*** Entire story and pictures are in the first post now. ***
I've decided to document publicly the history of my partnership, Pincher Processing LLC. Pincher was the first company in the USA to commercially sort and remarket brass cents (to my knowledge). BTW, I call them brass cents because that is their alloy -- 95% copper and 5% zinc. This is the highest grade of brass. Copper does not have stable characteristics when pure, so the alloy is necessary especially for circulation coinage.
In early 2006 coinflation was reporting that brass cents were worth about $0.025 each. This got me thinking about a process to sort them commercially. Because the brass cents weigh 3.1 grams and the zinc cents weigh 2.5 grams I chased the idea of using gravity for some sort of mechanical separation. I abandoned this idea because any such machine would be too tedious and slow.
About this same time Ryedale began developing his sorter and I watched with great anticipation his demonstration videos. I started crunching numbers to determine the ideal scale for my business. Originally I anticipated frequent trips to all of the local banks to retrieve their full penny bags at face value and to return for deposit the zinc cents after sorting. I envisioned a row of 12-20+ Ryedale sorters in my garage at which I would spend a couple hours per day feeding them with a bucket of pennies and a scoop. At this scale the numbers didn't work out to make it profitable enough. Also, the supply side was just too thin.
So I started thinking about commercial sorters because of their ability to process large amounts of coin automatically. I was thinking about modifying a sorter and blending it with the insides of a Ryedale sorter. I had contacted several companies to get volume specs on their machines, and my lucky break came in the form of a phone call from a De La Rue salesman one day when my family and I were eating lunch at A&W in Berthoud, CO.
After explaining that my goal was to use the machine purely for the purpose of processing pennies (I didn't say anything about sorting for metal content), he said, "Ya know, I've been talking to another guy in Philadelphia who wants to use one of our machines to separate out the copper pennies."
*** (jaw hits the floor) ***
Me: "Can your machine do that?"
Him: "Well, we have this machine, the Mach 9CDE (stands for "Coin Detection Euro"), that was designed for European banks to be able to off-sort anything that isn't a Euro coin. It uses conductivity to test the alloy of the coin and rejects anything that isn't within a certain range of tolerances."
Me: "How many coins per second can be processed?"
Him: "Well, it is a bit slower with the coin-detection feature on, but I think it will do 50 coins per second."
Me: "How much?"
Him: "It is an expensive machine."
Me: "How much?"
Him: "Are you sitting down?"
Me: "I will if you want me to, but HOW MUCH?"
Me: "How soon can I have one?"
In my mind I had already calculated that processing at that volume the machine would be paid for in ONE WEEK... or a month in worst case.
Once I knew I had the equipment to do the job I knew I had to have a few things:
First, I needed a partner. I was pastoring High Plains Independent Baptist Church in Milliken, CO, at the time (a church I started from nothing). My idea was to pastor full-time and have Pincher Processing on the side to supplement much-needed income. I wanted a partner who would actually do all of the manual labor (sorting and maintenance) while I managed the business side of things. I had a friend who was a fellow investor and an appreciator of precious metals. I sat down with him and we made a deal that we would both loan Pincher Processing LLC $10,000 of our personal capital. I offered him 25% of the business, but instead he opted to use his $10,000 infusement as a purchase rather than a loan in favor of a 30% stake in the company. He is a great friend to this day, and we still talk about this fantastic adventure.
Next, I needed a coin supply. A HUGE coin supply. According to my calculations we could process about $12,000 per day, or $60,000 per week with one machine. So I put some phone calls out to the Denver area armored car services. I was invited to meet with Mark (director of coin sorting) at Brinks in Denver. He gave me a tour of their facility, then proceeded to tell me that they had more coins than they could get rid of because they processed everything from Coinstar (the green machines in grocery stores, etc.).
Great! I'll take the pennies! Not so fast... Brinks doesn't actually own any of the coin. They facilitate coin deposits for banks. They are a vault service, and ONLY BANKS are allowed to actually "own" the coin processed by Brinks. This presented a challenge. In fact, when we finally started processing we were the only bank customer allowed to drive our trailer into the brinks facility and pick up coin directly.
