You can be on Entrepreneur’s cover!

How This Entrepreneur Recovered From Bankruptcy to Increase Her Profits More Than Tenfold During the Great Recession, Tracy Matthews was in debt $335,000. Here's what she did to dig herself out.

By Tracy Matthews

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Kelly Boitano

Editor's note: In the Women Entrepreneur series My Worst Moment, female founders provide a firsthand account of the most difficult, gut-wrenching, almost-made-them-give-up experience they've had while building their business -- and how they recovered.

Tracy Matthews had just hit a milestone: Her jewelry business, Tracy Matthews Designs (TMD), had just turned 10 years old. During that time, her pieces had garnered global attention. She'd sold on QVC and in Bloomingdale's, Anthropologie and hundreds of other stores, including in Europe and Japan.

Initially, she designed pieces for women featuring semi-precious stones, silver and gold vermeil (which retailed from $50 to $500). In 2006, she began designing sterling silver, 14-karat gold and rosewood "rustic urban chic" pieces for men ($50 to $1,000), as well as fine jewelry containing 14- and 18-karat gold and diamonds ($300 to $2,500).

By 2007, her 10th year, she'd grown the company to nearly $1 million in sales. But the recession was looming, and things were slowing down. Matthews' boyfriend at the time warned her that "doomsday" was coming. She brushed him off, thinking he just had a negative attitude. That is, until the market crashed in September 2008.

Related: After Completely Freezing During a Pitch Competition, These Co-Founders Stayed Up All Night Preparing for a Second Chance

In October 2007, TMD shipped $150,000 in inventory. The following October, TMD shipped only $10,000. Year-over-year revenue halved. Stores kept closing, and bankruptcy notices kept showing up in the mail. Matthews had to lay off her entire seven-person team, and she racked up about $335,000 in debt because of defunct receivables. By December 2009, she'd shuttered the business entirely.

Image credit: Raquel Lauren

Today, Matthews has two new businesses -- a commissioned fine jewelry company and a business coaching program for jewelry brands.

In our series My Worst Moment, Matthews explains how she's learned from her mistakes to become more profitable than ever.

What follows is a first-person account of this woman's experience. This interview has been edited for length and clarity.

When the first packet came in the mail, I was in disbelief. A company we'd just shipped to had filed for bankruptcy, and they were not paying us for the $33,000 order.

Then another envelope arrived, containing a similar notice for a $20,000 order. Then another.

At the time, I remember going to the ATM at a tiny bodega in the Manhattan's West Village to grab $20 for taxi fare to a trade show, and my account registered -$2.02.

We'd invested a lot of our cash back into the business to finance orders. If we didn't get paid within 15 days of the date the payment was due, it became a cash flow issue to finance payroll and future orders.

Even though I noticed sales were slowing, I ignored the fact that many of my key accounts for years stopped or slowed orders.

I also wasn't paying enough attention to the cash projections, because I was scared to look at them. But because my monthly payroll and expenses for my seven-person team were close to $60,000 a month, I had to take drastic measures.

I had to lay off the salesperson I'd just hired one month before, which was rough. She'd just left a great job to pursue her passion for fashion, and here I was, the failure boss, having to lay her off (and many other team members who'd been working with me for years).

Over the course of the next year, our phone was ringing off the hook. Credit card companies were serving me papers once a month. The few team members I had left had the worst morale, and my operations manager and I decided it was time to make a tough decision and close down the business. I gave my remaining part-time team members six months' notice. Most of them stayed until the end, and I helped place a few of them with other companies.

Who was I if I was no longer a jewelry designer? I thought. How will I make money? I really struggled with my sense of purpose in life. The worst part about it was that I had to save face in front of friends and customers. The stress took a huge toll, and I lost a ton of weight, lost hair, developed a thyroid condition and all around had low energy. I was in a constant state of anxious energy and couldn't sleep, which made me more anxious. When I filed for bankruptcy in 2011, I felt like I was going to be living on the streets.

I'd been teaching yoga here and there since 2007, so I bumped up my schedule to get health insurance. Teaching gave me a sense of belonging and security, and it made me feel like I mattered. It also helped pay the bills for the short term.

Within 18 months after the worst experience of my life, I launched a new business, specializing in commissioned fine jewelry, that had more profits in one month than I'd ever had in one year. To accomplish this, I'd hired a consultant, taken some time off to reflect and completed a course about marketing via the web to expand my scope beyond trade shows and brick-and-mortar sales. Via LinkedIn, I also landed a freelance gig designing jewelry, which lasted about a year and half on and off and helped me gain some confidence while my new business took off.

Before long, I was able to set aside $30,000 in just one month for myself, and up to that point, I'd never paid myself or took a profit draw of more than $6,000 a month before that. The money always had gone back into the business. My consultant taught me the importance of keeping inventory low and cash flow high, and paying myself versus skipping paychecks. If you aren't financially stable, then you can't make good business decisions. I'm obsessed with the numbers coming in now, tracking cash on a cash flow projector.

One of the biggest issues during my first company was that 95 percent of my revenue came from selling to stores. When wholesale took a hit, so did my business, and I didn't have a strong omni-channel presence. I built my second and third businesses upon multiple streams of revenue to diversify the risk. I've also learned that a bigger business, in terms of accounts or sales, doesn't always translate to more profits.

Related: This Entrepreneur Fought Her Neighbors for Her Right to Open Her First D.C. Restaurant and Won

I built something I truly enjoyed aligned with the type of people I wanted to work with, so it never felt like work to me. Emerging designers started to notice and often reached out to "pick my brain." This led me to co-found Flourish & Thrive Academy, where we help independent jewelry brands launch, grow and scale successful businesses.

As a bootstrapped entrepreneur, having trusted sources or consultants to give you business advice is important. It's easy to get blindsided by your situation. As I was growing my first business, I passed up several opportunities for consultants, coaches and peer groups because of the investment cost. Now I advise everyone to get the right support to make better decisions more quickly.

Tracy Matthews

Founder of TM Jewelry Group, Inc., and Flourish & Thrive Academy

Tracy Matthews is the founder of commissioned fine jewelry maker TM Jewelry Group, Inc., and the co-founder of Flourish & Thrive Academy.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Dad Started a Side Hustle to Save for His Daughter's College Fund — Then It Earned $1 Million and Caught Apple's Attention

In 2015, Greg Kerr, now owner of Alchemy Merch, was working as musician when he noticed a lucrative opportunity.

Business News

I Designed My Dream Home For Free With an AI Architect — Here's How It Works

The AI architect, Vitruvius, created three designs in minutes, complete with floor plans and pictures of the inside and outside of the house.

Business News

Adobe's Firefly Image Generator Was Partially Trained on AI Images From Midjourney, Other Rivals

Adobe gave bonus payments to people who contributed to the Adobe Stock database to train its AI, even those who submitted AI-generated images.


6 Things That Will Tell You If You Are Destined for Leadership

These qualities are inherent in natural-born leaders.

Business News

Disney World, Disneyland Will Now 'Permanently' Ban Guests Who Tell This Lie to Skip Lines

The company rolled out changes to its Disability Access Services earlier this week.

Growing a Business

5 Ways to Maximize Your Returns at Live Conferences

Industry conferences can make or break your business, but careful planning is required to guarantee a return on your investment.