Friday, April 15, 2011

"Accountants, attorneys, and bankers advised me to hire people with lots of experience"

Another business mistake story reported by Marcia Pledger of The Cleveland Plain Dealer. This story is from Ratanjit Sondhe. He emigrated from India to the U.S. in 1968 with $8 in his pocket and two Master’s degrees to pursue post-graduate studies in Advanced Polymer Chemistry at the University of Akron. He soon became an American entrepreneur, founding Poly-Carb, Inc., where he served as CEO and Chairman for 34 years. Poly-Carb was sold to DOW Chemical in 2007.

I came to America in 1968 with several degrees and spent years studying chemical research before I started the former company with two friends.

When I started Poly-Carb, accountants, attorneys and bankers advised me to hire people with lots of experience.

My adviser said that because I didn’t know anything about business I should hire people who were knowledgeable about marketing and sales. It wasn’t bad advice. But it didn’t work for this company.

The people I hired wanted bigger cars, titles, offices and salaries. We had seven secretaries at that time and yet we still couldn’t get a letter typed. Suddenly, there were 55 people working at a company with less than a $1 million in sales.

The rude awakening came when my accountant told me that for all practical purposes I was broke. In that same meeting, my attorney advised me to file bankruptcy. He said, “We can file for Chapter 11, and I can settle your accounts for 10 cents on a dollar. We can do it very quickly without you losing your name or the business or accounts.”

For the fist time in my life I couldn’t sleep. I didn’t want to cheat people. Instead, I took a hard look at my business. I still had good orders, and realized that I was responsible for 90 percent of the company’s sales.

I decided I had to let go of my entire staff. I realized we didn’t need seven secretaries; just energetic, intelligent people who wanted to add value and work together as a team.

But even though I had good orders, I still needed raw material to fulfill them, and I did not have any money. I contacted my largest supplier and said I needed to visit them in New York. I owed them $500 million, and they told me there was no need to visit – just send a check. Somehow, I persuaded the senior vice president of finance to see me.

I told him that I had legitimate orders from contractors backed by the Department of Transportation. He said, “You didn’t make money before. How are you going to make money now?” He was right. But I showed him the cash flow that had been calculated for my company. I said that people were making those large salaries were no longer on my payroll. I have people who will work about one-fourth of what I was paying.

He said,” Your know, either you are the biggest con artist that I have ever met or you are a really honest person.”

I said, “It takes a con to recognize a con. But it also takes an honest person to recognize and honest person. You tell me who I am."

He game me the money, and we were able to pay off all of our debts within a year in 1980. We’ve been profitable every year since then and now have a second facility in Georgia.

Related post: John Bliss: hiring experienced people is riskier than growing your own

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