Surviving Retirement 1

This is a little unusual for me since I tried to implement a different format feature for the first time. Sometimes these don't work as well as you would like.

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How do I start this story? Ellen and I married young and retired young, and what? We failed retirement 101? We are lost in a sea of opportunity and we are clueless? How about, I wake up every morning and look at her and ask, "What do you want to do today?" and she answers, "Whatever you want to do." All I want to do is find something to do today that won't bore me to tears and for her to regain the sunny disposition and cheerfulness that she always displayed during our first fifteen years together.

Ok; I am Joseph Magnon and Ellen is Ellen, nee Carter, Magnon. We met our sophomore year in college. She was a merchandising and marketing major and I was an accounting and operations major. Two weeks after meeting, we became inseparable. We studied together; we ate together; we stayed in her dorm room together. We went to summer school together and got an apartment that fall together. My parents adored her and her parents felt the same way about me. They started planning our wedding before we even began to talk about it.

We talked about it over Christmas that year. There wasn't much discussion. I asked her if she had thought about us getting married. She said, "Yes; when?" I replied, "This summer before summer school starts?" Her rely was, "Sure, that works or spring break would also work. Pick one." We were both doing an internship; so we decided on early summer before summer school started. Our honeymoon was a long weekend at resort and spa provided by our parents.

We graduated at the end of the summer, but enrolled immediately in the MBA program. She went for a Master in Fashion Merchandising and I took mine in the relatively new field of internet sales and marketing. We earned our diplomas in a year and half and immediately started our business, JoEllen's Clothing for Professional Women. Actually, the reason we took the MBA classes was an excuse for us to write the business plan for the company that we wanted to start. Ellen was a petite woman who had always had problems finding good looking, professional clothes. Most of what was available was for teenagers and younger girls.

As we developed our plan, we focused more on traditional and timeless clothes for all women with an emphasis on petite women's sizes. We stayed away from fashion trends and upscale items; rather we offered a wide range of skirts that could be stylish for work, school, or on casual evenings out. Our mainline blouses were button down cotton and polyester blouses that could work with a suit, a sweater, or stand alone. We stayed away from underwear and nightgowns, but did include some comfortable night shirts. In short, we wouldn't make the style pages of the newspapers or magazines, but many women had multiples of our standards in their closets and drawers for everyday wear.

It wouldn't be right to say that we were an instant hit on the internet, but we got orders the first week we put the website up. Ellen handled the sales processing, merchandising, product selection, and marketing. I handled the ordering, shipping, billing, and accounting. We were profitable within six months and we were already having repeat orders from our early customers. When I began the end of year reporting process during the slow week between Christmas and New Years, we celebrated a profitable first year and the number of our orders and invoices had regularly doubled almost every month.

We were profitable for several reasons. The first was that we lived and worked out of a rented house several blocks from the campus. The second was that we only took out of the business what we needed to survive on. The third was that we did virtually all of the work ourselves. When we did have a busy order load, we would hire a couple of college kids to pack and ship orders on a part time basis. By the end of the year, we had two who regularly came over on Thursday and Friday after class to help. The only real time off we allowed ourselves was on Sunday. That was our day of rest. We often slept late, made love, went out for lunch or had a picnic. It was our recovery day.

During that first post Christmas slow period, we evaluated our past year and then talked about our plans for the coming year. We based our plans on projecting half of our previous year growth although we had no expectations that things would slow down. Ellen wanted to add two new lines to our catalog which I agreed to. The one thing I wanted was to upgrade our computer system. We were still working off of our college computers and they had frequent problems. Rather than trying to piecemeal it together, we took a deep breath and decided to hire a friend who was graduating with a degree in communications and network management. She had been the one we had used to help us set up our computers at the start. When we talked to her, she had begun a job search, but was finding the going tough. She accepted our offer for part-time on the understanding that she could continue to look for a full time job. We agreed and Melinda Watson started on January 2

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On January 10

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, she asked us for a joint meeting. Both Ellen and I were afraid that she had found a full-time job already and that she would be leaving us. Instead, she said that instead of upgrading our existing computers which were very overloaded, we should keep them, but buy a server to run all of the programs and internet and use our existing ones as workstations. When she told us that this would cost only a little more than the upgrades, I looked at Ellen and we both said, "Do it." Melinda went out to order the server and came back with one in her back seat. The store had one sitting on the shelf that was less than six months old and had been taken back because the company that had leased it had gone bankrupt. It was complete with cables, monitor, software, and a laser printer. She had spent two thirds of what she had said it would cost. We changed her from part-time to fulltime that day. She was going to save us money. The rest of the week, Melinda installed and tested the server and on Sunday, she shut down the website to move it to the server. On Monday morning we were operating on the new system. All of our workstation computers worked faster and better than before and it made all of us more efficient and productive.

