How Southern NetworX Has Avoided Financial Over-Leveraging

Dollar SignThe business philosophy followed by Southern NetworX is somewhat different than those followed by most small businesses. Jeremy Anderson (CEO) and Michael Petri (CTO) have similar backgrounds in technology, and both have worked for a few companies in the past that might have had a good thing going (as far as products/services offered) but ended up failing due to poor management at top levels. This is something we strive hard to avoid at SNX.

The problem is actually quite simple, and it translates from the routine of our everyday lives and how we do things nowadays vs. how things used to be done in the past. Starting and growing a business has always been a big part of the “American Dream,” and entrepreneurs continue to pursue that dream every day. Unfortunately, a huge number of start-up companies fail very quickly and many fail much later while seemingly doing so well. According to the U.S. Small Business Administration, over 50% of small businesses fail within the first five years. Why?

We believe a large part of this is due to the fundamental change that has occurred in the way people choose to financially fund and develop their businesses. Without a doubt, technological development over the past couple of decades has made us more connected than ever. The Internet has allowed us to gain access to information and data like never before, and it’s made us more productive in so many ways, so why are so many businesses failing? Some would argue that the same technology that has connected us and made information so easily accessible has also made us much more short-sighted, and infinitely reliant on instant gratification. This is especially true when it comes to funding our business ventures.

So, what does all of this mean for a small business? Here’s an example of how things used to work, vs. our current “have it all now” model that provides us with instant gratification:

1960’s: A small mom-n-pop auto repair shop in a small town has no other franchises, no debt, and is considered profitable. They keep their books in the black and enjoy life.

Today: Same business scenario in today’s economy would be considered unsuccessful unless they can now open 20 new franchises in neighboring towns, all within the first 12 months of start-up, on borrowed money, from banks or investors or what have you. This means that while the single repair shop may have started back in the ’60s and continued to be profitable and self-sustaining decades later, the same shop started today, using the wrong mentality, could easily over-reach too soon while at the same time being financially over-leveraged and end up having to close its doors because it can’t pay its bills.

Jeremy and Michael have witnessed too many of the companies that they used to work for go under, either going from true profitability to loss (due to waste) or never being profitable at all and only surviving because of investor funding, which was all based on promises to the investors that there was some magical return on their investment in the very near future.

At Southern Networx, what we have tried to do is learn from all these different failed companies and build ours based on what we would have done differently. The main thing that we always took away from the past experiences is this: to make sure that the company is always self-funded. At SNX we are not dependent on outside funding, which means that we do not answer to any investors or any other outside parties who may NOT have the company’s best interests in mind. This allows us to make our own decisions as to which direction the company goes, and allow us to ensure its survival and profitability.  Thus far, it has worked beautifully.

What businesses do you know of that have used financial over-leveraging to start out? Has it worked for them, or have they ended up closing their doors?

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One thought on “How Southern NetworX Has Avoided Financial Over-Leveraging”

  1. Great piece. Always know interest rates and pay as u go inur personal affairs. Much the same as business, don’t over extend ur debt!!

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