Mark at Brinks explained that Coinstar deposited all of their coins with US Bank. This left me no option but to approach US Bank. I needed $60,000 in pennies per week. It was an unusual request, and it was elevated to the upper levels of their corporation (the dark under-belly of slimy US banking). At first they were really unsure if they wanted to do business with me. They were worried about their reputation if word got out that they were helping someone destroy pennies. Eventually they presented me with an offer that included fees that were outrageous -- $6,000 per month in deposit and withdrawal fees. All this IN SPITE OF THE FACT that we were providing them a service by returning the zinc cents bagged in official bags for deposit at the Federal Reserve bank at our own cost! What could we do? And they knew it.
If I could have I would have gone straight to Coinstar, and I tried. But unfortunately I needed the pennies sorted out of all of the coins, and Brinks did that on behalf of their customer, US Bank.
US Bank set us up with a vault account where I would call in every night to order the coins I wanted to pick up the next day. We made a contract with Brinks that permitted us to back our trailer (20' gooseneck) into their loading bay to receive $12,000 in pennies (4 bulk bags on steel skids). We built custom bracing on our deck to receive and lock down the feet of these steel skids, and it proved tricky to set them on their precisely at first, but eventually it became doable. Brinks had told us that the entire process of off-loading, reloading, and strapping the load had to be done in 15 minutes. This was the most stressful part of every day. I had to back that 20' trailer up a ramp and through a single garage door into pitch dark while Mark stood guard with pistol in hand. It took me a while to get that right on the first try.
I had a partner; we had a machine; we had a coin supply. We just needed someone to buy all of our brass cents.
Our testing had shown that we could yield at least 25% on our sorting. This would mean in a typical week we could do a little better than 4 tons of brass cents. Who needs 4 tons of brass per week in the form of pennies?
My research led me to Casper, Wyoming, and a foundry called Ex-Cal. It was (and maybe still is) owned by two brothers who moved the company out of California to get away from all of the taxes and regulation. They were older successful men, and very intrigued by us young'uns who had the gaul to try to do what we were doing. We had an appointment for a presentation. I made up a Powerpoint and my partner joined me for a road trip from Fort Collins, CO to Casper, WY.
The plant manager, Joe, proved to be our advocate, and really gave us a hand up. The presentation went well, but they balked when I said I wanted 92% of the melt value. They came back at 85%, and so we had a deal. We agreed to deliver a 1 ton sample as soon as possible so they could do a test melt. They were hoping to be able to melt it down and use it directly in their castings in place of the very expensive high-brass alloy they were buying. In the end this proved to be impossible because too much of the zinc evaporated in process, and they were not set up to do professional smelting. Instead, they started sending it to a smelter and were acting like a middle man. Joe came to us after a short period and introduced us directly to their smelter, but I'll save that part of the story for later.
De La Rue sent us a Mach 9 CDE for $12,500, and it was quite the day when we got it into our newly rented warehouse! (Later we would add a second machine for redundant sorting to guarantee purity.) I had picked up a sample bag of pennies from the local bank, and we set to work trying to program the alloys. This proved to be quite challenging. De La Rue did NOT want to give us ANY information about the programming of the machine. From their perspective only their techs should have access to the programming.
Under our service contract we had techs out several times, and finally one of the techs gave us the secret button sequence to access the programming menus. Later he also let us look at the technical manual (TOP SECRET according to De La Rue) and he also showed us how to flash the Bios with jumpers on the board. This became necessary because the dust from the coins would short circuit the board and freak the entire machine out. De La Rue sold us a $100 exploded diagram of the machine with part numbers.
The only part that failed on us continually (think every two weaks) was the rotating solenoid that would "eject" coins that didn't meet with the programming specifications. Those little pennies would actually wear a groove right through the steel to the point that they would slide past without being ejected. We could tell when our yield suddenly dropped off. Eventually we bought a second solenoid ($125) and would rotate the two in and out every couple weeks to have them fill welded. The repair shop was giving us the hardest Rockwell they could without making the part brittle, and they were quite surprised at how quickly we were wearing through it. Oh well, it was part of the maintenance. We paid $40 per repair and just made swapping it part of the plan.
