My Favourite Failure: 4 big failures which nearly cost me everything - Joel Gandara

0:00Let me ask you a question. If someone wanted to access your company's devices or premises, how difficult would it be? If they had a helping hand on the inside, could they get it done? The answer is probably yes, which is why we're working with the National Protective Security Authority and the National Cybersecurity Center to share their secure innovation campaign. They can see that state actors, as well as competitors and criminals, are looking to steal from UK startups. You're probably aware that your cybersecurity needs to be rock solid, but a lot of startups forget about insider risk. Take one company the NPSA told us about who had a disgruntled member of staff.

0:38A state actor charmed them into stealing the company's flagship software, which they then took to the state-owned business instead, costing the company billions. If you want to get a better handle on your security, the Secure Innovation campaign can help. Check out npsa.gov.uk forward slash innovation and download their free quick start guide. There's a link in the show notes. I remember my wife crying and saying, we're going to ruin our credit. What kind of people are we? You know, she always wants to do the right thing as well. But there was no more choice. We had no more money. I mean, it was either going to be we pay our mortgage for our house and our food, or we keep paying those bills and we end up under a bridge.

1:23And we had two little kids at the time. So we had made the very difficult decision. That's Joel Gandara. He sold his businesses a few months ago, is retired doing what he enjoys, so he's feeling pretty good about his life choices. But a few years ago, it was a very different story. He would have been shocked to learn that this is where he'd end up. It seemed more likely that Joel would find himself back where he'd begun.

1:53Joel didn't have the easiest start to life. I was born in Cuba in a communist country. I came here on a boat when I was a kid fleeing communism, looking for freedom. I was a kid. My parents made that decision. I'm very grateful for it. I grew up in the United States, but we started from the very bottom. We were very poor. So I grew up just outside of Oakland, California. Not a safe area, not a nice area in my opinion. There are some nice pockets, but where I grew up was pretty poor. And the role models that I would find, because they had a nice car or they had a little bit better life or nicer clothes, were often drug dealers or people who stole things or somehow in illegal activities.

2:35Unfortunately, that's what a kid would have to look up to because there weren't many other mentors or role models. So I grew up always wanting more, always knowing that I did not want to live in the neighborhood I lived in and being surrounded by some of those bad elements. So when I was in high school, I got a job selling shoes at a department store and I saw an opportunity to get ahead just a little bit. If I could occasionally just take a few pairs of shoes from the shoe department that I worked in, I could sell them. You know, these are$70 shoes. Maybe I can get$30 for them at school and make a few bucks.

3:13And I did that. And it went great until I got caught. And unfortunately for me, or fortunately, it was really serious because it was about two weeks after my 18th birthday. So I was now an adult and this really counted. It wasn't a slap on the wrist. In fact, it was a fees, probation, spend the night in jail, go to court. You know, it was not fun and it was very impactful on me. Now I said, I'm never going to steal again and I haven't, but I did find myself just about a year later, still in that same environment, still limited with the impact that I, or the people that I could have on me that would impact me.

3:55And so what I started to do was loan money. Now I was 19 years old. I was making a few dollars here and there on interest and someone failed to pay me. So a friend and I paid him a visit. I drove the car. That friend got out of the car and broke that person's window and got caught. And so I got arrested again. It was my second time in just about a year. And I I thought, what is happening to me? This isn't how I was brought up. I'm not a criminal. But I'll tell you, those two incidents impacted me. I still have that healthy fear of ever doing anything illegal and ever getting in trouble like that.

4:30So I've kept my nose clean, very clean for all these additional decades. But that was an impactful moment in my life, both of those. Wind forward to his late 20s and things were looking up for Joel. And I was selling men's underwear, men's swimwear, men's athletic apparel. And I was really growing this little business. And I was, for the first time, making six figures as an income and very happy and working a lot. But something happens when you start having success sometimes if you're not careful. Sometimes you get somewhat of an ego. And you start believing that, well, if I could do this well on this, I can probably do well in anything.

