Matt Russo ’90 discusses with Cash Flow Issues
In this eClips interview Matt Russo talks about cash flow issues in his first year of business. It was a wild ride that almost left him homeless. Read his story or watch his video in eClips.
When I started my business with Northwestern Mutual, it was truly entrepreneur… there was no base, no salary, there was nothing. I went through their training program and I had the capacity to represent their products. So things like office space, things like staff, computers, anything that you would need to get started I needed. I had $3000 in the bank when I started.
So there was a tremendous sense of urgency. Here’s what happened. My first month in the business, I made $13,000 and I remember calling my dad up and saying, that advice about quitting the wine business, that was great. I said I made $13,000 my first month, I don’t even know what I’m doing yet, I think I’d probably make a half a million dollars within the next four months once I figure this thing out. And like a dummy I went and bought a four-bedroom house, I bought a Mercedes, 560 SEL, I took on two offices. I got a full time staff person, I bought two computers, a copy machine, the printer, everything and my second month in the business, I lost $3000.
In my third month in the business I made zero and I remember by the end of my first year in the business I had 13 credit cards that were maxed out. I had $47,000 in credit card bills and I was using those to pay staff and just to do whatever I could do keep the deal afloat.
I would go out for lunch and when you’re talking to people about their financial situation, your credit card can’t come back unaccepted right, and I would meet with somebody, we’d be having lunch and I would always get a cup of soup because it was the cheapest thing, cup of soup and water. I would say, because I’m asking you so many questions, I don’t have time to eat.
As soon as we would order, I would go and find the waiter or waitress and I would take out this stack of 13 credit cards with the rubber band around them and I’d say, hey listen, I know most of these are gonna get declined. You can’t come to the table and tell me that the card got declined; I’m in a really important meeting. Find the one that goes through, I’ll give you a great tip but please don’t embarrass me and that was my first year in the business.
I remember one Friday, I made payroll, I had $1.18 left in my bank account, I’m sitting in the office with my assistant. We’re celebrating by having a glass of wine, the phone rings and it was RMBG Mortgage Company and they said, Mr. Russo, this is RMBG Mortgage Company. I said, hey, I’ve got my mortgage with you guys and they said, we know. We’re calling to tell you that we need to foreclose on your house and I said, why?! ‘Cause you haven’t paid the mortgage in two months. I fibbed, I lied and I said, I can’t believe… you’re embarrassing me with this. I sent those checks out, you lost them… you find those checks and I bought myself a week and I managed to come up with enough money to keep them off of my back for a while. But that’s what it was like in the first year.
I stayed in that house for ten years, much longer than I needed to. I could have bought a much nicer house. I owned that house when I couldn’t afford that house. Even after we sold that house, for six months after we sold that house, I sat in my neighbor’s driveway in my car and I missed that house because we had that house and we did everything we could to hold on to that house because we couldn’t afford that house. That was the first year in the business.