In times of drastic change, opportunity abounds…for those who see it.

As the various commercial market places correct themselves, adjusting for the unprecedented changes currently occurring, opportunity abounds…for those that can see it.

The first principle that controls our dynamic business economy is recognizing the incredibly powerful force found in a capitalistic system. This force has the power to change industry over night, create successful products and end successful exploits at a moments notice. It fuels successful restaurants and as some win others lose, others with a moment  of  brilliance. Old run down neighborhoods become expensive and trendy. Gas costs $4.00 per gallon and entire industries change. The sub prime market goes bust and new industry lending practices and products emerge as yesterdays business practices business becomes a thing of the past…overnight.  

Nothing is ever static in the business world, its all a matter of timing, and those that feel the tempo of change and respond effectively survive and can gain a competitive advantage. The market repairs itself when it changes. Change fuels downturns, it turns downturns around, and it speeds up accelerating economies, what ever is needed to correct the various markets peaks and valleys, it does, it corrects with change.

The second principle in play is, with change there is vast opportunity. Once the opportunity is envisioned, things happen, as the opportunity is exploited  and success is achieved for those who take the risk and dare to lead the way. 

These are two very powerful forces that are behind change and transition. The market place continues to constantly make adjustments for what works and what doesn’t work, embracing great marketing programs, supporting excellent new products, new fashion, new technology, advances in quality, reductions in cost, changes of style, etc. As well it rids us of ineffective practices, and products no longer in demand.  Entire industries can appear or disappear over night as change can occur with barely any notice at all.

Legislation can force change as new laws and new requirements create new twists and turns and opportunities for change.

Thus we know two things. Let the competitive capitalistic market dynamics remain in control of our economic system, do not interfere with its mechanization and it will adjust for whatever works and what does not work and will solve every economic problem which occurs.

Keep the government out of business, it mucks up the natural flow.

The major players supporting this  economic force are the entrepreneurs and their vision as they see such changes as an opportunity for fulfilling the supply and demand of new situations.

Thus every change creates a void which is filled by the entrepreneur who sees  and understands that this is an opportunity to step ahead of competition, make a larger profit and secure an advantageous position in the market place.

This is what significant change is all about.

Trends go up and down,  various influences support change. Change happens, entrepreneurs fill the void that change creates and profits are made. It’s a wonderful process and it works. Its capitalism and the competitive spirit working together. Let it happen and economic issues will come and go but our economy will remain very strong.

 

 

 

 

My lifelong addiction to my best organizational support system…a blank book and my “man purse”

Yes, I am one of those men who carry a bag with me most everywere I go. I admit it, some call it a “man purse” a “murse”….others call it a pocketbook as they snicker to themselves. Let them snicker, I know the power it carries and I tell you its the part of the best habit I have, and I highly recommend it as it is the basis of my personal organization and business support system… allow me to explain further.

It started when I was 21 years old, along time ago. I was in business and could not remember every phone number or directions or who I met with and what I promised I would do, and my worst nightmare was saying I would do something and then forgetting to do it, or losing a phone number, a name etc. 

I purchased a blank book, and began to write notes to myself, telephone numbers, addresses, cash flows, to do lists whatever came past me that I felt I would want to review for some reason and soon I was unable to go anywhere or do anything without my book in hand so I could jot down whatever seemed worthy of remembering. Then I had to solve the problem of how to carry my book with me at all times so I could be certain I had it when I needed it. Thus it became clear to me I needed a bag, a man purse, a murse. I then selected a readily available version and eventually designed one that fit my needs perfectly. I still carry the same bag for over fifteen years, designed to store my blank book and other necessary items comfortably and conveniently so I have it with me at all times.

Thus the merger of the two became the basis of a survival system, my blank book and my bag. Add to my bag, a cell phone, my calculator, my blank book, a pocket for my car keys, pencils, and other stuff and its my office in a bag, always by my side and always ready to serve me. If I am in my car and hear something on the radio I may want to check out I can write it down, directions, names whatever, whenever and whom ever.

