Should you let your Business Default?

August 12th, 2011

There’s justifiable anxiety about the possibility of the US government defaulting in obligations to its creditors.  This was brought to a head with the initial inability to agree on the terms needed to raise the national debt ceiling, followed by Standard & Poor’s decision to downgrade the country’s credit rating.

This situation affects all of us and it is clear that government has to become truly accountable for the precious funds that it squeezes from taxpayers.  And one of the problems is that politicians have a short-term, bring-in-the-pork and win-the-next-election mindset, while the nation needs long-term thinking.

Analogies can be made with businesses in financial trouble.  If your company’s revenues are insuficient and you are up to your proverbial ass in alligators - so beset with payables issues that you’re spending way too much time and energy responding to creditors – there comes a time where you have to consider a default.  In other words, you may have to intentionally not pay your company’s debts as originally contracted, just as it is feared that the US government may decide that it cannot make good on all of its debt promises.

You have to be honest and up-front with yourself, your team and your creditors.  If you are to stay in business, you will likely reach a point where you need time - free from the need to meet urgent creditor demands – to ramp up the top line.  As with government, you will need to cut costs and increase revenues.  And you may need to default on some or all of your creditor agreements, including those with your bank.

You may need to reach agreement with each and every creditor on the most effective way to move forward.  This can affect all suppliers, but unsecured creditors especially know that when considered rationally, they stand to lose everything if they force you out of business.

Your company does not have the management structure of the federal government.  You will not likely have conflicting opinions, or short-term elected thinkers using other people’s money to meet fuzzy objectives.   You can get back on track, with the right mindset and the will to succeed.  Turnaround management professionals are here to get you there.  We are paid only by results.  And what could be better than that?

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Emotion is an Enemy of Business Debt Settlement

July 29th, 2011

The collector called to tell me just how much he thought of our business debt settlement proposal.  “We’re insulted”, he spat.  Here we go again, I thought. 

Business collectors deal with debt as their bread and butter.  They have to be objective and know something about the company being hounded.  And they should take time to read the comprehensive settlement proposal that we send them.  But some of them use the emotional card as a first step, if they think it helps get them paid.

This is why it can be so difficult for business owners and their accounting staff to deal with late payables issues.  They can be too close to the problem to be truly rational about it, especially when dealing with someone bent on using emotion for their own benefit. 

The net result can be a shouting match.  And the collector, who is feigning having been disrespected or abused in some way, is the one who tends to do the insulting.  In reality, it achieves nothing if the business has no other alternative than to press on with the same debt settlement proposal.  

I recognized the collector’s ploy for what it was and asked him if he had read and understood the proposal we had sent him.  It had been pointless to bark at me when I recognized the tactic for what it was.  It may have made him feel good, but it achieved nothing.

It’s a major issue in companies we deal with.  Most owners and controllers tell me they hate to have to deal with collectors and the collection staff of law firms.  There is so much emotion involved, manufactured by collectors but so real to them.  And this is one reason why they need professional help in putting their case to the other side in the most rational, understandable way. 

They have to cover all the bases, in writing, as to why they cannot pay everything demanded, today.  And why, if they doled out “good faith”  payments to every single deserving creditor, this may very well suck up every drop of cash needed to generate future revenues and meet payroll.  Possibly why they need a 60-day payment respite, to give time to re-group and work on their top line revenue strategy.

It’s so true that when you’re up to your ass in alligators it’s hard to drain the swamp.  You have to either kill them, or keep them at bay.  Figuratively, you either have to settle with them in terms you can afford, or get them fenced off for a while, to get the time needed to generate a new revenue stream.  The two things go hand in hand.

The outcome of an effective debt reduction and top line improvement strategy is happiness all round.  This goes for you and your staff as well as for the suppliers, who stand to benefit from your lifetime customer value.  That’s an emotion we all welcome.  And what could be better than that?

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Put your Business Debt Settlement Offer in Writing

July 12th, 2011

A common mistake made by business people, when attempting to settle business debt, is that they don’t put the offer in writing.  There are so many good reasons for doing so.

You have to set the scene and tell an honest, effective story.  You know that there’s  a reason why you just cannot pay the full balance, or you need time and payments to satisfy the bill.  The thing is, the creditor knows nothing of this.  He just knows that his receivable remains unpaid.  And he has likely come to conclusions of his own as to why this has happened, which don’t reflect the true picture.  