For the first six months of our second year, our orders grew at the same rate as the previous year, but starting that summer, the rate began climbing again. The new lines that Ellen had added had begun to pay off. By fall, we had four part-time college students working after school every day and we had run out of room to work. Ellen and I slept in what was her office. My office was the guest room and it was full of orders and paperwork. The third bedroom was Melinda's office and it was full with the server and related equipment. The living room was our shipping center and the kitchen was our break room. I had rented a storage room to keep our inventory and it was full.

The only solution was to move the operation to a new location. We found a 10,000 square foot building that had once been a movie theater not too far from the college. It had also been used as a club, a gym, and most recently the home of a little theater. The building had appeal for a several reasons. It had a large open floor to store and move material around in. The stage area was a good size for packing and shipping. There was a double door with a loading dock on one side for shipping and receiving. On the upper level, there were three offices and a storeroom along with the projection room which had a good cooling and ventilation system for the server. Ellen loved the lobby area and felt that it would make a nice shop for close out items. The front opened out on a street of cafes, galleries, and boutiques. She felt that we could add additional business there. The area had been run down and was being restored into a nice gathering, eating, and shopping area.

We staged the move in three steps. I moved my office over to the new space and began receiving new shipments there while I set up shelves and shipping stations. When I was ready, we moved all of the stuff out of the storage room and the shipping supplies and materials from the house. Melinda had run the lines for the computers and printers and we were running remotely from then on. Ellen moved her office over next and got herself organized. We waited for the Thanksgiving holiday to move Melinda and the server to its new location.

When it was all said and done, Ellen and I looked at the rent house and saw how little furniture we really had. The lease was up at the end of December and we decided to let it go. That gave us a month to find a new place to live. One of our part-time students mentioned that there was a mid-rise condo complex down the street with several units for sale. A number of parents had bought condos for their student to live in while going to school with the intent of selling it when they graduated. The real estate market was in one of its doldrums and condos weren't selling which led to the price dropping on a number of them. Ellen and I went to see what was available; we were shocked. We could buy a nice one bedroom for less than a good used car. When we asked about a two bedroom, the only one they had available was a large one on the top or fifth floor. There were two equally sized ones on the top floor and each had a good sized enclosed patio on opposite ends of the building. This one came furnished with nice furniture and was priced at what a nice new car would cost.

We talked about it as we walked back to the office and felt that it would be a great place for us and the price was more than reasonable. When we got back to the office and told Melinda, she simply said, "Neither one of you has taken anything out of the business. There is plenty of cash, go buy the damn place. You deserve it." That settled that discussion. We moved in over the Christmas break and celebrated New Years on our patio with Melinda, her boy friend, and the part-time students who were still in town. It was cool that night, but a fire in the fire pit warmed the area up nicely.

The next spring, it came out that Melinda's boy friend had started up a computer network and internet support company. He wanted to marry Melinda and have her work for him. After several discussions, they could provide all of our computer support and network needs for less than what we were paying Melinda and we made a deal. We were sorry to lose her, but since she would be our account executive, we seldom went a day or two without seeing her. They lived in another condo complex just down the street from us.

During our fourth and fifth year, our business began to stabilize and a pattern began to develop. Our incoming orders began to coming in during the afternoon and continued until about ten at night. Ellen began staying at home in the morning and coming in at noon to handle the new business. That meant that the shipments needed to be ready in the morning; so I came in early and stayed until the pickup was made shortly after lunch. She would bring me lunch when she came in; then I would go home and take a nap. I would pick up dinner for her and take it in about seven and began processing orders for the next morning. I stayed until she was through and we walked home together. Together we were spending a combined 18 hours a day working to build our business. One of our part-time girls had graduated and we hired her to run the new store front. We didn't have to rely on over stock and out of date things; we simply discounted our regular stock because we had little handling and processing cost. The store was successful and growing as word spread about our products and prices.

We had simplified our shipping operation too. If a customer ordered a single item or multiples from the same manufacturer, we arranged for it to be shipped directly from the manufacturer with our label and catalog. The only orders we now handled and processed were the ones from multiple manufacturers. We had hired an ex-military man who was now going back to college to run our shipping department. This freed me up to spend more time streamline our operation and plan for future growth.

The woman that ran our store was named Marcella, but went by Marci and she proved to be an excellent choice. She was familiar with our retail store and our internet operation as she had worked in all areas while in college. At the end of our fifth year, we named her manager of store operations. This allowed Ellen and I to take our first ever vacation together. The decision to go to the Virgin Islands in December and January was a no brainer. We spent two glorious weeks together on the beach, dancing clumsily in the clubs because we had not danced in over five years, and shopping the native shops. When we returned home, we brought with us two very nice tans and the designs for six island inspired dresses that Ellen fell in love with.

During the spring, Ellen approached a number of our regular manufacturers about making the dresses, but they all declined much to her frustration. We talked and I said that I would do some research on the subject. It didn't take long to discover the problem. Most of the major bands and big stores bought in very large quantities and they were manufactured off shore by the tens of thousands. The only domestic manufacturers focused on the small volume but high end products using expensive fabrics and custom designs. They manufactured in the hundreds or thousands. There were a few who specialized in making small lots of twenty five or less as tryouts and samples to show to potential buyers. One of those was located in our town.