5:12And that's what happened to me. I met a manufacturer who told me, look, you've already set up distribution. Why don't you help us grow this brand in the United States? So I started importing it at my cost. You know, I, this wasn't like I was holding it for them. I was paying for the products. I got a warehouse at the time I was working out of my garage in my house, but I went and got a warehouse. I got employees and I started really growing it, but it was a lot of investment and the sales just weren't there. And also it was right around the time of the 2007, 2008 economic crash. And so sales just weren't there.

5:49And I was out just about $200 ,000. And since then, I got to tell you, I've had investments that lose 200 ,000, lose half a million and it hurts. But I'll tell you when 200 ,000 is almost everything you have in savings, it really hurts. And that's what happened to me back then. The business that failed was for Women's Apparel, a deviation from Joel's prior business in menswear. Joel's ego and his wallet took a hit, but fortunately, he had a good partner. So she's been through the good, the bad, and I'll tell you, in the beginning it was more bad because we had these drops in our business multiple times in our investments.

6:27But fortunately, I did have that stability of a great wife who at the time was working as a registered nurse full-time taking. In fact, things got so rough right around this time and with a future loss of real estate investments that we got hit with, where she started shifting to weekend overnights. So she got a contract with the hospital to work on the weekends overnight. So that means Friday night, go in at 11 o 'clock, oh no, seven o 'clock and work for 12 hours, do it again Saturday night and do it again Sunday night. So for seven years to build back up, my wife did that sacrifice of no weekends for us as a family for seven years where she just worked those overnights just because there was a differential in pay and she could bring home extra money to get us out of this hole.

7:14And that's what allowed me to get to the next level. Sure, there were still more losses, but it allowed us to slowly climb out of that and get to a better place. Speaking of losses, what was the deal with real estate that Joel mentioned? 2008, it started here in the United States, and I think it probably hit the whole world. I had six properties. See, everything I had ever earned, and I know this sounds maybe like I'm exaggerating, but I'm not. Everything that I had ever earned went back into investments, whether it was in my own business that I had, starting new businesses, putting everything into the stock market, putting the majority into real estate.

7:53So I got to a point early 30s and I had six properties. And these weren't sort of, I thought I was being responsible. I wasn't putting in 5 % down payments. I never put less than 20 % down payments. I was putting big chunks of money, sometimes 33%, however much cash I could put down so that I could have a manageable payment. And I thought, well, that's responsible. And I'm not here aggressively trying to flip these properties. I'm holding these for the long haul. They'll appreciate in value. But what I did not know at the time, now I've changed my perspective on real estate investing, but what I did not realize is that I should have invested for cash flow.

8:31If a property is going to cost me$3 ,000 a month, I should have been collecting$4 ,000 a month in rent. Instead, I was taking losses every month on these properties thinking, it's okay. My income keeps rising in my businesses. The value of these homes continues to go up, I'll be fine. Well, when the economy crashes in 2007 because of Lehman Brothers disaster and people are buying less, I'm making less money. And when 2008 real estate crashes, well, no one wants to buy my homes. No one wants to rent my homes. You saw people moving back in with their parents. And just there was a low demand for real estate, especially where I'm located in Miami, Florida, where we took a massive crash.

9:12And here I was stuck with six mortgages, that's six property tax bills, six homeowners associations bills. And I had just lost a couple hundred thousand dollars on a women's apparel brand. So I was strapped. I was in trouble. And the way that I got through that, I'll tell you this, I kept paying the month. I thought I was a very responsible, moral, ethical person. So I just kept paying my mortgages. I couldn't rent these places out. And when I finally got tenants, I was way below my cost. But I said, I just got to do the right thing. I'll pay the bank every month. I'll pay my taxes. I paid everything for a year.

9:48And then I ran out of money. I literally got to under$10 ,000 a month, and that was not going to cover one more month. And I remember having that very difficult conversation with my wife and saying, we've got a perfect credit score, both you and I. We've been the most responsible people we know, and it's come to an end. They made the difficult decision to keep paying their mortgage, but not the others. They sold some of their properties at a big loss. Others got taken by the banks, who incidentally wouldn't speak to them about repossession until they'd missed payments, which is pretty nuts. So Joel and his family had to scrap again.

