Biz911

It can be catastrophic to lose equipment that is needed to generate business income.  Unfortunately, when sales are down and costs have already been cut to the bone, it still may be impossible to keep current with essential equipment lease payments.  That’s when the real trouble starts.

Once the leasing company, or lessor, starts to send threatening letters or enlists the help of a law firm, you have to act quickly and effectively.  

Assuming that you have realistic plans to get back on track with revenues, you must to be able to communicate to the lessor that you need its help and consideration.  It helps to provide information on:

1. what precisely caused this problem, together with
2. the current status, and
3. outline of your strategy for a turnaround. 

The lessor wants to keep you as a paying customer.  Its willingness to restructure payments or to give you a break in the total sum owed will be influenced by the percentage of monthly payments made to date and the equipment’s estimated garage-sale value.  It does not want to lose out, big time, if your firm goes under.  

A key to resolving lease issues is to recognize the lessor’s potential loss.  It is generally understood that businesses operate in an imperfect, risk-laden world.  A lease is not an annuity.  It is your job to bring out the necessary facts and propose a realistic, practical solution. 

Your proposal has to be aimed at the lessor’s best interests, emphasizing the upside of doing wihat you suggest and the downside if not.  Given that the lessor has lost a certain degree of faith in your ability to make monthly payments – restructured or not – you have to give it some confidence in your ability to follow through on a payment schedule that your firm can sustain.

Equipment lease disputes can appear to have no solution to troubled business owners and managers at the receiving end of hostile telephone calls and correspondence.  

These issues can be compounded by replevin law suits, the intent being to have the sheriff turn up with a court order to seize the equipment.  This could traumatize you and your employees and suck the life blood out of your business. 

The essential thing is to act quickly and decisively, before the problem gets worse.  Don’t make false promises that will prove impossible to meet.  Get professional help to deal with the issue. 

Your time is better spent in developing new ways to generate business income than in the uncharted territories of dealing with a lease dispute that may be critical to your business survival.

Businesses in desperate shape can often be saved.  Frankly, not all should.  Maybe the market is not there, or management isn’t up to the task.  But if the business shows resilience and the potential to thrive, disputes can generally be satisfied to meet the needs of the company and its creditors’ alike.  This takes effective communication.  The exception is where conflicts are based on personal issues, such as rancor, distrust and even hatred, rather than on rational, financial considerations.

A business in trouble can become beset by those who understandably feel justified in getting as much as they can, in short order, while paying little heed to its potential to give them lifetime customer value.  These complex debt issues can involve banks, equipment lessors, landlords and trade suppliers.  As well, business partners may be fighting with each other.  To those involved it can seem like an irreconcileable mess.  Everyone wants their bite out of the company and are prepared to pay for good legal help to get it.    

It’s easy in this situation for accounting or legal professionals to view the situation as hopeless and recommend bankruptcy.  But Chapter 11 will cost tens of thousands of dollars, padding the pockets of the professionals involved, rather than being used to make proportionate reduced-cost settlement payments to creditors.  This loss of cash to the company and its suppliers is one of the reasons why most Chapter 11 filings are quickly converted to Chapter 7 liquidations.

When a company’s creditors look out for their immediate self interest, it can kill the business, together with the unsecured suppliers’ hopes for getting paid.  It’s akin to the well known “Tragedy of the Commons” scenario, which describes the dilemma where individual livestock-owners see it in their best interest to add more and more cattle to the commons.  It makes sense in the short term, but it results in the eventual destruction of the commons’ ability to function as a productive grass-producing system.  And if the grazing disappears, everyone loses out. 

To head this off, all the livestock owners would need to understand that it’s in their best interests to control their desire to get everything they imediately want.  They would need to come to realize that they are playing a part in killing the productive asset that they need, unless they hold off.  Someone would likely have to get them together and let them know the situation.  It’s a similar scenario in complex business debt workout situations, when you communicate with creditors and ask for their patience and understanding.

The key in resolving complex debt predicaments is to get everyone (whether or not suits have been filed) to step back and take a holistic view of the problem. In the short term, they can minimize their losses.  In the longer term, they can maximize their benefit with a strengthened business relationship and loyal customer.  

This process akes place by thoroughly analyzing the situation and assessing the claims of each and every one of the creditors.  It is effective to start by putting together a simple report, for distribution to them, outlining the issues and alluding to solutions that would move everyone forward.

Time is of the essence.  If a suit has filed and served, it has to be answered.  The plaintiff has to be tied up in court by competent legal counsel for long enough to get the overall situation resolved.  

If your business faces multiple creditor issues, tackle the situation in a holistic way.  If you handle each issue in piecemeal fashion, you will be less likely to succeed.  