I would look ridiculous if I walked around with my brief case everywhere I go, but my “murse” is ok, its over my shoulder or held by the hand strap and its my life saver, whatever i need for survival, plane tickets, receipts, a check book, whatever, goes into my “murse” and I have my office in a bag. It is also the only effective way for me to always have my blank book with me at all times so I can refer to it or write something down that I may want to remember later.

Could I accomplish this other ways? Probably, but this works for me and has worked for me for many many years, so well that I admit my addiction and proudly carry my “murse ” with me were ever I go, as it has whatever I need to survive and succeed in it and I always have it and my blank book at my fingertips.

I have a lap top but I do not take it to dinner or when I am out with my wife, or at a ballgame or wherever I may be…but I do have my “murse” with me, thus I am always ready to jot something important down.

My blank book and my bag…the secret to my organizational success. One final note, my blank book has no lines either, I love the blank page so I can be artistic with my cash flows and notes…lines feel restrictive to me, but either work. Try it, and if you can handle the snickering, it will be a terrific tool for you, and when asked about my bag,  as I frequently am, I say nonchalantly, its for carrying my glock! That shuts them up.

I have dug an old blank book out many many times to recapture a bit of information I recall I recorded and its always there waiting for me to refer back and rediscover the bit I was looking for, its saved my life and business many many times.

I admit I love my blank book and have experimented with many until I found the exact one I liked the most. 

I have never been without my book since. I use one up every three months like clock work and then purchase another and store the old one. You can not imagine how many times it has provided me with information I needed or allowed me the way to record something I wanted to refer to another time.

I no longer have to remember anything…its in my book.

 

Beware if you ignore the IRS, they have some very powerful and damaging collection tools, levying your checking accounts and accounts receivables.

The IRS has huge power to do many things that will cause you great pain and suffering and loss of property, business opportunity and yes even your home…This we all probably understand, but a closer analysis of some of their collection methods is appropriate to remind you not to ignore them, there is a better path through cooperation then in avoidance. Just as the IRS code gives them power to liquidate, the same code gives protection to the taxpayer and ways to resolve the issues. They are workable if you know the path and have a guide or a map.

However there they have a few tricks you may want to be aware of.

You will be warned in writing that they are intending to lien and then levy your accounts. They will do this, it takes a while but eventually they get to it. Typically they will determine were you bank, and will levy all your accounts, removing all funds that are there, irrespective of checks written against the account, they will simply all bounce. Frequently this will occur on a Friday afternoon as they are certain to get the payroll account at its fattest. You will discover this Monday morning if not over the weekend when your employees are told they cannot cash their payroll checks.

Be aware, that while part of the strategy is to collect cash, part is also to get your attention so you work out the debt effectively. Be aware also that they are not allowed to take money from your payroll account, although they do all the time. However it is beholden upon you the taxpayer to inform them and prove to them that it was payroll they got and they will release the cash levied in a payroll account immediately if challenged and you satisfy the burden of proving it was payroll. Again, they do this to make certain you pay attention to them and cooperate with their efforts to collect.

Some “smart” business owners figure this out and then either attempt to hide money in the payroll account or even use the payroll account as an operating account. This may work for a while but you will be discovered and this is why you must prove to them its current payroll they took (levied) and then they will release it.

As if that is not annoying enough, as now you must find the funds to cover all the bounced checks, their next trick can be fatal or at least very damaging to your ongoing business, when they levy your accounts receivable.

First you may have given them the information to do this during an interview were they ask specifically for you to name the accounts receivables and provide contact information. However they also have the power to look into your deposit history and determine who has paid you in the recent past and thus they make the assumption these may be ongoing customers who will owe you again and thus they levy them all, irrespective of whether or not they currently owe you anything. 

You can only imagine the horror experienced when your best customers call you and inform you they are sending the check they owed you to the IRS as ordered by the levy.  They then explain they will not be doing any further business with you for two reasons, first being they are uninterested in having the IRS in their face because of you and the second being you are no longer deemed reliable and worthy of doing business with because they fear you will soon be gone…That’s the end of your business.

You may recover from this if your customers are loyal and if they are savy enough to know the IRS will only send out a request and will do nothing to follow up on it, but it is a huge hit on your business status with your customer base being very unhappy and allot smaller then before this occured.

