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Risk and Reward – The Bargain of Business and Bankruptcy

When you start your own business, part of the implicit bargain is that you’re going to take a risk in exchange for the possibility of making a fortune.

It’s one major reason why so many people don’t start a business – they can’t handle the risk of loss.

Those who do take the leap understand that if the venture goes south, they’ve got the opportunity to do what the capitalist system allows – they cut their losses, file for bankruptcy, and move onto the next big thing.

That’s what Halsey Minor, founder of CNET did. But when the chips were down, he filed for bankruptcy. What’s the lesson for the small business owner?

A Grand Opportunity

CNET was launched in 1994 as a production company for television programs dealing with the then-nascent technology industry.  Riding the wave of the technology boom, CNET became a one-stop source for tech news and information, eventually expanding into radio and a series of web properties.

Those web properties are familiar to those who download software online (download.com) and look for the latest information about cutting edge technology. Some of the now-valuable domain named owned by CNET were:

  • download.com
  • downloads.com
  • upload.com
  • news.com
  • search.com
  • TV.com
  • mp3.com
  • chat.com
  • computers.com
  • help.com
  • shopper.com
  • radio.com

In 2008, CNET was bought by CBS Corporation  for $1.8 billion.  And with that sale, Halsey Minor did what every entrepreneur dreams of.

He cashed out.

Waking Up From The American Dream

From there, Minor embarked on a series of business transactions. He bought art. He bought real estate. He invested in companies such as Grand Central, the precursor to Google Voice.

Some made money (Grand Central was a big win) and others lost money (the real estate venture was a notable bust).

In the end, Minor was left with $100 million in debt and only $50 in assets.

The Bankruptcy Bargain

Minor chose to file for Chapter 7 bankruptcy, turning over his assets in exchange for a discharge of his debts.

For the American business person, it’s a fair trade: you gamble with the house’s money and, if you lose, you cash in your chips.

Minor clearly realizes this, and says, “if you win some you are going to lose some too.”

It’s no cavalier attitude, despite what the press may think. It’s the reality of the business world. You bet, you lose, you go home.

But that’s not the full story.

In the time after you begin your business dealings and before you file for bankruptcy, you employ people to help realize your dream. You pay them money and they, in turn, spend that money back into the economy.

That doesn’t make it easy or fun for the person filing for bankruptcy, of course. Losing hurts, after all.

You lose your business, your belongings, and a piece of your ego. It’s a harsh price to pay, but a fair one.

That’s What Makes The Country Move Forward

Without bankruptcy as a means for the business person to cut their losses, no risk or innovation happens.

The guy with the great idea doesn’t take a chance because he knows that if he loses, he’s got nowhere to turn.

That new technology never sees the light of day because nobody’s willing to put their neck on the line.

Those employees are never hired. They never buy homes and cars.

The wheels of commerce grind to a halt.

Next time you see a business fail, think about all the good that came out of it before the fall.

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By |June 3rd, 2013|

About the Author:

I’ve been a consumer protection lawyer since 1995, working to help people end their bill problems. I’m a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.

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