To my relief the phone kept ringing into the year 2000. We had a person who answered phones at the front desk beg us to not send our next mailer because she was so stressed out answering the 20 incoming call lines we had at the time. BTW it would be wonderful if you would call and place an order with RAVE when you are finished reading this month’s reflection. RAVE had over 70 employees at the time. We were almost sitting on top of each other trying to figure where we could add five more.
Where was the news media in January-March of 2000? The economy/computer market was nothing but green lights. In April, it was as if someone just plain turned off the faucet. The Dot.com market crashed and our phones quit ringing. Worse, we started receiving bankruptcy notices from customers, notices that won’t get paid for what we did ship the month earlier.
We had formed a sister company in 1995, RAVE Financial Services (RFS). It received close to one million dollars in bankruptcy notices in the first 3 months following the dot.com crash and many other leases were at risk. RAVE Computer’s sales dropped almost 75%.
The banking industry labeled the tech industry as high risk and couldn’t distance themselves from RAVE fast enough. Our trusted banking partner, National Bank of Detroit (NBD), who loved our cash flow and profits and all the fees they had been charging us called us to let us know they were going to do an audit the next week. They started with RFS and found the bankruptcies. RFS had done well enough we were in a position that we self-funded several million dollars in leases that had nothing to do with the bank. RFS was taking losses on our investments the bank had not lost a penny. It didn’t matter; a week later we were told that they were being put into a “forbearance agreement.” In other words they were cancelling their line of credit and wanted to be paid on all outstanding loans within 90 days. Much of the loan money was out on multi year leases. They demanded that we sell off the leases to other parties at discounted prices even if they were at a loss to RFS. They were unreasonable from my perspective, even threatened to padlock the doors. What is still is most frustrating to me, not only did they get every penny of their money back we still had profits left over. Then the IRS starting calling to collect on unpaid taxes related to the bankruptcies. That finished off any profits we made, we had no choice at that point but to close RFS.
To make matters worse, NBD then notified us that they were also pulling our line of credit at RAVE Computer, and we had 120 days to pay them in full. The first thing they did is put a lien on all of our receivables and we had to get approval from them on any purchase or payment we made. The second was to discontinue any payments for services they did not consider essential. We were audited every week by a company they assigned who charged us ridiculous fees.
Thank God for a professional group that I had joined called TEC, which later became Vistage. Thecontacts that I made including the managing partner of an accounting firm who had great relationships with reasonable banks – who also became a good friend, along with my TEC chair. The accounting firm put together forecasts and proposed operating costs. The bank trusted their recommendations about RAVE and we paid off NBD.
All of this financial turmoil had come as a shock to me; the company had never lost money, never had a layoff, and only made money. By the time the dust settled RAVE was a new company, we went from 70 employees to 24 and had a whole new business plan. In retrospect, it was healthy that it had happened. I received the equivalent of a four-year degree in street smarts. Within one quarter we were profitable again. I am proud to say that RAVE was 13 years old then, and now we are in our 30th year. We did have another setback between then and now but that is another story.
So how did RAVE get into the Defense Industry? Next month.