10:24Five years later, things were looking rosy. I was on top of the world. My men's apparel business was doing really well. And I was importing a brand from overseas that had zero representation in the US when I met them. And here, I grew them to a couple of million dollars a year in sales in the US. I got them to about another million dollars in Europe because I partnered with a distributor in Germany and he started covering all of Europe. I covered all of North America. And we just started steadily growing. We were all so happy. The owner of the brand, who was overseas, was very happy. We had a great relationship.

11:02We saw each other twice a year in Las Vegas at big industry trade shows where I'd run a booth. And he was always so proud. He's older than me. And he would always tell me, you know, you're kind of like my second son. You know, my first son is not interested in this business, but you are. You've always believed in it since that first order you placed with me of$2 ,000. And now here we are, you're buying over a million dollars a year from me every year and growing this. And things were fantastic until he visited my home. And him and his wife came and spent 10 days with us. And he saw how well I was doing.

11:36Not that I flaunt it, because I definitely keep a simple life. But he saw the flexibility in my life. He saw my warehouse. He saw my staff. He saw that I was living a dream life. And he went back home to his country after those 10 days at my house and told that son of his that was never interested in the business. He told him how well things were going for me. And that son immediately jumped into our space and started contacting my clients, both in Europe and then in the United States. And that was the most depressing moment of my life because I saw something I had built, something that was getting me close to a million dollars in net worth.

12:12I mean, I'm sorry, net income every year. I was really growing this thing. And I saw that going away. I literally saw parts of it go away. He took the European distribution immediately and I lost everything I had built there. So did my partner in Germany. And then they started attacking my US market and contacting my clients directly. I'll tell you, that was a low point in my life that impacted me tremendously. This was the toughest failure for Joel to take because it was personal. He'd been backstabbed by people he trusted. In the aftermath, Joel realized he'd been expendable in that business.

12:47He'd been a middleman between brands and retailers. He wasn't making the stuff, nor really selling it. So, in his next move, which led to his recent exit, he started building his own brands and buying websites so he could sell his brand's products directly to consumers. The margins became immense, and Joel today is basking. Why does Joel think he ultimately prevailed? Well, there was one reason, which is often overlooked and is often the difference maker for entrepreneurs who bootstrap. Something that wasn't a new lesson to me, but it solidified something I'd believed in from a very early age is the power of living well below your means.

13:29Because then on the other side, you could do some very big things. And what do I mean by that? When I decided to start my own brand here, I wasn't yet making very big money, but I was doing okay. But that very first brand, my first order with the factory was$80 ,000. And then I had to get a logo, buy a domain name. You know, I had to add on a lot of expenses. I had to ship these products in. I had to get racks for my warehouse. I had to hire new employees. So easily, it was an immediate investment of$100 ,000. Now, this is shortly after I lost all my real estate. I could not get a loan. I couldn't find anybody to loan me money, I'm sure.

14:10I didn't even try. And I also did not have to bring in partners. but because I lived as economically as possible and and had a few good months a good year two good years I saved up all that money despite having lost everything in real estate I got aggressive again on my savings it opened the door for me to go do the next thing because how many times have we not been in a situation where we say oh if only I had x amount of dollars I could take this opportunity I hear a lot of older people say if I knew then what I know now I would have bought that real estate, I would have opened that business, but I didn't have the discipline or the education to be responsible with my money.

14:48I got to tell you, every single time I get the opportunity to make an investment, I get reminded that being smart with money is a good thing. I've never heard anybody regret saving money and investing it, but I always hear regret for overdoing it and splurging and spending too much because it fails to give you those opportunities later. Real wisdom in there. Expenditure often rises to meet income, also known as lifestyle creep. You're going to have some failures, so making sure you can get up and swing again quickly afterwards is a key part of the entrepreneur toolkit.

15:29That was Joel Gandara on his favourite failure or failures. Thanks for listening to this episode. I've been your host, Dan Murray-Surter. If you liked this episode, please subscribe or follow us and leave a review. We love to hear what you think