It was this very problem that brought me together with our Philadelphia competition over the phone. The name of the place was Antares Metals, and they started operations a couple months after we were rolling. From what I heard, they started on a larger scale that we did (5 machines), but they had a larger supply source. The salesman from De La Rue asked if he could give them my number because they were having this problem. When I got the call I didn't give out much... any... information. I figured we each had to solve our own problems. That's business.
Additionally, we discovered that the duty cycle was about 45 minutes. Eventually the sensor would load up with dirt and short out causing ALL coins to be ejected. This would contaminate our product and cause for tedious hand picking them out of the box. This could be prevented by disassembling the entire machine and cleaning the sorting disks with 409 every hour. We could do this in 15 minutes, so the machine would run for 45 minutes every hour.
Back to the business side of things. When we first started sorting we didn't know about "the float." This is the difference (in time) between the recording of a withdrawal and the recording of a deposit. Come to find out, US Bank would debit our account the day before we picked up the coins ($12,000 per day) and would credit our account for the coins we returned 2 days after they were returned. This made for a 3 day float. When we first started up things spiralled downward quickly -- at one point our checking account was overdrawn by $60,000! They worked with us on this until we could get the cash flow balance out. Just another way the banks take advantage of you.
Our yields were consistently 27.5% brass. We had just enough supply to run $60k-$75k. Every morning I would take my Dodge 1 ton and goose neck trailer and back it into Brinks. Mark would unload the zinc pennies I was returning (less than 3 skids) stacked with $3,500 of pennies in sealed $50 bags. All of the bags were stamped "Pincher Processing" and bagged according to Federal Reserve Policy -- because that was where they were being transferred. Then Mark would put 4 steel skids with $3,000 bulk material handling bags onto the trailer (@ 4 tons), and I would strap them down.
Later Mark told us that the Federal Reserve accused us of trying to cheat them because the skid weights were about 200 pounds less than they should be for $3,500 in pennies (IIRC). He actually had to break open our bags and count them for the Fed to prove that we had counted them correctly. The difference was merely that they were all zinc cents instead of 75/25.
Brinks was nice enough to give us a large hopper with a sliding door on the bottom to feed our machine. You can see in the pictures above that we set the hopper on custom made legs that locked into the steel skid onto which we set our primary sorting machine. We would have to lift a $3,000 bulk bag by the straps with the forklift, and untie the shoot in the bottom of it to fill the hopper. Then the hopper would have to be CAREFULLY set on top of our sorting stand. This was tedious for a while until we got a feel for it. Only twice did we actually spill a ton of pennies on the floor (literarlly). You have no idea how hard it is to pick them up.
Friday was pay day. After returning from Brinks I would unload the new coins for sorting and load my trailer with 4 tons of brass cents and start the haul to Casper, WY. The truck had to be registered with the DOT and I had to have a commercial license. This meant all of the pain of driver logs and weigh stations as well as the port of entry into Wyoming. I was always a little leary of getting snoopy Troopers at the port of entry, but my biggest problem came from a local Sheriff -- think Roscoe P. Coltrain.
I was cruising along merrily with the truck pegged to the speed limit when I see a very angry cop in an SUV next to my truck with lights blazing and emphatically gesturing for me to pull over. He came to the window and said, "I WAS FOLLOWING YOU FOR 2 MILES! WHAT TOOK YOU SO LONG TO PULL OVER!" Honestly -- it was the middle of the prairie in Wyoming, I was listening to Rush Windbag on the radio, and I had no visibility out my back window because of the trailer. There was no traffic, so I hadn't been watching my side mirrors. Anyway, he calmed down and told me to take my rig to the next exit.
All he wanted was to do a standard DOT inspection, but there is a problem. Actually many problems. This is my second load I'm hauling to Casper, and I DESPERATELY need to get my $25,000 pay check into the Casper US Bank before 3:00 p.m. in order to have enough cash to order coin for Monday. I was already running down to the wire, and this guy decides to give me a 45 minute rectal exam. In the end he told me that he found 3 major violations that give him the right to shut me down, BUT... out of the goodness of his heart, and seeing that we were brand spanking new to this he gave me a "fix it" list and sent me on my way. With his ego well-fed I was back on the road. I got to US Bank at 3:45 p.m, but one blessed cashier hadn't yet closed out her drawer for the day!