The need for a written proposal is especially important when dealing with an attorney, or a collector.  You want to say nothing to them that can be misrepresented, then relayed to the creditor in the form of a leading question.  You can imagine them saying something like, “Hey, Mr. Smith.  John Jones just called to offer to settle this account for thirty-five cents on the dollar.  We’re not taking it, are we?”  And why should he accept it?  He has no framework of reference to balance his preconceived notions.  He wants it all, yesterday.  So you can expect to be told to get lost.   

So many factors come into play when making a proposal.  You have to consider your creditor’s position.  He likely wants your lifetime customer value, if in fact he can be shown that you can get through this rough period.  And he needs to know the likelihood of collecting cold, hard cash after he is through paying his attorney fees and court costs.  So often, it is all but impossible to do so.

It’s important to keep your proposal rational and focused.   You cannot always achieve this by calling someone, especially as you likely feel bad about your firm being the cause of their problem.  It just takes the other side to react emotionally to your offer to set off an unproductive sequence of events.  And if they take a stand during that first phone call, it can be very hard for them to ”step down” later and accept your offer.

If you need business debt relief, you absolutely need to comunicate well with your potential adversaries.  They want paid, as you do for your firm’s receivables.   But put yourself in their position.  Would you accept much less that owed for a job well done, just on the strength of a phone call?  I don’t think so.   But you might consider it if presented with a comprehensive proposal that told you the whole story. 

Want help to stay in business by working out cents-on-the-dollar settlements with creditors and their agents?  Get in touch.  We’ll get results for you, while treating your creditors with courtesy and consideration.  And what could be better than that?

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The Importance of Attitude

June 20th, 2011

Some of the business people I meet up with are paralyzed by fear.  Like deer trapped in the headlights, they just don’t know where to turn.  They’ve lost the positive attitute that they had when starting out.  I was reminded of that last night, when watching a great new TV series, “Turnaround King”, on the National Geographic channel, featuring Grant Cardone.

He encountered two fairly typical situations – a Gold’s Gym franchise and a Buick dealership - where the businesses were on their last legs.  Simply put, they had to increase revenues, fast.  In each case, the owners had figuratively gone to sleep at the very point where they needed to be most proactive.

Cardone’s recovery strategies were straightforward.  These businesses desperately needed to boost revenues.  And, in the Gold’s Gym case, he showed how to mount a productive, targeted direct-response postcard campaign to drive potential customers to the business.  Once the prospects started to come through the doors, he demonstrated how to implement an effective sales process to convert interested prospects into committed customers.  And to involve everyone in the company in this process.

The Buick dealership owners and employees appeared truly shell-shocked.  None of the sales people wore a collar and tie.  They looked dishevelled and half asleep.  And the sales manager proved, on hidden camera, that he couldn’t sell.  As often happens in our specialty, one of the owners said that they’d been in business for many years, so they didn’t need help.  Not a clever thing to say when the family knew the dealership had about twelve months to live – in the absence of positive change.       

The real interest for many of us is to be able to discover how each company will have fared, a year or so down the road.  In my experience, unless net revenues can be made to take an immediate and substantial jump, creditor actions can pose serious threats.  A landlord can file to foreclose.  Or a leasing company can file a replevin action to seize essential equipment.  There are two sides to the revenue/cost equation.  So at least in parallel with sales and marketing initiatives, you need a strategy to communicate with creditors.  And to come to terms with them in a way which makes sense to your business.                   

Cardone did not mention the cost side, or resolving creditor disputes.  This is not part of his specialized focus.  But he did a great job of emphasizing the essence of any great business – large or small – which is attitude.  In marketing, sales, or any aspect of our businesses, it’s great attitude that counts.  It’s the foundation for everything else.  It’s contagious.  And Cardone has it in spades.

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The Best way to Sell

May 31st, 2011

A nephew just called to tell me that he’s become involved in “consultative selling.”  He has decided to sell food suppliments in a multi-level marketing scheme.  My immediate reaction was negative.  I’ve been invited by aquaintances to lunch meetings in the past, only to discover, too late, that I was being ambushed in an attempt to become somebody’s downline.

As in anything in life, there are few in MLM who truly succeed.  The vast majority fail, especially in that business, where only a fraction of one percent actually make a full time living at it.  And of that tiny portion, only an elite few actually make a good living.

I don’t want to stomp on his dreams, but I have so many questions about his approach.  This is a mature product.  The people who make the real money tend to get in early.  And he intends to make this his sole source of income.  He doesn’t have other business revenues, or a job.  As Dan Kennedy would say, your biggest enemy is, “the number one”.  One source of customers, or income.  Or one way of doing anything.

