The Guy Who Did Not Listen

 

There is no question that it is often difficult to heed the advice of an outside consultant who does not know your business like you do. I was consulting for a guy who had recently acquired five franchises in a relatively young industry. He had his sights set on expanding his business in order to provide the income he desired.

 

My first order of business was to go over the company’s financials. After finding several problems I sent in one of the Hatton Group’s financial experts while I spent time in the field with the owner learning about the business. Once the financials were in order my CFO and I sat down with the client (the guy) and reviewed costs and sales projections for each of the franchises which showed that this business could not generate the income needed to support expansion.

 

I knew our numbers were accurate and that they had revealed the current state of affairs for each franchise. The client did not want to believe it. He said my CFO had “made a mistake.”

 

What we found was that the projections fell short by $300,000 of the client’s expectations. The accurate financials gave us a foundation to properly project costs versus sales. The end result proved that the expansion could not possibly provide the net income he desired.

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However, as entrepreneurs often do, he stuck it out for a whole year before he sold the business. It was a hard lesson to learn as well as a very expensive one, costing not just a lot of money, but the opportunity costs for a whole year in a business that could not provide what the owner thought it would. What is one year of your life worth, going in the wrong direction?