Dealing with the Federal Reserve we hit a few roadblocks also. Come to find out, they would only keep $100,000 in pennies on hand. If they already had that much then they wouldn't take our pennies and we would have to stockpile them and wait to return them. It was a real pain, and hard on the float, but at that point were were revolving a much larger cash flow, so we could handle it.
Joe at Ex-Cal called me and said he had someone who wanted to meet me. It was the owner of the smelter the got their stock from. Joe brought him down from Casper, and we had breakfast together at Johnson's Corner on Interstate 25 at Johnstown, CO. He waxed eloquent about his fabulous business success and immense marketing connections. He talked about bygone days when he had been involved in off-sorting and melting Canadian silver quarters. He told lots of stories. Lots. In the end he said, "Why don't you guys come out to California and we'll talk about partnering." Joe was handing us off. He really had our best interest in mind and felt that we could have better success without him in the middle.
My partner and I, along with our attorney and accountant, took a day trip from Denver to LA and back that night. We toured the facility, heard a lot more stories, and wondered where it was all going. Basically, he wanted a 50/50 partnership. He would put up the capital ($11,000,000 line of credit with US Bank to which we had direct access), and he would be grinding up the coins and shipping them around the world as a working alloy. So we started hammering out a joint venture agreement. We made several drafts and e-mailed them to him, but he wouldn't commit. He wanted to split the proceeds (the difference between face and intrinsic value) 50/50, but we demanded that the PROFIT be split after our operating costs were factored in. Here the story gets sticky.
I got into a bind with my truck. I had purchased a 2003 Dodge Cummins truck with remaining factory warranty on it, and within the first few weeks I noticed that it was down 8 quarts of oil! It seemed to be running OK, but I was noticing oil spray on my trailer. After shutting down for a week to have Dodge to the repairs I was informed that it needed a new engine. Fine. It's under warranty. The new engine came in, and the day they were going to install it a rep from corporate came into the shop and told them that it wouldn't be covered. According to them it "failed due to neglect." They said it was run without an air filter (sand blasting on the turbo showed this). I said it didn't matter, but the filter in the truck had been installed by the dealer from whom I bought it UNDER WARRANTY. Long story short, they wouldn't cover it, so I had them put the truck back together, but its days were numbered.
Anyway, it was about this time I was trying to get the guy in CA nailed down on a Joint Venture agreement that my truck died. All of a sudden we need a lot more capital than we had on hand. We need to start taking delivery from Brinks of $75,000 semi-truck loads. We also needed to start sending $75,000 truck loads each week to California. We needed Tim and his $11,000,000 line of credit. So I started doing business without anything besides e-mails in writing. Bad move.
When the zinc cents hit $0.011 we decided to melt ALL of the pennies down. Even though we would take a slight loss on the value of the metal we ended up saving several thousand dollars per month in bank fees by not returning them.
We only sent 5 truck loads before my SHTF. But we hadn't been paid for any of those loads. We had withdrawn the supply coin from his line of credit. We had also paid our expenses from his line of credit. Over the phone he had said that he was going to cut us a check after year end. He even sent me a stack of papers from his receiving department showing the total weight of the shipments as well as the LME going price when they were received.
I'll never forget 12/14/06. It was 6:00 a.m. and I was laying in bed after my alarm had gone off. My phone rang, and it was my attorney, Kelly. She said that she was watching Bloomberg and just saw that the director of the US Mint, Ed Moy, had issued a formal ban on the "treatment, melting, and export" of US pennies and nickels. I hung up the phone and told my wife, "It's all over."
We had just bought a 5-acre farm near Johnstown, CO, and were selling a house in Fort Collins, CO. In other words, we "owned" 2 houses (actually, we owned 4 mortgages). I can't describe the sick feeling I had in the pit of my stomach.
