Learning lessons when a small business goes under

— -- David Payne's sweets business went sour.

The South Florida entrepreneur had the culinary competency to create tasty, sprinkle-clad cookies and buttery caramel popcorn. He had a unique brand name — In-dulj — which is the phonetic spelling of indulge. And he had a small, treat-stocked shop at an indoor flea market.

What he didn't have: a steady customer base.

Slightly more than a year after launching his company, and a few months after he rented retail space in Port Richey, Fla., Payne couldn't keep up with expenses. As the snowbirds who flocked to Florida took off in spring, revenue fell.

"Sales were going up every weekend and things were doing well — up until the tourists left," he says. "Then business started dropping off."

Purchases by local residents didn't make up for the decline, and Payne soon realized he couldn't survive. He sold his baking equipment on Craigslist and closed up shop in March.

"It was heartbreaking," says Payne, who launched In-dulj Gourmet Sweets after being laid off from a public relations job in Atlanta. "To a certain degree I felt like a failure."

As he dealt with falling sales, a new opportunity arrived via e-mail: a PR-related newsletter listed an ideal job nearby. Payne applied and was hired. He closed the baking business on May 22 and began work at Fetching Communications three days later.

He's relieved that he can pay his bills — and harbors no bitter feelings. Exiting the business was painful, but Payne, 32, says he learned entrepreneurial skills along the way. He's also proud that he took a leap.

"I consider myself lucky to say that I gave this a shot," he says.

And he doesn't rule out a return to his baking business, even if it's years away.

"One day I hope to try it again, believe it or not," he says. "I haven't given up."

It can be devastating to give up on a business. But when financial problems, health issues or the day-to-day stress of running a firm get to be too much, many business owners have no choice but to pull the plug.

Small-business failure rates in the U.S. rose 40% from 2007 through 2010, according to a new report from Dun & Bradstreet. Even in non-recessionary times, about half of small firms fail in their first five years, according to data compiled by the Small Business Administration's Office of Advocacy.

Yet as many thwarted entrepreneurs have discovered, they typically have the strength and resilience to recover from their loss. Often, they're able to keep a wounded entrepreneurial spirit alive, and even nurse it back to health.

Of course, there are those who find it tough to move on. But many say that with some distance, perspective and support from friends and family, the sting eventually fades, and they can pull some life lessons from the wreckage.

First pain, then freedom

Jeff Liesener's 2007 was miserable. After 12 years of owning the professional development firm High Achievers Network, he had to lay off his longtime assistant, close down offices and pull money from savings to keep the business on life support.

Many of his seminar attendees were in the real estate and mortgage industries — hard hit during the economic downturn — and could no longer afford to attend.

Once, High Achievers Network had revenue of $1.2 million and 18 employees. But with revenue plummeting, Liesener had to cut his losses.

"It was a tremendously hard time," he says. "You get attached to something when you put a good part of your life into it."

He found someone to sublease his main office space in Phoenix, sold some business assets, and in 2008 worked from home while meeting final business obligations.

In 2007, he used the proceeds from the sale of a rental house along with his credit cards to help meet bills. By 2008, without office rent or employees to pay, he was able to make a slight profit, pay down the credit card debt and get financially stable.

"We've always kept our lifestyle in check," he says. "Our cars are paid for, we have a low mortgage on our house, so that was a big help as well."

He still had to deal with the stress of closing the business, but he was able to spend more time with his wife and two young children, as well as consider what his next professional chapter would hold.

"It's hard to find personal joy in your life, your family and other things when you have a big black cloud over you," he says of 2007. "But 2008 was a fun year, a freeing year."

Liesener, 42, decided to team up with a friend who began meal-delivery service Topline Foods. The firm brings all-natural and organic foods to health-conscious folks in the Phoenix area.

With this venture, he plans to avoid the bumpy path that he's already gone down. A food-related firm, Liesener hopes, isn't as apt to sink during an economic downturn.

"The seminar business was tremendously dependent on the economy," he says. "So I wanted to look at something that was more recession-proof."

He learned what he didn't want in a business, as well as a larger life lesson: Even when things look incredibly bleak, "There is hope," he says.

After going through such a rough loss, Liesener still has worries. "My biggest concern is 'What if this doesn't work?'" he says.

But he knows that if the new business falters, he'll be able to steady himself again.

He's done it before.

"Things work out," he says. "There's a light at the end of the tunnel."

Entrepreneurial skills

That light is difficult to see when a business owner has scared employees, overdue bills and creditors calling.

