It was such a childish mistake for American electric entrepreneurs to end up committing suicide.

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(This article comes from Business Insider, Tiger olfactory compilation)

Last week we reported the failure of Ecomom, founder Zhu Di Sherman (Jody Sherman). Judy shot herself at the end of January this year, after two weeks ecomom the company became a creditor to sell the project, entered the bankruptcy liquidation procedure. Today, the company updated its Facebook and website information, announcing that it had been acquired by Etailz in late March and that the site will be back online this summer.

Ecomom first spent money forced to shut down, and then the twists and turns of the takeover is very surprising. Six months ago the company raised 5 million dollars, raising a total of 12 million dollars in investment. And Sherman did not leave any words to explain its behavior.

The question that this article wants to try to answer is what happened to the company's cash flow late last year?

Three people are familiar with the company's financial position. One of them was an external accountant, Darou Marinov (Darin Marinov), who, through his lawyers, declined to comment on the article. The other is Zhu Di Sherman himself. The third person was the company's internal financial audit, which took office last October, when he joined the company three months before it was forced to close.

This person is Philippe Petis (Philip Prentiss), who is responsible for collating the financial statements of the last few months of ecomom. According to Pettis, the company's aggressive sales culture and Sherman lack of financial knowledge led to the disappearance of the company's book assets.

We posted the financial report online without any processing. The following are some of the key points, please note that this is not a summary of the Pettis report, nor does it represent our view:

• Pettis joined Ecomom in October 2012 as the company's first audit. The company never set up the position of chief financial officer. He is chief financial officer in Sherman and outside accounting, responsible for managing invoices, statements and financial matters.

Ecomom never realized a monthly profit.

• The first month Ecomom's business was good, though the company lost 500,000 of dollars. The October 2012 Income statement is broadly as follows:

(in 1000 US dollars)

• Revenue: 322

• Sales Cost: 173

• Margin Rate: 46%

• Sales: 288

• Management fee: 102

• Operation: 169

Dances expenditure: 87

• Customer Service: 24

• Net profit (loss): (548)

• "The loss of about 500,000 dollars is not a significant sum, and the company has just received a $4.8 million trillion in funding last month, with sales and operating expenses coming mainly from one-off construction costs," Pettis writes, "and more importantly, Black Friday is coming." We expect November sales to be over $1 million trillion, and if we don't include one-off spending, it looks like we have a chance to make ends meet. ”

* Black Friday sales reached a record high, and this day has also become the beginning of the end of Ecomom. The company's revenues in November amounted to $1.1 million trillion, but also lost $860,000. Pettis in the November 2012 report to answer why.

(in 1000 US dollars)

• Revenue: 1089

• Variable cost *:

• Sales Cost: 548

• Discount: 751

• Stock: 152

• Delivery: 134

• Marginal rate of return:-48%

• Fixed costs:

• Employees: 141

• Consulting Fee: 111

• Advertising Fee: 44

• Recurrent costs: 41

• Net profit (loss): (864)

We were just trying to get a one-time sale, but we have not been able to limit the consumer to repeat the discount, so each order is ultimately 50% of the price of the deal, "Pettis explained," in other words, on average, every more than 60 U.S. dollars in shipping orders, our variable cost will reach 89 U.S. dollars, loss of 29 dollars. The more you sell, the more you lose. If we cut our sales to zero, we can comfortably feed our company for two years, but with current sales we will spend three months in cash. Now it's time to sound the alarm. ”

• After losing 864,000 of dollars, Pettis said Sherman finally realised there was a problem, but the sinking ship could not be saved.

• Sherman held a management meeting and made some major decisions, but for some reason, the serious financial problems were not mentioned. "I can assure you that no one has ever mentioned the two words ' profit ' and ' proceeds '," Pettis in describing the meeting. "Judy is a marketing guru who is hosting a meeting that focuses on marketing plans. ”

• Sherman said at the meeting that he would introduce an additional $2 million trillion in financing, possibly one of the existing investors, arranges Fund (note: Arranges Fund denies the claim, saying that they had never considered additional investment in the company. )

• There were 2.2 million dollars in the company's bank account in November.

• After November, Ecomom abandoned the discount strategy and was responsible for the sales of the general manager and vice president of the separation. But without a discounted strategy, Pettis said sales had slipped and Ecomom was trapped in a backlog of inventories.

Sherman also did not get the 2 million dollars from arranges fund, and no one else to invest, but he did work hard to finance. "Judy and I didn't know each other very well, but I sat across from him in the office and heard a lot of bad financing calls," Pettis recalls. "I distinctly remember one time when he hung up and said, ' Well, I don't like this kind of conversation. ’”

There is a big problem, Sherman don't understand some basic business principles. "I would give Judy a look at the financial statements, he glanced at me and sent me away, ' without a detailed analysis, no one would understand this, ' Pettis wrote, ' and it's particularly fatal that he doesn't know the concept of profit. At the end of December, it was a bit desperate, he said to me, ' Phil, Get me a forecast and see how much we need to sell to be flat. He did not understand that three years of negative profit margins did not make him understand that the higher the sales, the more losses. He started the company with the money he had raised, and when things got bad, he would just display what he knew. ”

• In the one weeks before Sherman's suicide, he asked Pettis to draw up a forecast to analyze what the financial situation would be like if the company fired half the staff and cleared the goods in the warehouse.

• Pettis remembers the last few meetings with Sherman. Sherman published "Pessimistic comments (morose comments)", such as "If you want me to leave, that's fine" and "I'm too old to start again". Pettis also said Sherman drafted a will in the week before committing suicide and handed it to his secretary.

• "On my last weekend, from January 26, 2013 to 27th, I drafted a different forecast report at Judy's request." Some of these are the 2013 profit and loss forecasts for different revenue situations, some of which are detailed expenditure forecasts, reduced expenditures and minimal cost schemes. I speculate that Judy would like to finally try financing, or be ready for a big layoff. Pettis wrote.

• January 28, Sherman ended his life. February 15, Ecomom became a creditor to sell the project.

* Pettis explains how variable cost in a report is defined in a message:

• Discount: We contacted the third party discount company Plum District to promote our products. For example, customers would pay Plum District 20 dollars for a 40 dollar coupon available for our site. We sell retail goods worth 40 of dollars and customers don't have to pay us any more, but in the end we can only get 20 dollars from Plum District (less service charge). This is very effective for driving web traffic, but it costs too much. For this example, the revenue is 40 dollars, a discount of 20 dollars. From the accounting technical point of view, this part should be counted on the "discount" account. However, because it was carried out under the management of Vice President of marketing, it was counted in the "Advertising expenses" account, hidden in the report.

• Delivery: FedEx logistics costs. We offer free courier service to our customers.

• Inventory: Third party warehousing service, located in La Bria, California (La Brea), the company name is forgotten.

• Consulting Fees: A large part of our IT department is outsourced. The most expensive part of technical support services is spent on computer systems OMX and Magneto. In the second place is the website design for a variety of promotional activities, as well as the usual technical troubleshooting. The cost of these people is about 100 dollars per hour, and we occasionally hire them--but usually 100 hours a month, or more. I used to work for Mattel (Mattel) and Medtronic, which is very diverse, powerful and top-notch compared to Ecomom's IT systems.