Then the phone rang again. This time it was my friend from De La Rue.
Him: "Did you hear the news?!"
Me: "Yeah, sounds like were done."
Him: "No, did you hear about Antares Metals?"
Him: "Federal agents showed up there this morning to close them down and send everyone home."
Great. Not what I wanted to deal with at that moment. It was only 6:30 a.m. in Colorado, and my partner wouldn't be at the shop until 7:00 a.m. I called him -- he was on the road. I told him to turn around and go home. We didn't want to have to talk to big brother.
I really hadn't seen it coming. We had talked about the fact that it would likely be made illegal in the future, but we had done our homework and knew that we were engaged in legal enterprise. We suspected that congress would learn about us, Antares, and others and pass a law banning the melting of coins. But knowing how congress moves we estimated that we would have at least 6 months from rumor to law. What we DIDN'T KNOW was that in the early 1970s, as a rider on some bill during the last inflationary scare, congress had already given permission to the director of the US Mint to ban the export and destruction (chopping, melting, whatever) of any US coins at any time without prior notice.
Bam. We were blind-sided. Up to that point my greatest fear was a collapse in copper prices. In fact, we had talked about hedging using COMEX contracts to lock in our prices for the near future.
Later that fateful day (12/14) my partner and I got together to talk over our options. We had downloaded the official text of the edict by Ed Moy (http://www.usmint.gov/pressroom/inde...release&ID=724).
Our first plan of action was to reason with the Mint (ha!). I explained how that we WERE NOT negatively affecting the amount of pennies in circulation because often the Federal Reserve would turn us away because of a surplus. They replied that it may be the case in Denver, but other places like San Diego had a coin shortage. I said that we would gladly help them alleviate shortages throughout the nation by sending our zinc cents to the Federal Reserve Bank that most needed them. That got nowhere (it made too much sense). Finally I suggested that we should partner with the mint to cull out the brass cents and replace them with zinc/steel cents. THEY would get the metal value of the copper pennies and we would just charge them a fee for sorting. Their response? "That isn't how it works. First congress has to come up with the idea, pass a bill authorizing us to do so, then shop for bids officially." Bureaucracy.
My next plan was to argue with the Mint (just because I wanted to). I told them that the reason the Constitution specified that only gold and silver should be used for coins is that the underlying assumption is that the person who owns the coin owns the metal in the coin. GET THIS, GIM... UNDERSTAND IT CLEARLY... they responded, "The bearer of the coin is entitled to the face value that the coin conveys, but the actual coin is the property of the US Treasury, issued by the mint to facilitate commerce." In other words, that handful of coins in your pocket? It belongs to THEM as an instrument of exchange, and you merely have the right to exchange it at face value in the marketplace. How does that change the way you think about 90% and numismatics?
The chief counsel of the US Mint was kind enough to send us a letter explaining that we were not in violation of any law, and in fact, we were completely free to continue sorting the coins. They just couldn't be chopped, melted, or exported.
I started thinking about the 100 tons of pennies that I had already sent to California (5 trucks with 22 tons each). He was going to settle up with us in January, but what was the status of all of those pennies? I called to talk it over. He is slippery, and I couldn't nail him down on anything, but the gist of our conversation was that all of the pennies were still on his dock, but he would be damned if they didn't vanish in a few days. I told him I didn't want any part in breaking the law, and I reminded him about the exact wording of the press release. I wouldn't talk to him again for several weeks when it would be time to "settle up."
Finally my partner and I continued mulling it over (still 12/14), and settled on a solid plan. We would contact the Royal Canadian Mint and propose a partnership. Canada does things differently. In Canada, the RCM not only mints the coins, but they maintain the circulation and ownership of those coins. The RCM is also a "for-profit" business that is wholly owned by the Canadian government. They are possibly the world's most advanced mint, and they make coins for many different countries.
I put a call in to Manon LaPlant, the director of circulation coinage. She called back and we had a pleasant conversation about our business model. I suggested that we could partner to help them reclaim valuable alloys and replace those coins with newer coins made of steel. She was very intrigued by the idea, and asked me to send an entire proposal. We got to work on it right away.