I love gardening and landscaping.  It gives me time to clear my head and come back to work better focused for the weekly challenges.  This weekend was especially hectic, because alternative periods of high heat and excessive rain had delayed most of our vegetable seeding and planting.  Our family had gotten well past the deadline for putting in most of our stuff, so we had to bear down and get it done.  Time and tide just don’t let you wait.

When it comes down to it, we’d get little done without deadlines.  It often takes external events or someone else to push us.  A lot of cash-strapped business owners don’t seek help until it’s too late.  They don’t act at an early stage to do the right things at the right times to prevail.  As troubles build up, they become increasingly frustrated, hoping that their ship will stay afloat.  And of course it won’t do this on its own.

A big frustration in our business is being called in to help resolve tough business issues at a very late stage, when the options are far fewer than they might have been just a month or two before.  If there’s ever a need for urgency, it’s when collectors are calling and suits are being filed.  It’s not too smart to get into denial and then be forced to act at the eleventh hour to try to avoid an immediate default judgment.

Collectors want to create a sense of urgency, don’t they?  Their success in doing so will determine if they succeed or fail.  And a suit filing by an attorney really gets your attention.  As a business owner, you have to adopt the same sense of urgency as the other side.  If not, there’s not much sense in trying to stay in business.

Are you concerned about diminishing revenues and mounting debt load and don’t know where to turn?  Get professional help.  We will help you to set up measurable debt reduction and top line revenue goals – with specific deadlines – to get you back on track.

The real estate entrepreneur had come to realize that she was in a real bind, for which there seemed few positive outcomes.  She felt boxed in from all sides and was behind in payments to several lenders.  Her income was way less than planned and the price of her main asset had declined.

The lenders knew her situation and her plans for recovery in fine detail.  They had gotten the information in writing.  But they were showing little cooperation in her need for business debt relief at this stage and simply demanded to get paid, immediately.  Precisely how these funds were to materialize was of no interest to them.

A lender will obviously expect to get paid according to the terms of its contract.  No doubt about it.  It will only accept a compromised settlement when it knows that it cannot be repaid in full.  We believe that, with adequate information, the lenders will come to this realization and we will be able to cut the necessary deals, once we have the ability to do so.

The client is smart.  She has that upbeat, resilient quality so typical of a true entrepreneur.  She understands that where she is now is no reflection on where she will be in twelve months, or five years.

It’s all in the head.  Rather than going to pieces, she is proactively looking at new strategies to bring in cash and is open to doing anything possible to minimize the damage to herself and her creditors.  Given the lessons learned in this situation, she is poised to join the legion of successful business owners who have gone through adversity in their way to wealth-building success.

As with so many other of our clients facing financial challenges, it is extremely satisfying for us to be able to support her in this endeavor.

We can only get what we want in life by catering to the needs of others.  Most of us learn this as we grow up.  It’s a basic concept that we have to constantly bear in mind, in our personal lives and as business owners.  After all, if our marketing and negotiating strategies are all about us, we’re in for deep disappointment.

As turnaround management specialists we often see the impact of troubled companies screwing up their chances for business debt relief and recovery by failing to consider the needs of their creditors.  Many of us have personal experience of being stung by those who have failed to pay us as agreed.  In the absence of any communication from the debtor firm, and after wondering what’s going on, the next question might be whether or not other creditors are being paid ahead of us.  And then we really start to get ticked off.

The fact is, if nobody at the debtor firm tells us what’s going on, who will?  If we don’t get voluntary feedback, or answers to our correspondence or telephone calls, we are likely to come to our own conclusions.  And these will paint a pretty poor picture of the situation and the individuals concerned.

It can come as a pleasant surprise to a creditor if its late-paying contact takes the time to level with them as to why the account is delinquent.  Candor tends to build relationships, not ruin them.  We are not catering to the creditor’s primary need to get paid when we act as straight-shooters, but at least we are doing the right thing to explain why the situation does not currently permit full payment.

It may be human nature to want to avoid unpleasant tasks, but an honest appraisal of your situation, shared with your creditor, can open the door to a settlement on revised terms, to meet your priorities.

As with effective sales and marketing practices, success in business debt reduction negotiations is fundamentally concerned with catering to your target audience’s needs.  If more business people would understand this, there would be a lot less need for collectors, lawyers and expensive litigation.

The “Soup Nazi” on the old Seinfeld show had an interesting business model.  He obsessed about the way that customers ordered.  He was so outrageously rude that he took customer relationship to a new low.  And he got away with it – on TV, at least – because his product was so good.  People would line up for it, in spite of the ordeal.

It can work that way in the real world, when people are desperate to have a business accept them as a customer.  Successful club owners know something about this.  But that’s a risky strategy.  The product has to be really, really good.  And people are fickle if a better choice turns up.

For me, I like to do business with people who are pleasant.  I have choices and go elsewhere if they are rude or indifferent.  The thing is, it’s relatively easy to ensure that your business gives good service.  This builds positive relationships with your customers.  And it makes sense, because it builds your “herd” of long-term relationship buyers, resistant to being rustled away by your competitors.

