Biz911

It happened again this week and it’s a familiar refrain.  “I want to pay everyone”, said the shaken business owner.  His import-export firm was in trouble.  He intended to catch up with delinquent payables and there was no way he was going to “stiff” anyone.

There’s nothing wrong with this admirable sentiment if dealing with reality, when acted upon early enough and if revenues really can be cranked up quickly.  But this particular business had waited too long to address its declining cash flow.  It faced a “perfect storm” of threats, accusations, law suits and default judgments.  Money had run out.  His landlord and banker were after him and he was trapped with nowhere to turn.

If you get into denial and wait too long, you lose control of your company.  It’s that simple.  Others get to call the shots.  They figure that it is in their best interests to do what it takes to try to get paid.  And when it happens all at once it becomes nasty and vindictive.

Our ideal clients realize early enough that:

• Wishful thinking gets you nowhere.
• You absolutely have to address declining cash flow before it’s too late.
• All costs have to be scrutinized and brought into line.
• Any unused asset must be sold to raise cash.
• You have to focus attention on effective marketing, knowing that the business cannot survive without adequate revenues.
• Creditors should not been misled or given unrealistic promises.
• You have to be prepared to communicate with creditors in order to restructure debt and to meet the vested best interests of each party.
• You need competent help to guide you through this unfamiliar minefield, so that your company gets through it, safe and sound.

If your business disappears, creditors get hurt, possibly left with nothing.  What’s the best, most honorable way to treat them?

• Stiffing them by going out of business, crying unrealistically all the way to the bankruptcy court that you want to “pay them everything that’s owed”, or by
• working productively with them before it’s too late to get revised payment terms, the intent also being to give them the long term value of your continued business relationship, once your company gets back on track.

As far as I’m concerned, it’s a no-brainer.

In his interview on the “60 Minutes” TV program last night, President Obama smiled when answering questions of Steven Kroft about the crucial state of the nation’s economy.

Kroft asked why he was smiling.  It left me wondering what he expected, or more likely, what did he think that the viewers would want to see?  A grim, ultra-serious persona?  I don’t discuss partisan politics, but I do want a leader with the right attitude.  And that involves resilience and an optimistic demeanor in the face of monumental challenges and uncertainty.

As business debt management and turnaround consultants, our job is to deal with tough situations on a daily basis.  We face issues involving families and livelihoods.  It would serve no purpose for us to come in at this crucial time and grimly act as if the sky was falling.

The task requires us to roll up our sleeves and do whatever it takes to help rescue our client’s business.  And we can’t do this in the absence of the right attitude.  We can best support our clients, meet their goals and deal with their creditors with an optimistic, friendly approach.  This can involve the occasional smile.  And doesn’t this also apply to our national leaders, Mr. Kroft?

According to media reports, some of Gordon Ramsey’s restaurants are performing poorly, or going out of business.  That’s understandable.  He’s in a fickle business, fraught with challenges.  Maybe he’s over-stretched.  It’s easy to blame these issues on the economy, but it surely has an impact.

The details of the problems are not immediately clear.  Whatever the reason, you can bet your bottom dollar that Ramsey knows how to change and adjust.  He has the premium brand recognition and the entrepreneurial spirit and flexibility to do so.

His holding company has apparently been taken to court several times recently over unpaid bills.  I don’t know the whole story but have previously noted the cavalier approach to creditors on his TV shows.  If his company treats its own creditors in the same way, it’s an f-bomb shame.  It’s no wonder they file suit in the full glare of publicity.

Doesn’t Gordon’s firm take these claims seriously, or get professional help to work out reasonable settlements beforehand?  Bloody Hell…

After getting into financial trouble, good business people can become consumed with guilt about not  paying suppliers as agreed.  Sometimes they become frozen with “debt denial” because it’s just too painful an issue to confront head on.  This feeling can be compounded if particular creditors are other small business people in similar circumstances, known to be tight for cash themselves.  The whole thing can result in procrastination and the perceived inability to do what it takes to save the business.

It can be hard to admit to ourselves that drastic steps have to be taken when the going gets tough.  It’s often easier to keep on the same course, hoping that circumstances will change, as did Dickens’ Wilkins Mikawber, who was always sure that “something will turn up.”  And this attitude didn’t help.  He ended up in the poor house.

The fact is, if tackled early enough, most businesses can cost-effectively do what it takes to ramp up revenues, even in today’s economic environment.  It may take help from outside, from someone who can take a more objective look at the situation.  But it makes no sense to let the business get to a point where cash flow dries up.

It really does help to identify the cause and remedies for decreasing cash flow at an early stage.  If it turns out that you need to delay payments and cut deals with creditors, do it as early as possible.

If you wait too long – incapacitated by debt denial – you may delay until it is too late. Eventually your business will reach a tipping point, where projected revenues have no chance of settling outstanding debt,  beyond which there can be no return.  And this would leave your unsecured creditors in the cold.  Not a good prospect, when you could have gotten something to them earlier and saved your business in the process.