IN 2015 there were 5,309 commercial Chapter 11’s filed in the US (which is similar to our administration proceedings) which was down slightly from the previous year. You probably couldn’t list more than a few companies that registered these because they’re generally not newsworthy however last week there was a giant splash as Nasty Gal filed.
The splash was caused because Nasty Gal was founded by the original #girlboss Sophia Amoruso who was one of the youngest women to make it onto the Forbes Self Made Women Rich List. As Sophia pointed out at a Business Chicks conference last week “there’s just less of us (women) to celebrate and to point their finger at.” Therefore when a young woman makes the list and falls off it, the sound is more obvious because there’s only one loud splash to take notice of instead of simply being one of many.
For Nasty Gal, of which Sophia stepped down as CEO in 2014, the problems are as old as time. Expenses were simply more than income. As Sophia explained to the Business Chicks audience, in business you have to make sure that your income is more than your expenses. Simples, right? Unfortunately, not always.
That’s because when a business is small it’s easy to contain. You know all of the income coming in, you’re across every department because you’re in charge of most of them and you know if the bills are being paid because you’re paying them. As the business grows you start to lose some of that control but you can still keep your eye on most things. However as the growth quickens and certainly when there’s exponential growth, all too often a founder or CEO will lose control of the business expenses. Suddenly, important things like profitability, cash flow, capacity, pricing are forgotten in the wake of chasing revenue and keeping stakeholders happy. That’s when profitability can fall, when decisions can be made based on the higher margins that were being made and suddenly the business is in serious financial trouble.
It sounds ridiculous to lose sight of the fact that a business needs to make more income than expenses in order to survive but often that’s the case. Certainly, to hear Sophia explain it onstage last week that’s exactly what happened in the case of Nasty Gal.
It’s so easy to shake our heads, to throw stones and to wonder at Sophia’s supposed fall from grace. But last week on stage, there was simply a vulnerable woman who was deeply ashamed of the news and who showed incredible strength and courage to publicly face the music (and a room filled with a thousand women) which is more than many CEO’s and founders have done before her.
As for Nasty Gal, the news isn’t all doom and gloom. Yes, Sophia may end up stepping down as Chair but the company hopes to strengthen their balance sheet with the Chapter 11 filing and attract new investment. And Sophia herself may only be worth millions instead of a few hundred million but hey, many of you would be happy with that much in the bank I’m sure.
My hope through all of this is that women learn from Sophia’s mistakes and choose to continue pushing. To choose to put on our big girl pants and keep our eye on the critical numbers in the business no matter how small we are or how big we become. To understand that we can be the creatives of businesses but at the end of the day, we also need to keep our eye on the numbers and to ask curious questions to make sure we know what’s going on. And if we don’t understand, to keep asking.
As for Sophia Amoruso, I particularly loved when she said “the muscle memory and scar tissue gives you deep resilience to keep going.” How you develop muscle memory and scar tissue is to keep grounded in the basics, keep an eye on the critical numbers and to have the courage to get up, every day and keep going.
It’s been a tough week for the original #girlboss but I hope she knows that female entrepreneurs everywhere are proudly saying #imwithher.
Tags: #girlboss, business, business confidence, business owner, cashflow, christmas cashflow, critical numbers, entrepreneur, female business owners, fempreneur, nasty gal, sales, women in business