Denial About Financials Leads to Failure

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This situation prompted the owners to run up extra batches of inventory to make sure their ice cream stands were always stocked. Instead, we recommended raising the price. Even if they lost 5% of their customers due to the higher price, they'd still make a higher profit. We tried to explain that if you're selling gourmet ice cream, people expect to pay more. They have to realize the product is exceptional and if you want the best you must be willing to pay for it. Since the store was in an affluent neighborhood we didn't see any problem with this. We gave it a trial run and in the first week profits were up by 130%. We also advised them to put an end to the "Do It Yourself" Sundae offered in the stores. Customers were making lavish use of sprinkles and whipped cream, and it was killing the profit on each item sold.

These were easy calls to make. But when business owners are in deep denial, they just don't see it. They don't want to face the truth and do the hard work that needs to be done to turn the business around.

In fact, Lucky Licks should have been less concerned with their own little ice cream boutiques and more focused on broadening their distribution to supermarkets and delis, where the real money is to be made. Jack and Jessie only sold their products to stores within a 100-mile radius. They could have tripled sales if they'd bothered to get in their car and extend their footprint to a few more counties. But they balked at the idea. It would have meant less time hanging out on their boat.

Ultimately we decided to go our separate ways. The owners were too resistant to change. They didn't want to do the hard work of saving their business. We couldn't make any of our advice stick. We'd just be taking money from a client hell-bent on ignoring our advice, and we didn't want to stand by and watch them destroy what they'd built. It was obvious they wanted to make some slight changes and expected the results to be satisfactory. But "close" only counts in horseshoes and hand grenades. All the advice and resources business owners have at their disposal to get themselves back on track are meaningless if they don't have the will to do it.

I wish I could say Lucky Licks survived their own financial mismanagement. They made a tasty "Raspberry Ripple," and now I can't find it anywhere on the Texas shore.

More case studies are available in our ongoing series.

With Samantha Marshall. Cloutier is the founder and CEO of American Management Services, a management firm that specializes in financial turnarounds and profit development for small and midsize businesses.

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