In a word, when contacted do not ignore them, it time to work out the debt…somehow, and there are many ways. Call me if you need help. 413-687-8388. I typically leave Friday afternoons open as I also frequently get emergency calls on Friday afternoons, and yes you can guess the reasons why.

 

 

In a workout situation, if Plan A fails, Plan B may be better.

It happens all the time. In a tough workout situation, the business owner does not want to confront the issues and unfortunately frequently prefers to just wait, doing nothing, yet hoping something will change. Plan A, the preferred plan fails to materialize for some reason and the business owner is then forced to consider plan B. Disappointed, disastrous? No,There is always Plan B  and it may actually be better then Plan A…why?

Because plan A didn’t work!!!

For whatever reason Plan A failed to happen so onward we go. In many cases plan A fails because the business owner failed to “pull the trigger”. He simply do not implement the strategy usually out of fear, intimidation, or he was unable to accept his plight and take control of his situation, making the hard but correct and necessary decisions.

 Then his property is in the process of being taken, his business is being shut down and liens and levies are implemented on his accounts and his receivables, law suits are initiated by vendors. It appears things could not be any worse.

I have always believed that out of disaster, successful emergence can occur. Let me remind you that the worse position your in, the more likely the best possible workout can be implemented. Thus while unfortunately frequently true, by bypassing plan A and suffering the consequences of further decline, greater  loss, fewer alternatives,  this all lays the foundation for a more effective workout.

Your creditors are more aware there is less likelihood of full recovery so getting less now may be better then waiting and hoping for more later, which will probably never happen.

The flip side of disaster can be a better conclusion.

Yes this is upside down thinking and not “normal” analysis, but when one is upside down, when your liabilities are greater then your assets, upside down evaluation for a successful workout plan to support re-emergence is the way one must think. It is the one situation were bad news is good.  

Its a skill one can learn to do or better yet, under such dire circumstances with so much at stake, I strongly recommend you hire a professional workout specialist. This is not the time to learn on the job.

If plan A  fails, plan B can be better. Keep focused, committed and resourceful. Never say die and remember, anything can be worked out, so the challenge is to make Plan B work… better then Plan A.

The underlying issue is to overcome the fear and reluctance to make tough difficult decisions in a stressful downturn situation…it must be done, and you must do it, maintaining the course is not always the best way to go, especially when you are upside down and in crisis, in fact it may be the shortest path to disaster.

You must be fearless and a leader, making the hard decisions, facing your demons and conquering them. Many people are depending upon you to succeed. Make it happen. There is always a plan B.

Call me if you need some help. 413-687-8388 (cell phone)

 

IRS Offer in compromise or a payment program, choose your poison, but not both.

If you have defaulted on your 941 payroll tax payments and have built up a debt and are now dealing with the IRS and working it out, there is a reality check you need to address and fully understand so you do not get trapped into a no win situation.

In fact it just happened to a client and fortunately I was able to stop it before he fell into the trap. Here is how it went. Of course the owner operator was deemed the responsible party, so the debt of the business is now the debt of the individual owner.

After a fairly vigorous discovery and investigation period were the IRS agent learned all she could through the collection process including the 433A and B forms and other  demands for financial documentation, and was pushing the client into entering into an aggressive payback program requiring large weekly payments, enough to satisfy the debt within a few years time. She “promised” that after a period of paying on this plan, the client could enter into an offer in compromise  and reduce the amount owed and that she would help make this happen.

Ridiculous…It ain’t so.

Very simply stated and an important strategy to understand in any workout, if the borrower can afford to payback the debt, what is owed, and demonstrates this ability by entering into an agreement and performing on it for a period of time, why would the IRS or anyone accept a discounted payoff when they already know they can get a full pay out with interest and penalties accruing along the way as promised and as performed to date? It will not happen. There is no good reason.

Further, the seperation between the Offer in Compromise department from the Collection Agent is extreme, and one has little to do with the other. Thus she has almost no influence whatsoever.