Before I could make a proposal I had to know more about the percentages of certain alloys in Canada. After doing a little preliminary research I realized that 3 alloys had been used for pennies (brass, zinc, steel), and 3 alloys used for nickels (tombac, cupro-nickel, and pure nickel). The pure nickel coins were worth nearly $0.25 each, so we decided to include nickels in our proposal.
I needed a sample to analyze with our machine. Ah! I never told you what the De La Rue Mach 9 CDE measures! Here it is:
We would get a sample of 20 coins of a known alloy-year that were very clean and run them through the machine to get an exact average of these numbers. Then we would adjust the machines tolerances until it could perfectly separate the alloys without being too lax or too picky. It was AMAZING once it was tuned (took a little voodoo). It could run 50 pennies per second with PERFECT accuracy. Under these circumstances it was kicking out 13 brass cents per second. I'll never forget that wonderful clatter. Once in a while, when it started getting dirty, we could actually here zinc cents starting to "clink" down the chute. We got very good at spotting a zinc cent on the pile of brass cents, but you had to HURRY if you heard one or it would be burried. (Interestingly enough, I'm sure I once saw a 1909 Lincoln cent plop into the pile, but before I could snatch it up it was burried.)
Anyway, I found someone who would send us a box of rolled pennies and a box of rolled nickels. As soon as they arrived my partner and I met at the warehouse to analyze them. I was armed with information from reliable sources like Wikipedia and the huge book of world coins. Both let me down. We found ourselves scratching our heads because we couldn't get a sample group of 20 coins that would consistently give us the numbers we needed for the machine. Finally, I decided we needed a BIG magnet. I went down to Murdock's in Longmont and picked up a construction-site magnetic sweeper (the kind on wheels). Back at the shop I dumped all of the pennies on the ground and spread them out perfect flat. Then systematically I went over the lot of them with the magnet until none would jump up. Then we set to sorting those steel pennies by year. WE WERE SURPRISED. We had pennies that were magnetic, and pennies that were not magnetic for the same year. We ended up having pennies that were zinc and pennies that were brass for the same year. And in both cases it wasn't because it was a change-over year. This was the case for a year or two, then skip a year, then another year. It was obvious to us that the RCM had no qualms about using multiple alloys multiple years. Additionally, we found some alloys that were completely unknown to the world coin book or any Internet source.
By the end of that day we had built a comprehensive table of years / alloys for pennies and nickels. Armed with that information I started writing up my proposal. In Canada, all of the circulation coinage MUST be rolled before being returned to the RCM for recirculation. This means that the transport and treatment fees for pennies would almost cost HALF of their face value! And the commercial institution bore this cost. (I did some research with armored car companies up there). I realized that any proposal would have to include rolling the coins and boxing them. About this same time I got a call from the De La Rue tech. He said that he had picked up a massive coin conveyor from a Colorado casino (Bushwackers) that had converted to tickets. This conveyor was meant to feed 5 coin wrapping machines using a recirculating belt system that kept each of the machines constantly fed from a LARGE hopper. On the bottom it had a conveyor and lift system to take the wrapped coins to a table for boxing. We ended up buying it from him for $1,500 (original cost was $60,000). As far as I know, that conveyor is still sitting in a barn on my farm near Johnstown, CO.
My proposal was for 10 sorting/wrapping stations. We would sort all of the coins brought to us, re-wrap the ones they wanted to keep, and send the others to be smelted for them. We just wanted a flat % of face value. The contract would have been worth $15M/year to us (but overhead would have been much higher because of employment costs and the need for a large facility). After they received the proposal at RCM we had a conference call with them. They loved the idea, but unfortunately the board of directors wasn't ready to do it. Their biggest concern was that they didn't currently have the capacity to replace coins as quickly as we could remove them from circulation. I suggested that they might consider expanding -- it would pay for itself quickly. But they had just finished an expansion of their minting facilities, and the directors wanted to make sure that they could keep the new larger facility occupied before further expansion.
In the end, I was told that they looked forward to working with me in the future -- especially if Canada decided to eliminate the penny. WOULDN'T THAT BE THE CONTRACT! It was looking more likely in 2007 than in the deflationary environment we are in now.