"There is such emotion evolved" when a firm begins to falter, says Jim Martin, managing partner at financial restructuring firm ACM Capital Partners.

"By hook or crook, (the owners) got to this point, and it's hard to face the fact that they're not going to make it," he says.

While money, equipment and office space can vanish when a business goes under, owners still have one element that can transfer to another job: entrepreneurial acumen.

In his new venture, Liesener says, he's using the accounting and management skills that he honed at High Achievers Network.

"You can do something entirely different and make a new life with the skills that you learned — it's just a new way to apply them," he says. "They are transferable."

Valuable employees

And those skills don't necessarily have to transfer to another entrepreneurial venture. The tenacity and self-sufficiency that comes with starting a business can also be seen as an asset by those looking to hire.

Fetching Communications client services manager Liz Lindley says Payne's entrepreneurial experience helps him relate to the needs of their small-business clients. When she interviewed the In-dulj founder for his job, she was also impressed with his drive.

Even though his baking business didn't work out, "It shows creativity, initiative and leadership" that he launched his own firm, she says.

Mimi Fix used the skills she learned while running a bake shop in myriad other positions, such as doing research and development for the Little Debbie Snacks brand.

But she eventually returned to the entrepreneurial path.

Earlier in her career, she started a baking business from scratch, growing from her home kitchen to a firm with nearly 20 employees.

When her police sergeant spouse retired, the duo moved south to Chattanooga, Tenn., and opened a bakery there. But her husband, David, didn't have the temperament for self-employment, Fix says.

"I eventually understood that if we didn't sell our business we would either divorce or kill each other," she says.

Fix, 61, held a few corporate jobs after selling the shop and earned a master's degree in food studies. But she's now back to being an entrepreneur, running a consultancy called BakingFix.

"I've stayed in the same industry, but I've remade myself," she says. "I teach people both the business aspects of how to run a food business and the baking aspects of how to turn your kitchen into a commercial bakery."

She misses her bake shop but knew that to maintain a strong relationship with her other love — her husband — it had to go.

"I learned how to channel that (baking) love into other forms," she says.

"There's life after a business ends. You just have to find your own inner way for dealing with it."

Tips for making the transition when a business doesn't work out:

•Mourn the loss, then move on. After permanently injuring her left hand, it was hard for Lisa Rodgers to make her Cactus & Ivy bath-and-body products. After spilling oil over labels she was about to apply, she realized it was time to do something else.

She let herself feel bad about ending her 11-year-old business, but didn't ruminate.

"Give yourself the opportunity to grieve over the fact that you've had to close a business that you love," she says. "But also celebrate in the fact that there are probably other things in your life that you can explore."

Rodgers, who now runs a photography business, "had no clue" about what she was going to do after closing Cactus & Ivy in April. But she had faith that another opportunity would arise. "Some people think it's holding on that makes one strong — sometimes it's letting go," she said in a blog post announcing her decision to close.

•Seize unexpected opportunities. Rodgers, 44, received rave reviews about the photos she posted on Facebook. But her first business opportunity wasn't snapping a family portrait or birthday celebration — it was shooting raw meat. A local chicken-processing plant needed pictures for its sales catalog.

Rodgers set up flattering lighting for the thighs, legs, wings and breasts, and edited the photos with care. She delivered the pictures before the deadline and created a strong business reputation in the process. "I never thought that this would be a full-time gig," she says. "But here it is."

•Finish up strong. Although both Rodgers and Liesener knew their businesses were coming to an end, they continued to meet client needs, even if it meant spending extra time and money.

"Do the right thing," Liesener says. When a business is going down, there's a tendency to take shortcuts to save cash, he says. But he wanted to make sure that his clients were satisfied to the very end.

"Relationships are key," he says. "Don't burn bridges, even when you're scrambling."

•Do some self-analysis. Before jumping to the next venture, consider who you are as a worker and what you want from your professional life, says Craig Libis, CEO of Executive Recruiting Consultants.

Professional advisers, such as a recruiter or career coach, can help. Some hiring managers may believe that a small-business owner is "a lone dog who is not used to people telling them what to do," Libis says. So entrepreneurs who want to join the corporate ranks may need coaching on how to present themselves as a team player.

As for Rodgers, it was her gut that gave her advice. It told her to stay on an entrepreneurial road. "I've been my own boss for close to 11 years," she says. "I know for a fact I would make a terrible employee, just because I've been doing my own thing for so long."