My nephew is really excited by the fact that the company promotes “consultative selling”.  Huh?  Is there any other kind?  What’s the alternative?

I learned sales from a great source, at an early age.  It was from Al Ferber, who made a very good living selling cars in San Francisco.  I worked with him for six months.  It was the best education I ever had – bar none.  I’m so grateful for his counsel.  Al knew all about consultative selling, well before the term became common currency.

Not for him the “sales pitch”.  He was a listener.  And he provided what prospective customers were looking for.  He considered them to be “clients”.  A medical doctor from Iowa, for example, visiting town for a convention, walked into the showroom to look at a Rolls Royce.   Al discovered, in his calm and disarming way, that the doctor had long wanted a Rolls.   But he confided that he would need to buy the car later, from a dealer near home.

No problem for Al.  After a spin around the city, he suggested that the car could be delivered to a town midway between there and his Midwestern home.   He painted a picture for the good doctor, where he could imagine himself driving a reasonable distance home in the car of his dreams.  And the sale was made, there and then, to the distinct benefit of both parties.

This was a typical Ferber transaction.  Whether for a high-end customer like this, or for a young woman who wanted a sports car which only came with a manual transmission, but who couldn’t drive a stick shift.  Al had the answer.  In this case, he arranged for driving lessons with a cool instructor.  

It was all about consultative selling, which is really about listening and reacting positively, with the solution that people are looking for.  If you can provide that, consistently and effectively, then you have a real business.

Al was, by a long shot, the most productive sales person in the dealership.  He had such a profound impact that I still occasionally ask myself, “How would Al Ferber handle this situation?” 

So what do I advise my nephew?  Without a day job, he has to get off to a very fast start.  He has to seek counseling from industry leaders.  But I’d suggest not putting all of his income eggs in the one basket.  If this doesn’t work out, he needs something to fall back on. 

As far as his enthusiasm for ”consultative selling” is concerned, he’s right.  He could become another Al Ferber.  But I don’t think he realizes that someone has used this powerful process on him, to get him involved.  If he is like so many others, he has been sold an impossible dream, unrelated to reality.  We shall see how it plays out.  I hope, for his sake, that he has enough smarts and staying power to build the MLM income of his dreams.  And that my analysis of his situation is dead wrong.

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Put your Offering in front of your Ideal Customers

April 28th, 2011

It is easy to forget to focus on your ideal customers.  We all want to increase revenues, but some customers demand so much attention, for comparatively little return, that they’re not worth dealing with.  Harsh words, perhaps, but true.

Our business’ ideal clients are companies of all types, grossing from about $1 to 10  million.   They’re not too far gone, in which the ship has gone down, leaving them to hold on to lifeboats with sharks circling their legs.  Sure, we can help these folks and it can be highly satisfying to do so, but it can often involve a disproportionate amount of effort.  

Far better, I find, to work with companies in “mid-decline”, using Turnaround Management Association parlance.  These guys still have realistic choices to make.  We can work out debt while simultaneously taking steps to increase revenues.  They get a great bang for their buck, and we receive payment in fair compensation for the increase in the companys’ net revenues.

The key is to find these clients in quantity, as it is in any business.  You want to find them, figure out where they’re headed, then put your offering in front of them, knowing that it’s what they’re looking for.  I found the perfect analogy for this last night, when standing in the kitchen at home.

A stream of ants had gotten into the house.  They were busily scuttling, to and fro, in a long line on the edge of the counter.   I got on my hands and knees and found where the line ended – right at the bottom corner of the cabinet.  

I picked up some ant killing gel from the hardware store and injected a spot of it, right in the middle of the ant highway.  “Pow!”  They were on to it in a heartbeat.  It was exactly what they were looking for, to take back to their ant house, or wherever it is that they shack up.

I had found my ideal customers and placed my offering in front of them, which was irresistable, nutrient-rich food, to eat there, with enough spare to take doggie bags home to their queen.  It wouldn’t have been effective to put the stuff on the ceiling, or at the other side of the room.  Or placed sawdust instead of tasty gel.  The product placement would have been dead wrong.  No, they needed what they were looking for, at the right time, in the right place.  And I gave the little suckers what they wanted.

They unwittingly picked up a ticking time bomb.  Not, in fact, what they thought they were getting and certainly not what we offer our clients.  The analogy ends there.  But the rest of it provides a good example of a successful approach to satisfying client needs and therefore to generating new revenues.

