Interview with a formerly bankrupt entrepreneur

People fail forward to success. — Mary Kay Ash

Many of life’s failures are people who did not realize how close they were to success when they gave up. — Thomas A. Edison

How should business people or professionals wrestle with crisis? The world is full of books and theories about success, but why are there so few formulas for overcoming failure?

Amid the global economic tumult led by the USA and Japan, it’s disconcerting to read about such tragic suicides like those of 74-year-old German billionaire Adolf Merckle, 52-year-old US realty magnate Steven Good and 65-year-old French aristocrat hedge fund adviser Rene-Thierry Magon de la Villehuchet, who reportedly lost at least US$1 billion of his clients’ money to American embezzler Bernie Madoff.

A few years ago, we had an exclusive interview with a young, talented but at the time “technically bankrupt” entrepreneur. We heard he’s now recovered and doing okay constructing and selling middle-class homes. We sought him out now for another exclusive interview. Here are some excerpts:

PHILIPPINE STAR: Can you summarize what happened to you a few years ago and why you described yourself as “technically bankrupt” then?

FBE: I came from a humble, middle-class family whose deceased dad used to be rich. I earned my first million in real estate sales as a hardworking realty broker. I creatively and aggressively sold over P2 billion worth of Ortigas and Makati residential and office condos in 1995 and 1996, plus luxury homes in San Juan, sleeping only four hours daily every day. The only times I rested were during Holy Week and All Saints’ Day to visit my parents’ tombs, but I was selling every day, including Sundays. I believe hard work and perseverance are infinitely more important than talent, luck, experience or intelligence.

Did you fail in business due to the Asian crisis?

It was more than the Asian crisis; in fact, I was still okay during the 1997 Asian crisis and retained my eight secretaries and two drivers even during the real estate slump. My failure came when I was bored by the sluggish economy and slow realty sales, when I went into the restaurant bar business with a local franchise. My earlier first mistake was putting my earnings into real estate such as vacant lots, some houses and also pre-selling unfinished condos partly for speculation, so I wasn’t liquid during the crisis. Worse, whatever cash in the bank I had I used to construct a huge restaurant-bar venture with a lousy and unscrupulous local franchise.

What was the worst time of your crisis?

I could write an entire book on crisis (laughs). This greedy local franchiser was so excited I was willing to invest a lot in a resto bar, he didn’t do a real feasibility study on his recommended site and also allowed me to build a three-story restaurant bar. It turned out he was just after the franchise fee, plus his monthly cut from the huge gross sales, without thinking of my profitability. In my case, I was rushing and I just trusted him. I spent a lot on this venture and hired over 50 employees. On the second floor I even had an entertainment area where I hired the best bands to perform every night. I worked hard, promoted it, had lots of sales, but the costs were high and the location wasn’t ideal. There weren’t even any jeepneys at night on that highway! Worse, the economy faltered then in 2001 with EDSA 2 and then a bloody EDSA 3 months later. It was Murphy’s Law, one disaster after another!

You mentioned a “lousy local franchise.” Aren’t all franchises more failure-proof for a new business?

That was my complaint to Samie Lim, the pioneer of the Philippine franchising industry. They needed to police the ranks of unscrupulous or untested business people who jeopardize other people’s capital with lousy or badly run franchise systems. He agreed with me. Some businesspeople go into franchising for the wrong reasons such as to try recover from losses, or to expand although their business model is untested or not yet fully developed and systematized. I was horrified by the chaotic nature of my franchiser, from the low-quality food to the disorderly system. I was spending more on marketing than him, yet he owned the brand and I was only the franchisee of one outlet! Later when I decided to shut down, two dozen other similar franchisees in Metro Manila and nationwide closed in the succeeding months. To show you how bad the location they “highly recommended” to me was, a couple of months after I closed, the McDonald’s across the street from my resto bar was also shuttered. Months later, the nearby Tropical Hut also closed. I lost many, many millions.

How did you survive the crisis?

I think running a losing business is probably like a drug addiction. I felt I was hooked. Even when I wasn’t earning money and the venture was losing many hundreds of thousands of pesos per month, I felt trapped and just couldn’t stop. I kept believing there were other ways to profit. Most people in crisis cannot cut clean, cannot just write off huge losses. Luckily for me, I went into sport during those many difficult months. For the first time in my life, I went to the gym daily to do the treadmill strenuously in order to vent anger and angst. Exercise creates the feel-good chemicals in our body called endorphins. When sad or angry, exercise!

How did you make a turnaround from bankruptcy?

I went back to sales — from realty sales to even life insurance sales. My first year in life insurance, I made it to the Million Dollar Round Table (MDRT) international sales achievement and even won a free trip to join the MDRT conference in Anaheim, California. More importantly, I also started to pray again.

What lessons did you learn from your crisis?

There are too many to enumerate, but I just want to stress that our positive attitude should never change. Even in the worst times, I never for even one second doubted that my ultimate destiny here on earth is success, that this and any other failures are just temporary setbacks. I never regretted taking risks or making that mistake of getting a franchise, because there are so many priceless lessons one can only learn from failure and will never learn from success. It is also better to risk and fail when you’re young than to never take risks, because the worst risk in life is never taking one.

Any other thoughts you’d like to share regarding crisis?

In crisis, one discovers who your true friends are. The best is my younger sister, who stood by me and helped. A good friend also offered support. More touching were my loyal office employees who offered to voluntarily resign because they said that I could no longer afford their wages. One of my three accountants is a young widower and has four kids, but he volunteered to resign in those bad times, so I sat down with him to suggest that he go into business himself by opening his own accounting service if he couldn’t find a new job. Months later when he got a few clients already, he visited me and even bought life insurance from me! He is now doing very well and is grateful for my advice that he open his own accounting firm. Today, I’m too busy in my successful realty business so I totally stopped selling life insurance or being a realty broker. But I really miss sales because I believe at heart I am forever a salesman.  

* * *

Thanks for your letters, all will be answered. Comments or suggestions are welcome at willsoonflourish@gmail.com.