At the beginning of 1998, SBN set out to follow a year in the life of a fledgling enterprise. The idea was to find a business that was far enough along in its growth to have achieved a level of stability, but still young enough that a year could bring measurable change.
If the quaint brick walls of Chip Eberhardt’s office could talk, they would tell a story of the most drastic changes a business can experience. They would also tell a lesson that Eberhardt and countless others have learned: Hard work and dreams are not enough to build a successful business.
Nearly three years ago, Eberhardt opened the doors to his new office in the Akron Industrial Incubator to establish Ohio Millwork Distributors Inc., a company that would provide custom wood trim, molding and pre-hung doors to contractors working primarily on mid- to high-end homes.
Today his office is vacant once again. Eberhardt made the painful decision this spring, shortly after his 40th birthday, to close the company.
“The last straw was a certified letter from the bank demanding payment in full,” Eberhardt says. “I had a hard time leaving the last time. I put my heart and soul into it. I stared at those walls for two-and-a-half years but the time just flew by.”
The first few weeks after shutting down were the hardest; Eberhardt had to come up with enough to pay a retainer before his attorney would take any steps toward filing for bankruptcy. As a result, Eberhardt’s home phone rang with creditors calling for payment, and he didn’t have any answers for them.
Until then, the company had struggled for months to survive a relentless cash-flow crisis. Eberhardt had already worked out arrangements with vendors to pay off long-overdue bills on materials they had supplied. But none of these vendors would extend any more credit to the young company, which made it all but impossible for a cash-strapped Eberhardt to buy materials needed for new jobs.
At its peak, the small company had eight employees, though in the final months Eberhardt had trimmed it to just himself, a secretary and a warehouse manager. He also managed to work with one rather than two trucks.
As a skilled carpenter, Eberhardt had excelled in his trade. But as a business owner, he faced obstacles he never expected. From interpreting financial statements to gaining bank loans and budgeting for payroll, Eberhardt learned as he went.
One of the cruelest lessons was when he learned that it wasn’t worth trying to make money by manufacturing his own pre-hung doors-one of the very tasks he had hoped to perform. Instead, it was cheaper for everybody if he bought the doors from a manufacturer and merely served as a distributor.
“We found it was better to buy a box and sell it,” Eberhardt says simply.
Other key mistakes, Eberhardt says, included burning through his cash while learning the business by trial-and-error, and adding staff members before he knew he could make their positions pay off.
Already in a money squeeze by the time SBN first spoke with him nearly a year ago, Eberhardt sold off the equipment he’d used to build doors, and cut the amount of space he leased by a third.
Desperate to regroup, early this year Eberhardt started cutting back on even the smallest expenses.
“I went through every item in the budget, from A to Z,” he says. “I took steps to balance the budget and addressed everything. I had to decide if things were a necessity or a luxury.”
Eberhardt returned the water cooler he had leased for $32 a month and stopped using a credit card to purchase gasoline for his work truck. “Things add up quickly,” Eberhardt says. “We found by cutting the little things we could save more than $3,600 a year.”
But it wasn’t enough. With four bank loans and 30 to 40 vendors with debts ranging from $250 to $55,000, there was no way out.
“I remember we got an $8,000 check but our bills for the month were $22,000,” Eberhardt says. “It was a matter of paying those that screamed the loudest at that point.”
Eberhardt didn’t file for bankruptcy in his business. He shut it down and filed for personal bankruptcy in September. Under terms of that filing, the bank received all but $20,000 of the money owed, and the other creditors received nothing.
“I’m a little guy too,” Eberhardt says. “That’s what hurt the most-leaving money on the books and being unable to pay back the other smaller operations out there. If I had it to do over, it would be different. But I can’t change the past.”
A liquidation sale of inventory and equipment was scheduled to be held by the city of Akron, with proceeds used to pay back rent on the incubator space.
Eberhardt also admits his personal life was suffering before he made the decision to close.
“If I had continued in business, it wouldn’t have been bearable to remain married,” Eberhardt says. “Closing the business brought us closer together.”
In June, Eberhardt took a job selling interior trim for Galehouse Lumber Co. in Doylestown. The job involves work with contractors and serves the very niche he had targeted upon opening his own business.
“I can continue doing what I like to do without the financial pressures,” Eberhardt says of his new job. “There was no breaking the ice and everyone at Galehouse has been very supportive. I feel like it’s my company too.”
With 25 years behind it, Eberhardt says he feels positive about the company and his future there.
“Dreams can still come true,” Eberhardt says. “My patience has grown and with every heartbeat I’m less irritable. I’m more patient now and I’m getting to know myself better … I’m finding true happiness.”