I was thinking about this recently after going into a local independent take-out sandwich place for the first time.  A sullen counter hand frowned and grunted, “Can I help you?” as I entered, before I had a chance to figure out the posted menu, which was hand-scrawled on the white-board behind him.

I do have a variety of responses to people who address me in that way, especially when their expression, body language and tone of voice would be more in line with, “What the hell are you doing in here?”  But I had no desire to make an issue of it at that point.  After a pregnant pause, trying to figure out the handwriting and what to eat, I made my order.

The atmosphere wasn’t good, but there were enough people coming and going to indicate that my sandwich might be worth waiting for.  It seemed as if the job culture required servers to be sullen when dealing with customers, but jocular with each other.  They really seemed to be having a good time until having to deal with those who were there to exchange cash for food.

There was something wrong with this picture.  Some of the customers may have been  regulars who had gotten used to this routine.  I have to think, though, that there would have been a line outside at lunch time if people had felt they were in a welcoming and friendly place.

The process of receiving the packaged sandwich was confusing, known only to the regulars.  But I did make it to the checkout, lunch in hand.  The cashier was having a bad day.  But, at last, I did see a smile.  It was drawn on the styrofoam cup placed in front of her, with words of appreciation for tips for “exceptional service.”

It’s a no-brainer that the owner would pull in a lot more cash, and the staff would make more money, if they were to give customers friendly, courteous and, dare I say it, respectful service.

In my favorite sandwich place I always have to stand in line.  The food isn’t any better and it costs a bit more, but it’s wildly popular.  The difference is in the atmosphere.  Customers really are made to feel welcome.  And you can bet that the owner has no worries about losing regulars to the competition, or the impact of the down economy on his business.  He’s built up such a rapport with his relationship buyers that nobody’s going to steal them away from him.  And there’s a lesson in that.

I have attended a lot of seminars on “how to get paid.”  It’s always important to figure out the mindset and methodologies of collectors and attorneys and to keep up with developments.

It’s a mantra with attorneys at these events that, before they file suit in a debt action, they always do their “due diligence”.  Most of them will say this up front.  By this, they mean that they find out beforehand if it is going to be worth their client’s money to go after the defendant firm.  After all, if the assets are all tied up and the defendant company is on its last legs, there’s not much point in filing suit.

Collection attorneys have a different take on this than other legal professionals.  Some of them run high volume operations and can live on the income from doing so, but the real money is in the percentage of the cash collected.  They deserve this, because they absorb some of the risk of collection, unlike your general legal practitioner, who gets paid on an hourly basis no matter what, and may be satisfied with a judgment.  I know this because I’ve frequently taken on clients with exposed, collectable assets, but where uncollected judgments are shown on their D&B credit file.  Collecting money – post-judgment – can be challenging and general legal counsel are not always very effective in this endeavor.

In their drive to collect a commission, collection attorneys can sometimes overlook the fact that a judgment will push the firm into bankruptcy.  I question the fact that they always do the “due diligence” that they claim they do.  As a recent example of this, a business owner called us in for emergency help.  The firm was at the end of its tether and owed a substantial sum to a supplier, which had resulted in a lawsuit.  The plaintiff and its attorney were unwilling to accept anything other than the full balance claimed.  No cents-on-the-dollar deal and no payment schedule, despite a full account of the debtor firm’s true situation.

The defendant firm was heavily indebted and on a knife edge with its bank loans.  We informed the supplier’s attorney that a judgment would put it over the edge.  But our settlement proposal was turned down.  The disheartened business owner did not want to prolong the agony by retaining counsel to delay the inevitable.  A judgment was sustained and, as sadly predicted, the big SBA loan was called.  The firm was forced out of business and the bank claimed all the assets, leaving the plaintiff with zero.

The supplier cried loudly that his attorney should have advised him to accept our deal, the inference being that he had not adequately done his “due diligence”.

The key to resolving disputes, especially in crucial game-over situations like this, is to communicate with the plaintiff’s counsel the true facts of the case.   He or she has to know – if they have not done their much ballyhooed due diligence – why your firm does not have the ability to pay the sum claimed in full.

You have to be able to show that you have something better than a judgment to offer them.  And to do that, they have to actually listen to you and read your carefully crafted proposal, before making the appropriate recommendation to their client.  For the creditor, this may translate to getting some cash immediately, or in the form of a stipulated payment plan, to help cover their costs.  As well, they will likely get your willingness, once your company is turned around, to give them the value of your future business.

Considering the alternatives, the plaintiff will likely conclude that this is the best you can do.  But its attorney has to do sufficient “due diligence” and actually pay heed to your perspectives and proposals if each side is to benefit.

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…