The next week after 12/14 was a sad week. We went into our warehouse to "un-sort" $75,000 in pennies. All of it was boxed on pallets ready for a truck to California. It took us an entire week to feed those pennies back through the machine and into bags to be deposited at the Fed. I felt like I was was holding my own funeral. To make matters worse, we got a massive blizzard (38" of snow), and had to wait a couple weeks to get a truck in their to return the pennies.
Of the mistakes I made running Pincher Processing, this is the one that probably cost me the most -- like the last 5 years of my life. I'm a trusting person; I'm an honest person. Because the coins had been withdrawn on another company's line of credit I returned the coins for deposit on that account -- not ours. At the time we had just purchased our second sorting machine on our business credit card ($12,500) and were running a balance of $25,000 on our SBA line of credit. We also were paying off a loan on our forklift. We had $42,000 in debt that hadn't been settled. I was waiting for the guy in CA to settle up with us on the 100+ tons of pennies I had sent him. I wish I could go back and change the account into which that $75,000 was deposited. Even if all I did was settle our debts and send him the balance.
I called in mid-January to find out when we could expect to receive our share of the profit. His response was that he didn't know what profit I was talking about. According to him he had a loss on it, and he was hoping we could reimburse him for his loss. Whatever. I realized I was completely at his mercy, and I had been whipped. I thought about suing, but I wasn't sure how I'd explain how I thought he had melted them all after the ban. In the end I let it go, and left him to God.
Because my church, High Plains in Milliken, CO, was being heavily subsidized by Pincher Processing they took a huge hit also. By second quarter we had to slash the budget by 50%. I went from seeing $50,000/month in business profit (most of it unrealized), to living on $300 per week. There was no money for the mortgages, so I started getting nasty threats. I received a letter from the now-defunct Countrywide Mortgage that they were foreclosing my house in Fort Collins and were intending to sue me for a deficiency of $100,000 (this was the beginning of the housing collapse, so values had really fallen and I couldn't even get a short-sale buyer). My realtor strongly urged me to see and bankruptcy attorney, and in September of 2007 I was granted a Chapter 7 discharge.
The next couple years we got by with just enough to live on. We got a sizable tax "refund" both years and were able to set aside $10,000 to buy 5 acres of land on my wife's family farm in Wisconsin. In 2009 we decided to retreat, regroup, and start over. That's where we are now.
After we moved to Wisconsin our business debt had taken a sudden jump in interest rate and payment amount due to a change in law. My partner didn't want to continue making the minimum payments (I was paying 70% of the payment, and he was paying 30% -- minimum payment was all I could do), so he cashed in some investments and paid off the remaining $22,000. He was even willing to forgive me my portion of the debt ($15,500), but I couldn't let him take on more of his share than we agreed to, so I have been paying him back (interest free) ever since. Next month, when I get my tax "refund", I will finally pay off the last $3,250 that is my share of the debt, and Pincher Processing will be behind me.
I can't describe the thrill of what we were doing. It was insane. Every day was an amazing adventure for the 8 or so months we operated. Nobody could believe we pulled it off. I still have a great deal of satisfaction in knowing I took and idea and made it very profitable... for a short time. I only wish I had benefited from the profit. In hindsight I learned several lessons from the experience that should make me a wiser person:
1. Always operate financially as if disaster is right around the corner. Don't assume that you can take a risk and get away with it. If I would have managed our personal and business cash flow more defensively we would have walked away with a small profit (less than we deserved, but more than nothing).
2. Business is business, and if it isn't in writing it doesn't mean anything no matter how nice you want to be or how much you like the other person.
3. PAY YOURSELF FIRST. Make sure you cover your bases before trusting someone else to treat you fairly.
4. Even attorneys can overlook something significant. Get a second opinion.
Have you ever seen Robert Kyosaki's BI Triangle? I've spent a lot of time looking at this chart to figure out how we failed. I think it was on 2 levels: Legal and Cash Flow. Legal really hurt us, but Cash Flow could have been managed to give us a safety net.