Sometimes losing money is a good business decision. That sounds crazy, right? It sounds crazy when I read it out loud to myself, yet I know that there are times when this is correct. In fact, I haven't written a business blog for over two weeks now, and the reason why is that I was busy losing money. On last Friday, two days ago, I lost $45,000. Am I in total depression? no. Am I completely pissed off? not at all. If I am going to have the balls to be a businessman and work for myself, I know that at some point in my life I'm going to lose more than $45,000. Its just part of the deal. The way to stay in business for yourself is to make more than you lose.
Now to explain why losing $45,000 was a good idea, let me start off by saying I was in the process of trying to purchase an empty piece of land bordering my company Witch's Rock Surf Camp in Tamarindo. This small piece of land was to allow me to expand operations in my restaurant/bar/surf shop and even up to ten more hotel rooms. I had agreed with the sellers to purchase the land for $450,000. I paid a ten percent deposit (the $45,000) and I had three months to come up with the balance owed. That was the last day of May.
Two weeks later I'm having a meeting with three bank representatives from the Central American banking institution Banco Cuscatlan, now owned by Citibank. They are ready to loan me the money for my expansion plans. I knew we were to have this meeting; thats why I paid $45,000 out of my own pocket to tie up the side property in the first place. All they need are some financial statements my accountant can draft up, once I decide who my accountant is going to be, now that I've decided to grow a serious business (hey, the surf camp now is completely serious, I just laugh at how I used to live in a school bus that was parked there). I leave on a couple of surf trips to Panama to clear my head and figure out what this all means. I don't follow through with Deloitte and Touche, the accounting firm that I had assumed would be preparing my documents. Before I realize it, I have three weeks left and still I haven't even started the loan process to buy this property.
For those of you who don't understand what an option is, let me explain it simply: an option is a payment from a buyer to a seller that goes towards the purchase of something, in this case a piece of land, so that the buyer is then allowed a certain amount of time to complete the purchase. In this particular deal, by paying the $45,000 I was buying 90 days to come up with the balance. I was planning to borrow the $405,000 from the bank, but because the bank wasn't on my timeline (something I can't always control) I was nearing my payment due date and without a bank loan.
I then come back to San Diego, where I sit back and look at my options. I had exactly two weeks to come up with roughly 400K when I sent out an email to everyone I knew who I could trust with the information, explaining the situation briefly and looking for capital to acquire this land. I was received with only interest from individuals wanting some kind of ownership in the surf camp. I decided that it is not time to sell out. I decide that, even thought I can find a way to personally come up with the $405,000 for the surf camp, it isn't in my best personal interest to do so. It would leave me financially unable to do anything in the case of this month, and next month, being horrible low seasons and my surf camp losing money each month. I'm about to have another baby with my wife, and if there is complications and I don't have health insurance, what would happen then? If I borrow money from my parents, who borrow it from their home equity line of credit, that is putting my parents at risk. When is it time to stop borrowing from those who believe in you? All I really know is that if I paid the $405,000, I would have been living with much more stress than I was interested in having.
Relaxing at my desk now, a nice Sunday evening, about ready to turn 30 tomorrow. I look back at the very few years I've been in business and I realize that I'm lucky to have had all of the experiences that I had in Costa Rica. I've learned how to deal with difficult situations and to learn from them. The owners of the property, upon learning that I was unable to pay them off, offered me an extension on the loan. I'll of course pay more for the property than the original asking price, but I'll have more time to find the money. I guess they know, as I do, that the best owner for their property is the company that I know and love, WRSC. And even though I lost $45,000, I'll still end up with that property one way or another. I've learned that bank loan processes in Costa Rica are unpredictable. I've learned how to pull myself out of the WRSC loop and act as an outside investor. I've learned a lot about asking people for money. I've learned a lot about many people I know, who have said over the years how interested they were in working with me, exactly how they stand when propositioned with my company. All in all, what I've learned has far exceeded the monetary loss I've incurred, and for that, sometimes losing money is a good business decision.