I visited him and discussed an order for ten each of the six designs in three sizes. The owner was an older man who had excellent equipment, but relied on manual labor rather than computer controlled sewing since with his business, he would have to change the program too often to justify the upgrade. He agreed to make the batch I wanted, but indicated that he was thinking about retiring soon and that if I wanted a larger order, he could refer me to a good manufacturer for a production run. I left him with the order and went home to think.

The next day, I talked to Melinda's husband about automating sewing machines. He didn't know much about process controllers, but put me in contact with a man who did. The talk with him was enlightening. To automate the man's sewing machines could be done in several ways. The simplest would be to set them up to run batches of the same thing in the same size repeatedly. The next step would be to add a computer design function that would adjust the same pattern to make different sizes. The last option was to put a full control package on that could literally make any design in its library in any size and quantity desired. It cost a lot, but would eliminate inventory and the same patterns could be made out of any fabric desired. When I told Ellen about it, she went into overdrive. We could offer the dresses on the web in all sizes and fabrics and could make them as we received orders. She wanted to take the ten I had ordered and put them in the store to get customer responses.

I picked our order up the next week and took them back to the store. Ellen immediately took one of each in her size and told Marci to do likewise. They wore each of them for a week and then compared notes. The next week there were six mannequins wearing them with a table asking our customers for their comments about them. Three weeks later, Ellen came to me and simply said, "Order twenty five more of each with these changes. See if you can buy that company, we can sell these."

Our banker had been after us to use them to expand our operations. We were still expanding from our existing cash flow and hadn't felt the need to borrow anything. If we bought this business, it might strap our cash flow depending on the price and deal that we could arrange. He suggested that I meet with a consultant that they recommended for business buyouts. The consultant asked me one question: did we want to buy out the entire operation including the building, or were going to buy the business only, or were we going to buy the equipment only. Then he suggested that I open discussions with the owner and get his most past five year financials and analyze them. When I knew what we wanted to do, I could come back and we could structure a deal to present to the man.

I went to see the owner and gave him Ellen's order and then asked him about his time frame for retirement. His response was that he would like to retire completely in two to three years, but was willing to work out a deal anytime if someone was interested. I asked if he had financials that I could study. He said that he would have them for me when I picked up the order. We shook hands and I went back to work.

I also started researching about buying a business and some of the pitfalls. Almost all of the potential problems seemed to stem from an inexperienced buyer who didn't understand the basics of the business. They tended to make uninformed decisions that came back to haunt them. As the consultant had said, there were advantages and disadvantages of each of the options he had mentioned. The major one was buying the building. Depending on its condition, it could be an albatross that restricted growth or it could allow for consolidation and growth potential. Buying the business as is could cause customers to leave because of uncertainty about the new owner. The major problem tended to be the employees. Good ones were beneficial; bad ones could cripple the operation. Buying equipment only might be the least expensive option, but it also meant disconnecting, moving, and reinstalling the equipment in a new facility. Then there was the issue of finding someone knowledgeable to operate and maintain it. I could readily see each of these issues and started making a list of questions and things I needed to ask.

Ellen and I talked over the options and it appeared that in general we favored buying the company, but perhaps leasing the building from the owner for a period of time. She felt that if we continued his regular business while our dresses began to find a place in the marketplace, that we would be in good shape. I liked that too especially if he had good people in place and we could retain them. I adjusted my list and added a couple of things that Ellen had brought up.

When I picked up our order, he gave me a folder and asked that if I wanted to talk, we should meet somewhere else so that he wouldn't upset his employees. I agreed and went home to look at his financials. It didn't take long to see what he had. For the past five years, he had worked regularly, but not at full capacity. For the most part, he had about a hundred regular customers and then another fifty who ordered irregularly. He had a dozen women who did the sewing and a billing and payable clerk. There was also a maintenance man. He might prove to be critical whatever we were able to work out.

The next week, I met the man for a light dinner and asked him my questions. He seemed well prepared with the answers. When we finished he said that he was well aware that the business wasn't a growing one and that he couldn't expect top dollar for it. He was willing to work with us any way we wanted. He had saved his money for retirement and felt that he was comfortable. He basically wanted to see it go to someone who could take care of the existing customers and employees fairly. That left me with a good feeling.

Two months later after involving the consultant, banker, and the process control guy, we launched JoEllen Causal Concepts for Home. We bought the business, rented the building from him, and retained the owner for two year to run the existing business while we hired and trained someone to replace him. At his present level of business, there were twenty machines busy and ten sitting idle. We had these ten converted to the full computer control ones with the computer sized to add the other machines as time went on. This is where we found the diamond in the rough. The maintenance man had worked on maintaining sophisticated control equipment in the military for ten years before he got out. He wasn't a computer man, but he could keep both the sewing machines and the process control equipment running efficiently and productively. A year after we started, we sent him back to school to learn about the computer side after he expressed an interest in learning more about the computer control and programming.