The ants have thankfully disappeared.  Clearly, that’s not what any of us want to happen to our favourite customers.

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Give Debt Collector Adversaries a Good Reputation to Live Up To.

April 14th, 2011

The suggestion that we give adversaries a good reputation to live up to was made famous by the great Dale Carnegie.  It was incorporated into his course content.  And I try to live by this rule myself – tough that it can be.  There can be real benefits in doing so.     

This is especially so in dealings with client’s creditors and their agents.  I normally enjoy interacting with the legal profession.  Intelligent, literate and analytical by definition, they deal with facts and outcomes.  Many of them have a keen sense of humor.  It’s some of the collectors I deal with – just the odd one or two - who test my ability to treat them with respect.   

It can be a challenge to give the odd rampaging collector a good reputation to live up to.  If you treat them the same way in which they clearly want to treat you, you’re not going to get the settlement that your business needs.  They like to fight.  They think this will win you to their way of thinking.  And maybe it works for them, with some people.

People who have gotten upset by such behavior have told me that they’ve given a certain collector a piece of their mind, for being so “obnoxious”.  We’re likely wired to respond that way and there’s a certain short-term satisfaction in doing so.  But a “feel good” response like this doesn’t move you forward to resolve anything.  You have to get past personal likes and dislikes.  And one technique is to treat your adversary better than they deserve.  Let perceived insults fly over your head.  Put the phone on hold.  Yell at them in private.  Take a few deep breaths.  Then smile, get back on the phone and speak to them with far more respect than they deserve.    

I was reminded of this a couple of days ago, when I received one of Bob Proctor’s daily emails.  www.InsightofTheDay.com .  He quotes Goethe, who said, “If I accept you as you are, I will make you worse; however, if I treat you as if you are what you are capable of becoming, I help you become that.”   If you treat the rare anti-social collector with a smile, after letting them rant and rave, you just might get what you’re looking for.  Put your proposals in writing.  Keep to the facts.  Don’t let them brow-beat you on the phone. 

Thank them, if you get what you’re looking for.  Who knows, maybe they’ll learn something positive from the experience, after you’ve gotten what you need from them.  And what could be better than that?

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Ask for Business Turnaround help Before it’s Too Late.

March 28th, 2011

Our local printer, just a few hundred yards away, has been great to work with since we started out in business.  It’s been a good sixteen years.

Our scanner is down, (again – what’s wrong with this thing?), and I walked in this morning, thumb drive in hand, to get some documents scanned.  If truth be told, it’s a beautiful morning and I wanted to escape for a few minutes.

Hmm…  The lights were off.  A stranger opened the door, revealing an unfamiliar, cold and empty interior.  No chipper receptionist or friendly sales people.  No owner.  Nothing, other than the landlord, there to clean up the place.

This is really sad.  These people were friends.  Tom was absolutely the best sales person I’ve ever had the priviledge to deal with – ever positive and helpful.  It was truly comforting to know that they were there.  They provided great service.  They were like family.  And they could be reached on foot – when I wanted to take a stroll in the fresh air.

Why the Hell didn’t the owner ask me for help?  She likely landed with a thud on the sidewalk – possibly with nothing to show for it – instead of on a feather bed, with cash in hand.  Suppliers will be hurting.  Her faithful and long-time employees must be out looking for new jobs.  The best ones may be starting a new business.  But where are they?  They haven’t told me.  Are they using their customer list?

The printing business has to be one of the toughest, with the change in technology and the market.  Companies have been dropping like flies, taking dreams and life savings with them.  But there are ways to prevail – one being to specialize and focus on web-based sales.  And some are doing well at this – even though it can be a cut-price environment, with fickle consumers gravitating to those who promise the very lowest cost.

When you run into trouble, you have to communicate – with suppliers and with customers.  It’s called effective marketing.  And you need support to do so, from someone who’s been there and done that.  It’s not always that difficult.  A fresh set of experienced eyes can help you to find the way.

It doesn’t help to keep on truckin’, when the scenery around you becomes unfamiliar.  You need a pit stop.  Check the GPS.  And take a new route, with the help of a navigator, otherwise you’ll be out of gas with nowhere to go.

I’m just stunned, saddened and annoyed, in that order, about my local firm disappearing in the night, without a trace.  It shouldn’t have happened.  At least, not like that.

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How does your Staff talk to your Customers?

