My All-Time 5 Biggest Bad Decisions!

A wise guy (not to be confused with a wiseguy) said to me in 1984….. “success is a matter of making more right decisions than wrong decisions, provided that your good decisions (successes) outweigh your wrong decisions (failures.)”

I unequivocally agree with what that guy said. And, I feel very lucky that, during the two extended careers I had in the reprographics business/industry, I’m “proof positive” that that statement is true. As I look back, I really do believe that my successes outweighed my failures, and that, for the most part, I did not repeat my mistakes.

[I hate to use the word “I” when I talk about my experience in the business, for you cannot grow or manage any reprographics company without a TEAM. And as one of my close friends (ex-partners) always so aptly put it, “there is no “I” in Team.” But, for this particular blog-post, I’m going to use the word “I”, because most of my failures were not attributable to “the team” (or to my partners), but to me (I) as an individual. And, besides, the word “I” takes less keystrokes than does the word “we.”

I decided to do this blog-post not because I’m using my blog as a confessional or to repent, but simply because my blog-site may, from time to time, be visited by a younger generation of reprographers, and, as an “old guy”, I’m hoping that some of them will read what I say, and, thusly, learn from what I say ….. so that they don’t make the mistakes that I did.

So, what were my 5 biggest bad decisions in the reprographics business?

My biggest bad decision:
This particular mistake cost us a small fortune. (And, had it occurred earlier in my career, it would have learned enough to avoid my 2nd biggest mistake. Often, “timing is everything,” as that saying goes.) In mid-1986, I bought a company, 500 miles away from our then core operations. At the time we bought that business, our core operations were rocking and rolling, we were very profitable, and we had a significant pile of cash, due to being profitable and because we had completed an IPO only months earlier. Also, we had, over the years before, completed several acquisitions and three different mergers, all of which were successful. So, because we wanted to expand beyond our core area, we listened with great interest when a friend called to ask if we were interested in helping him out. What we learned was that he had two other partners and that there was a complete lack of communication (and I guess trust) between the three partners. The company was losing money. And, the squabbling amongst the then partners was causing a distraction, a loss of focus if you will. So, what did we do? We bought the company. And, we kept the former majority owner on as the President of our new subsidiary. As a part of the deal, the other two ex-partners “retired” from the company, with one-year non-competes. The partner we kept was the principal technology dude. One of the partners who retired was the principal sales leader. (I have no idea what the third partner’s strength was.) (Now, I’m going to digress for just a minute. It is now 2009 as I write this post. It was 1986 when we bought that company. In other words, some 23 years have transpired since we bought that company. I go to the IRGA most years (except for a few years after my first retirement in mid-1988). Every time I go to the IRGA convention, I always bump into the ex-partner, the “sales leader”, from the company we purchased back in 1986 … AND ---- he never fails to say these words to me (in his funny accent) …..”you know, Joel, I am the partner you should have kept on to run the company; had you kept me on, it would have been very successful.” Well, some might call that “rubbing it in”, but all it does is make me laugh and smile, for the guy who continues to say that (and I’m positive he will say it again if I make it to the IRGA in Pittsburg this year) is one of the reprographics industries nicest, smartest guys. Years after we bought his company (the one that was my 2nd biggest mistake) we became industry friends. Most reprographers know him and feel the same way I do about him; he has had terrific success over the years with the 2nd company he started, and he started that company from scratch, which is something that many of us second-generation owners did not have to do. Okay, lest I digress any further, let me get back to the story.] Buying that company (the one 500 miles from our core operation was not the mistake, at least it was not the biggest part of the mistake. The mistake was pushing forward very quickly to expand the geographic scope of the company we had purchased. Within one year, we had four locations instead of two. And, we poured money into those new operations that we should not have, such as building an FM that had a very expensive engineering photo-lab within. Our fast expansion may not have been a problem if our sales efforts had been terrific. But, remember, we did not retain the ex-partner “sales leader”, and, although we were led to believe that the President was the key driver of customer relationships, that just wasn’t the case. Well, maybe he was the key driver of “customer” relationships, but if you key on the word “customer”, you will know where I’m going with this. If you want to expand a company, you’d damn well better know how to convert prospects to customers, i.e, you better damn well be really good at new business development activities, i.e., good at converting “prospects” to “customers.” Okay, lessons learned: (1) make sure you interview all “selling” partners independently of one another; do not just interview the majority partner. Doing so will not guarantee a good decision (as to who should be retained and who should not or whether you should buy the company), but, at the very least, you’ll have more of the picture. And, if there are different stories, and you can’t reconcile the differences, should give you lot’s of reason to pause and think a lot more before you jump into the water. (2) fast expansion can be very, very expensive and fraught with distractions; and, if you don’t have a sales leader who can make it happen, you’re going to be hard-pressed to generate sufficient sales to cover the costs of operating your expanded business. What’s that old saying, “haste makes waste”? I bought that company because I, as look back, was, I guess, suffering from “visions of grandeur”. (Or, as Danny DeVito, one of my ATF actors, put said it in one of his movies, “you’re DELUSIONAL.”)

