A Carpenter’s Tale

I once read an article about a research on managing wealth. It was reported that people who suddenly became wealthy are more prompt to losing their fortune as compared to those who made their own, or those who inherited it.

It gave examples of celebrities, sports personalities who surged to fame, and lottery winners who struck the lottery but lost their fortune completely. It also explained that those who suddenly received money usually lack the preparation to manage their wealth due to the element of surprise.

However, I somewhat disagree with that. The Chinese believe that wealth does not pass three generations. Hence, those who inherited wealth from their family might not be able to have their fortune protected forever. On the contradiction, I have learnt of many celebrities and sports personalities who managed their fortune really well. Robbie Fowler is one footballer who wasn’t earning the highest pay through playing football, but according to a report published some years ago, he was among the top ten wealthiest footballers due to his prudent investments and financial management skills.

As for those who made their own fortune, there is no assurance that they will handle it better even though it is commonly agreed that people tend to appreciate ‘blood and sweat money’ more. There are businessmen who started with nothing and achieved quite a fair bit, but yet lost it all for reasons such as greed, inability to change, lack of sustainable long-term business plan, etc. And at least in one instant that I know off, a businessman whose business had grown really big, went bust due to lack of sustainable entrepreneurial skills. Let me share with you the tale of a carpenter.

This happened in a town that used to export the most furniture to the rest of the world. Way before this town became popularly known as D’ furniture town, there were already people making furniture here, mostly small scale. There was this SME entrepreneur who operated a small furniture business from a kampong just outside the town. He was producing furniture which he sold locally. Besides his own customers, at times, he was getting orders from bigger factories that were doing export but cannot cope with the demand.

When the orders from other factories were increasing at a rate that was beyond imagination, this carpenter started to think that why should he just act as a sub-contractor? Why not deal direct with the overseas buyers instead? Hence, he embarked on a business expansion plan and from that moment, his every touch was like the Midas Touch and in just a short few years, he was no longer a mere carpenter. He was now the managing director of a mega furniture factory seated on acres of land and employing hundreds of workers to manufacture thousands of furniture.

Everything was going so well for this entrepreneur that his business kept expanding each year and there was no stopping him. At its peak, he gave away a brand new car as grand prize during his company’s annual dinner, while the land his factory occupied was large enough for him to apply for industrial park status.

Financial-wise, he was borrowing high to finance his aggressive business expansion and he was borrowing from illegal money lenders too since the loans given by banks fell short of what he needed. Just when nothing seems to be able to go wrong, his business took a nasty knock during the Asian financial crisis.

Apart from the volatile currency exchange that attributed to the difficult export conditions, his main buyers started to ask for lower prices. Prices that was so ridiculous that he had to supply at a loss. However, he had no alternative since he did not have a big customer base and his large operations depended on only these few buyers.

Due to high overhead and mortgage, he knew he couldn’t sustain the losses for long, but he could not figure out a plan to get his business out of this turmoil. He finally decided to cease operations, and he siphoned out as much money as possible from the business to his personal account. One of the biggest furniture factories in town was harshly shut down and thousands became unemployed.

To the surprise of many, this former carpenter remained in town and lived life as normal except with an addition of some bodyguards to protect him from the “harassment” of the illegal money lenders because he had decided to keep all the money from the business even he knew that he was not the rightful owner. He did all this, for fear of going back to where he started; a carpenter!

Fellow SMEs, this story serves as a lesson to remind us not to be too engrossed with increasing purchase from the existing customers, but neglect the importance of having new customers. Having a large and diverse customer base will help to cushion the impact when some customers walk away or try to hold you ransom. When business is good, continue to acquire new and prudent management skills to be ready to face any unforeseen challenges. Nothing can last forever. Remember; there is often calm before the storm!

God bless SMEs!