt taught me to appreciate money more than ever.
We’ve all heard about people who win the lottery or get a huge inheritance only to lose it all—and fast. When you’re not used to having money (which I certainly wasn’t at the beginning of my career), it can be easy to make the wrong choices and wind up empty-handed.
Although I always knew how to generate cash, I never truly valued it until I lost it all. Learn from my mistake: control your spending and save well. You’ll feel so much better when you can look at a nice cushion in your savings account.
3. Learn how to calculate risk
Before you sign a lease, open a store, or make any other business commitment, you have to assess the value of your business and figure out what costs it can withstand.
When I signed the lease for my jewelry business, I was mesmerized by the huge levels of foot traffic and tourists who would come into my store. I thought a high volume of sales would justify the exorbitant rent, but this risk ended up not paying off. In that situation, the only one making money was the landlord.
At the end of the day, volume and sales don’t matter. All that matters is your net profit, and how much you actually keep in your pocket. Know your numbers inside and out, and don’t agree to anything if they don’t add up.
4. Take your time
When you’re excited about your concept or passionate about a specific location for a store, it’s hard to be patient and wait for everything to align.
But for a location to be successful, multiple factors need to come together seamlessly—the store’s layout, what shops are nearby, and even the convenience of the parking lot.
Nobody likes to lose money, and it’s better to take your time and make sure you have a winning location and concept that stays true to your vision.
Going bankrupt was one of the most stressful, painful, and humbling experiences of my life. But I don’t regret the experience in the least, since it taught me what I needed to know to get where I am today.