Shutdowns vs. Bankruptcies: Top entrepreneurs when they’re growing vs. When you’re shutting down the right way

Opinion by Stefan Vuza, president of Chimcomplex

The public opinion is presented only with the cases of entrepreneurs who manage companies in the period of growth and are promoted as being the only successful ones! But an economy has all generations of players in the ring: start-ups, then those that grow, but also those that stagnate or even decline. And this diversity gives charm to economic life.

Nothing is written about entrepreneurs who manage the activity of a company that is in the final part of life and who manage to “land smoothly”, even if their engines are on fire! No top is made! And this is because we still live in the communist culture, according to which to have a failure or to close is a shame, and society avoids learning from failures! Or it’s not like that, but quite the opposite!

Entrepreneurs who manage to survive such an experience become just like diamonds, which are the result of great pressure! If in everyday life the quality of a friend in need is known, it is the same in economic life: the quality of a manager is revealed when the company is in a dive, and if it is too late, how will it make a “landing” on the ground without any victims , even if the ship is on fire, as I wrote.

There is no top of these hero pilots because they are very few, but it is not true! But it is true that the statistics show that the success rate (launch, growth, profit, etc.) is 2% of the number of active companies and that of closing without damage is only 1%. Only 1 in 100 closes are perfect, and that means everyone involved gets their money back!

I’m one of them and I’m not looking for recognition, because I’m not attracted to the glories of this world, but I know another 74 entrepreneurs who went through this fire, what made them perfect and who have stories for the city! Let’s talk about them and with them because they are the real teachers! They’re all unsung heroes to the public, but they’re totally satisfied inside because they resisted the temptation to pull the plug, stayed intact even though they lost money, and managed the difficult game of closings without injury! They lost money, but they gained the lesson, which now, in their next business, is worth tons of pure gold, which is not found in books or schools, nor in the advice of friends or competition!

I coordinate the activity of 26 companies and in my 30 years in the industry I had to finally close 5 of them, and today it’s time to share the gold of this experience with you!

I looked for such information in the media and found some more, related to Iasitex, written by various “folklorists”. Analysing the comments, I realized that the masses do not understand how the economy works, and decided to write this article.

For the uninitiated, Iașitex is a factory in the S.C.R. group. which has closed its manufacturing activity, but which is not bankrupt, but is still in business. Its assets, however, were sold under the pressure of a SIF for real estate interests – also to them, the top! Now, because there is a God who sees all that happens unjustly, 7 years after their hostile takeover, the SIF has failed to make anything of these assets. Except for knocking them down, which he’s good at!

Axiom: Any business develops, reaches maturity, and then closes! This happens in any country, at any time, because this is how the economy works healthily around the world!

Those who still live in communism and its nostalgia and imagine that factories are eternal, stay there, because reality and whatever I or others write cannot convince a limited mind!

Now, if this is the implacable fate, the question arises: “when can factory closings be considered successful cases?”

The difference between a success and a failure is how the business closing is managed! Therefore, it is not the finality that is important, but the way to get there! (Otherwise, no surgeon would be worth doing any more medical operations because we would all die one day. But he decides to operate to the end, as do the managers!)

In the case of companies, the pilot manages to make a “perfect landing” in the conditions where the company has “engines on fire” if, following the closures, no one loses and everyone gets their money, starting with:

• Banks and any creditor,

• The state through taxes and penalties,

• Employees get all their rights and then get another job,

• Suppliers and others.

These are the cases considered successful and their managers are real heroes.

Do we have such cases in Romania’s economic history?

It is true that such closures are rare, 1 in 100! But it happens, and when it happens, they must be shown to young entrepreneurs as models that will help them in their adventure!

Non-professionals or freelancers (lately) only see the other 99% among the cases, where we have scandals, because someone remains unpaid. The media exaggerates them in informing public opinion, because scandal sells better than success! But in this reality of theirs, there is also a parallel one, which includes fair managers who keep quiet and take care of things well done even when you have to close!

What do the Iașitex, Sinterom, Contactoare Buzău and Uzuc Ploiesti factories have in common? All are factories with a long history in Romania, but which have reduced and then closed their production activities one by one for various reasons. But none of them went bankrupt and have no debts to anyone! SCR Group integrates activities in the industry that continue to perform economically even if some factories are closed for the time being.

Let’s take them one at a time.

If spark plugs had been bought from Sinterom, the factory would still exist today. But the company R. decided to buy spark plugs for Dacia from their friends in France (even if the quality was identical – we just had the same French license). I sensed the trend in time and ensured a slow landing! Nobody lost!

The devices from Contactoare were no longer innovative because the Romanian engineers never excelled in this field (the communists copying everything that was considered good from capitalism). But when the market came together and became competitive, you could see the difference. Here it is to be learned that not only the contractor, through his work and involvement, can influence the closure, but also the non-involvement or lack of skill of the engineers!

All the functions of a company are related to each other (technical, production, economic, investment, HR, research, entrepreneurship, etc.), and if a function is not performed, then everything decays! Simple minds will look for blame (instead of solutions) which they will quickly give to the entrepreneur, because it is comfortable. But in life, history is not written only in black and white, but in infinite shades of gray, and to grasp this “complexity” you need an involved mind that not many have!

Iașitex and NovaTex used to produce fabrics, but when wages rose in Romania, orders moved to Turkey. And it’s good that it was like that because Romanians deserve better salaries!

In the light industry, there were 3 power plants (with headquarters in Iașitex, Nova Pitești and UTA Arad) around which 10-12 other regional factories gravitated.

The first to close was UTA Arad, which could no longer ensure decent salaries, knowing that there are many other opportunities for employees in the western region of the country.

The last one was Iașitex, which closed 10 years late, because we had an excellent management team there that worked day in and day out and tried to resist the rising costs! I once again congratulate the efforts of the engineers from Iașitex to find solutions and I must remember that in Iași there was the strongest nucleus of the light industry in Romania, but which, without government support, disintegrated!

A professional trader must sense when the closing time is coming and must prepare this process meticulously in advance if the downtrend is the final one. But it is true that only 1 in 100 entrepreneurs have this sense and do not fall into emotional, subjective, or senseless heroics! If you make this decision in time, you succeed; if not, you enter the phase where you make more and more efforts to maintain yourself but in the end, you will still collapse, and in this scenario inevitably there are victims.

Iașitex and Nova have successfully closed! Sinterom and Contactors alike! And in all these cases we have paid all the money to all creditors, employees and any other party involved, a rare case and unnoticed by anyone. It is true that we were tempted at times to abandon but gritting our teeth we resisted and managed a smooth and safe landing for all passengers!

We have worked extremely hard to make these closures successful. I’m not looking for external recognition, because I have the internal one when I see that more and more of us come to the meetings with the “veterans” of over 5 or 10 years and we tell the stories of the adventures we lived together in the factories where we grew up and that formed us in what we are today: mature and whole people.

The only bankruptcy in which I was involved, and where Bank X was the real criminal, gave me a lot to think about, and after 10 years of work, I built the solution to restart the Dej Cellulose Mill, out of ambition I admit!

All vital assets are already purchased, and the business plan is launched on a capacity of 500,000 tons, the old one being only 60,000.

And here I will show the financial world that they were wrong when they did not risk together with the entrepreneur who was dedicated and “all in”! Excessive caution led to losses for all players and today when I meet the decision makers of those times, they all regret that they did not have the courage to overcome the crisis of 2008 and say: “how far this industry would have been today, but it was not meant to be! No one had gone through such a crisis!”.