How To Go Broke With Billions – The Sears Story

David Mulvaney Uncategorized Leave a Comment

We’ve all heard the news lately. Sears was looking to get bought out for over 4 billion but no one took the bait so now they will get chopped up and liquidated. Sears, out of business. Who would have thought? Let’s look at basic numbers first so we can make an assessment based in reality. In 2017 Sears had gross sales over 22 billion and a gross profit of 4.69 billion. Sears was seeking a buyout somewhere in the area of 2017 gross profit, around 4.7 billion. But with nearly 4.7 billion in income they had expenses of 6.29 billion.

I will do everything in my power not to cuss right now but who the hell runs these companies? These geniuses think that somehow it’s ok to run a company at 1.6 billion dollars in the hole. Do you see the problem yet? Sears opened in 1893. They had everything they would ever need to stay in business forever if the idiots that ran them had avoided the two things that cause business failure.

Lack of sales.

Too much debt.

Sears had the sales.

Sears had a gross profit of 4.69 billion per year. Do you understand how much money that is? A million dollars stacks to 18 inches if it’s all hundred dollar bills. A billion dollars stacks 1,000 times that. That’s 1500 feet tall. Over a hundred stories. Are you getting the picture. How the heck to you go broke with that much income?


The only way to go broke with the kind of income they had is too much debt. Sure, they might categorize it on a balance sheet as expenses but basically they agreed to pay people money and their geniuses refer to it as “overhead”. Lots of items fall under overhead but the big one for Sears was rent.

Many years ago Sears should have been purchasing cash flowing assets including all of the real estate that their stores are in. In fact they were. But as time went along Sears, through bad management, got so far in the hole that they began to sell off their most valuable assets including their flagship brand Craftsman.

For the life of me I do not understand how anyone on the planet with any basic knowledge of economics would sell off all of the assets that are making you money and keep the ones that are dragging you down. This is what is wrong with Wall Street.

The formula to a winning business is simple.

You need an endless supply of prospects that turn into profitable customers. You take a portion of those profits and pay owners and eliminate debt. Once all debt is eliminated you build reserves. Once large reserves are built you purchase cash flowing assets. You repeat until your assets are the main producer of income.

This isn’t rocket science. That is the formula for success in any business. So whether you just started in business today or whether you have been in business for 20 years that is the path. If you are not on the path it isn’t hard to get back to it if you are willing to take action.

I don’t know if Sears can be saved. Here’s the problem. They are in quicksand, meaning they are in a downward spiral and getting out of it can be nearly impossible. I know firsthand, I went through it myself. Perhaps this is why it’s so clear to me why Sears is failing. They did just a few things wrong and it sank a 125 year old company. It sank my 17 year old company.

I rebuilt, which is what entrepreneurs do, but the experience it gave me was amazing. Not fun, but amazing, eye opening and one of the best learning experiences any entrepreneur can have. How to go broke and start over. I was hard headed. I assumed that I would be different. But like the people who think socialism will work if they just do it right, I thought I could handle the debt load we were operating with because sales were good. I was wrong and a very successful twenty year old manufacturing company I created died. Sears was wrong and it sank a 125 year old company. We did a lot of things right for years but I made some wrong decisions over a 10 year period and the debt burden became too much and my company was dead.

The good thing about an experience like that is you don’t have to go through it to learn from it. I can look at Sears and learn from their mistakes and so can you. You can learn from the mistakes of others and if you are willing to, it can make you millions. I can honestly say I have spent millions on my education. I used that education to not only get my life and money back better than ever but to help others do the same. I want to help prevent others from making the two big mistakes, lack of sales, too much debt.

If you are concerned about your business I have good news. You don’t have to end up like Sears. You can follow a simple plan to prosperity but it starts with you taking the first step. The first step is understanding that you need to change and have someone you can talk to and bounce your ideas off them. You need someone to guide you. You are the entrepreneur but you don’t need to be alone. If you don’t seek my help seek someone’s help. There is lots of room at the top but the heap of failures is far bigger. Don’t be a Sears, do something now.

To your lifelong prosperity,

David Mulvaney

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