My 2nd biggest bad decision.
In early 1987, I bought a company that was not even close, geography-wise, to our core operations (which were, at the time, in the Wash DC – Baltimore area). I bought that business because I was, at that point, still suffering from “visions of grandeur”. Before we bought that company, I had taken the time to evaluate its financial condition, its assets, its liabilities, its financial statements and had come to the conclusion that its problems (it was losing money and had lost a ton of money over the prior three years) was attributable to the significant losses that company had incurred from a branch operation (120 miles away from its main operation), by then closed. I bought that company using a “bulk purchase of assets”, which is a method of buying assets “on the cheap” – basically, you purchase the assets that you want, but you don’t have to take on any of the debt, winding up with those assets free and clear (most of the company’s creditors ended up getting about $.10 on the dollar, but that was their problem, not mine.) I thought I was being smart. As I realized only several months later, I had been totally stupid. Buying that business was one of my top 3 biggest mistakes. There is one very good lesson I learned from buying that business. Kind of simple. If a business is losing money, there has to be a very good reason why, and there are often more reasons than just one. In this particular case, we were “banking on” the key-customer relationships that the Owner/President had (and, he stayed on with us after we purchased the company) and on his knowledge of and experience in the business, and on his passion for the business and leadership skills. WRONG, WRONG, WRONG. Boy, did I get that one wrong. After we purchased the company (and the company had no debt, for we paid cash for its assets), the company continued to lose money. Within a few months, I knew I had made an absolutely stupid decision. One of the “key problems” was the lack of leadership. Finally realizing what the major problem was, we terminated the President and installed the two young VP’s (Sales and Operations) as “co-GM’s”.) While we probably could have turned that company around, our board had already voted to “throw in the towel”. Our 2nd in command at the time, said, “we should just close it, cut our losses and be done with it, it is too much of a distraction and a drain on our core business.” Instead of closing it, we did manage to sell it. (I often wonder why in the world the company that bought that business from us bought it. For, they would have gotten the customers and business anyway, without having to pay a dime. Well, I guess that shows you that others make mistakes as well, and, just so you know, the company that was dumb enough to buy that “pig ‘n a poke” from us was one of the largest reprographers in the U.S. It is nice to no that you’re not alone, when it comes to making dumb decisions.)

My 3rd biggest bad decision was directly related to my 2nd biggest mistake.
Right after we bought the company I mentioned in the previous paragraph, our President of that company convinced me that we should enter into a lease on a new space that had to be substantially built-out to our specs. (Because of redevelopment, we had to move out of our existing production center, but we knew that going into the deal.) While we never did move into that new space (it had been committed to, but was not ready to move into by the time we sold the company), it proved to be a very costly build-out (we had photo-labs back then, not cheap to build-out and they require lots of floor-space) and, in order to keep the cost down, we had committed to a long-term lease, guaranteed by, yep, you guessed it, our parent company. Lesson learned: avoid “Taj Mahal’s.” like the plague. My definition of a “Taj Mahal” – overdoing it. If you want a palace, become a King (or Queen.) If you want to run a profitable, lean-mean fighting machine, do everything you can to keep the floor-space to a minimum and “no gold fixtures”. While your facility does need to be very functional and clean (at least, clean in the customer waiting area and in the conference room), it does not have to be or look like a palace. Frugality, I think, being the key word. If you have the choice between “Class A”, “Class B” or “Class C” office space, choose the latter. Invest your money in people and technology, not in a “Taj Mahal.” [Because we, the parent company, guaranteed the lease, selling the company, instead of closing it, allowed us to (thank goodness) transfer the liability for the new facility to the company that bought our subsidiary. Which is why I was desperate to sell the company, not close it.] I decided to write about this mistake (committing to a Taj-Mahal-like facility) even though we actually avoided the expense of that mistake (because were sold the business and, with that sale, the expense of that mistake.

My 4th biggest bad decision:
My 4th biggest mistake was the commitment I made to enter, through the formation and funding of a subsidiary, the business of selling CAD systems. (Several of my friends who were also involved in ReproCAD made this same mistake.) Our subsidiary offered: CAD systems (primarily Bausch & Lomb), CAD operator training (we hired one CAD- proficient architect and one CAD-proficient engineer), and we also provide “plotting services”. While we did not lose any hard dollars on the sale of CAD system stuff, we wasted a ton of money on salaries, fancy office space and travel expenses, and, of course, we wasted a ton of time. When we realized that what we had committed to was not going to work, we scaled the business back to “just” a plotting service bureau, and, well, then we made money. One of the team members that operated the plotting service bureau, Ed K, is now, some 24 years later, a head I.T. dude at NRI’s operations in Washington, DC. (Very knowledgeable guy.) In the book, “Good to Great”, the author talks about the “hedgehog” concept, basically, sticking to your core business, sticking to the business you know and the business you can do really well. Had I read that book 25 years ago, I may not have made the mistake I made. Well, probably not.

My 5th biggest bad decision:
My 5th biggest mistake was making my 4 biggest mistakes all within a period of about 15 months. As you might imagine, that period in my business life was very frustrating, agonizing and heart-wrenching. We went from making money to “break even” (N.I.-wise), and that was very embarrassing because the reprographics industry (and business at our core operations) was quite healthy at that time. TG we recovered from those bad decisions.

One of my friends asked me, one day when we were talking about our successes and failures, if I thought taking my company public (in 1985) was a mistake, considering the size of our company back when we did the IPO. Well, it was probably a mistake, due to our small-size at the time, but certainly not within my top 5 or even 10. [And, I wouldn’t give up that experience (completing an IPO and being a public company) anyway.]

Okay, finally managed to complete this post, even though the negative-nostalgia aspect was certainly not pleasant. Most, but certainly not all, of the bad decisions I made happened during my first extended career in the reprographics business. We were fortunate to not repeat these mistakes during my second extended career in the business. (That does not mean that I did not make mistakes during my second extended career in the business; it’s just that the mistakes I made during my second extended career were not as big (or dumb).