March 23rd, 2011

A garden supply store in our area recently went out of business.  It was a sad story.  The company had been around for decades, but the aging owner became suddenly and seriously ill.  He was incapacitated for four months.  In that time the debt-ridden business went to Hell in a handbasket.  Vendors started crying foul.  Lawsuits were flying and the place went completely out of control. 

This wasn’t a franchise, which would have helped, because the place was not managed and controlled with systems.  It was in total chaos by the time he got back.  And he was in no state to contemplate a business turnaround.   

A new firm took over the lease, selling similar products and services.  And the owner has never been in business before.  It’s clear that he has an uphill battle on his hands, unless he makes some simple changes.  And the first of these is to talk to his staff about how to interact with with customers.

Simply put, the store manager has a bad attitude.  He barks at customers.  I heard him call one of them “confused”.  He bad-mouths the competition.  And he’s generally unpleasant to be around. 

There’s a website, but it’s not very informative, or attractive.  There’s a half-hearted attempt to get customers’ e-mail addresses, to build a list and community.  And the e-mails seem to be written by the crusty, know-it-all  manager.

The business has little chance of survival unless some pretty simple changes are made.  People have to feel welcomed and appreciated when they enter the store.  And they have to become part of  a community, receiving regular positive “touches” from the business.  As the immortal Dan Kennedy would say, they have to become part of the business’s “herd”.

I don’t want to see a good man lose his investment.  But at this point, unless he makes changes, he’s not going to prosper.  That’s tragic, because like so many others who don’t pay close attention to customer needs, he’ll go down like the Titanic.  He’ll grumble all the way about the bad economy and price competition from big-box stores.  But the real cause is closer to home.

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The Best Way to Collect from late-paying Business Debtors

January 23rd, 2011

As business turnaround specialists, we do everything in our power to help our clients’ businesses to survive and thrive.  Much of this starts with a strategy to work out deals with creditors and their collectors and attorneys.  But, other than this, the most important component is to take steps to increase revenues.  

It can be very easy for a fresh set of experienced eyes to see immediate opportunities to pick the “low hanging fruit” that will increase a business’s top line.  And it’s satisfying to be involved in this process.  But we find all too often that a client’s inadequate revenue stream has little to do with marketing.  Rather, it has been systematically crimped by unpaid and late receivables.  

Some of the most traumatic cases I’ve dealt with have been where a major customer has been extended a huge amount of credit and has then gone out of business.  Expected revenues are replaced by debt.  You can do little about this once it has happened.  You learn from the experience, of course, like not having all your eggs in one basket.  And a more effective credit policy, taking more care when trusting clients and customers with your hard earned dough.    

When going to bat for our clients, to work out deals with their creditors, I’m often reminded that the collectors and attorneys we deal with are focused on their own immediate needs.  They want to get paid and move on.  Their idea of “getting paid” may differ from ours.  We are generally able to resolve the issue at a substantial cash discount.  But they have no interest in any productive future relationship between the two parties.  And they generally act accordingly.   

This reminds us that, when we have to collect money from late paying businesses, we can’t paint them all with the same brush.  They all hurt.  But their owners are not all “deadbeats”.   Don’t automatically sic a collector on them.  Even if they are able to collect everything, they’ll take up to fifty percent of the total for doing so.  And ruin the relationship for good. 

The collection business does not have the best reputation.  It fulfills a necessary function, but there are some pretty bad actors.  Just check Bub Hibbs’ site at www.budhidbbs.com .  Or a new initiative by the immortal Bill Bartman at www.stopthesecriminals.com.  From my perspective, I’ve seen good and bad.  In the main, the business collectors I deal with tend to be professional.  And I see them as a cut above those working with consumer debt.  But the collection industry is not necessarily the best choice for business people to collect from other companies. 

The thing is, business debt collection involves much more that the immediate payment.  The late-paying customer represents a continuing flow of business, if they are able to survive.  It is far better to figure out which particular late paying accounts you want to keep, then to take the soft approach.  Introduce a business turnaround specialist to them.  Establish the reason for late payment.  If absolutely necessary, offer them a discount, to get the account paid now.  And in the process the specialist will show them - for a fee – how to develop a more resilient, profitable business. 

We do this for our clients.  It works like a dream.  No fighting or cajoling.  You keep a hard-won paying customer, if on different payment terms for a while.  Their firm becomes more profitable.  They are motivated to buy more from you.  It’s just good, common sense.  As long as you’re dealing with honorable business debtors.  And most are.

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