Her plan was bad advice. Selling blue sky which will never happen, and enticing the tax payer into a very expensive and brisk payback with a false promise of salvation later on. It will never happen. 

Never enter into a pay back agreement and then perform  if your intent is to negotiate an offer in compromise. This is the wrong kind of cooperation and works against your best interests…always.

 Better to accept reality and stay with the likelihood that you cannot afford to payback the full debt while now paying current 941 taxes and briskly reducing the  past obligation. It makes little sense and is likely to result in default again anyways, so whats the point. You have already entered into default and now are primed to do an offer in compromise…so do it. Do not expect you can do both. Its one or the other, pick your poison.

Its not about pleasing the revenue officer so maybe he will be nicer to you, its about being able to afford the workout and resolve the issue while staying in business. That’s the challenge. they are fine with closing you down and liquidating your assets irrespective of what the return will be. Even nothing is ok. 

Alternatively, it is unlikely you will be able to afford both the aggressive payback program the service is demanding you accept  and ongoing current payments. Its too much, and paid weekly, no room to breathe

Bound to fail.  Do something else. Qualify for a discounted payoff, then schedule the payments and get it done, but the first time you make a payment on their “plan” your workout days are over, it will be straight to liquidation a soon as you default one more time.

You never want a payment program unless there are extenuating circumstances that prevent a viable Offer in Compromise. That’s the best plan.

 

If your business has tax liens…can you sell it or its assets to immediate family members?

The IRS code says that transfers between immediate family members is deemed fraudulent on its face. Without having to evaluate the facts, the code says that it is natural and anticipated that children will lie for parents as will brothers and sisters and parents lie to protect and help each other. Its a natural occurrence, so frequently experienced that the IRS code determined to end this matter by simply deeming all such transactions between immediate family members fraudulent on its face, therefore eliminating the requirement for evaluating this issue all together.

That’s the bad news. The good news is I have arranged many such transfers of assets between family members despite the above described barrier by arguing the following facts to the revenue officer with the following logical arguments.

1. The business is not readily marketable to the general public, it loses money , and is a niche provider with few valuable assets thus basically unmarketable.

2. We have the assets appraised and although immediate family they are willing to pay fair market value for them, assuring the IRS that they are getting fair consideration for the release.

3. We “retire” the original tax offending family members out of ownership of the new entity although allow consulting or even employment by the new entity.

This has worked repeatedly. It is also a natural evolution as frequently know one else would purchae so this creates a natural and advantageous opportunity for both sides. Additionally it may protect family income and long term work effort, perhaps saving jobs and opportunity were there may be few alternatives.

I have found repeatedly that while clearly not intended by the code, the IRS agents empowered to defend and support the code, understand the benefits to both sides if this is type of transition is permitted under carefully considered circumstances.

It is important when contemplating such a transition that it is discussed with the IRS agent in advance and acceptance of the plan is obtained. I would recommend this factor be included in the Purchase and Sales contract clearly stating the facts and the relationship so all is out and on the table for everyone to see and understand. 

It would be foolish to permit a “responsible person” from the original offending company to take an ownership position or for that matter any previous owner be them responsible or not. Additionally, it would also be inadvisable for a previous owner to be an authorized check signer for the new company.There needs to be a 100% transition between the previous owners and the current new owners, especially if they are family. In other words, there needs to be a clean break between the old and the new.

This also permits for a seamless transition, without business interception, which may be critical to the business surviving.

Thus do not reject this opportunity just because the tax code says it is not permissible. With the right circumstances, it can be done.

 

 

No means yes…just not now. How many rejections until a sale is made?

I have stated in other blog entry’s that in business “no” means “yes”, just not now….that’s the attitude a salesperson must maintain to be successful. Of course this is assuming your talking to a bonafide potential customer who uses or should or could use your product or service.

As long as the potential client is talking to you, “no” is an acceptable answer, not to be considered a rejection, just a postponement, the customer is just not ready yet.

The danger is when the talk stops and there is no further opportunity to penetrate and close. When you cannot talk to your potential client because he is not taking your calls, you may have a real no, although i still say its only a harder postponement, and will require a strategic reconsideration as to how to approach him next, not a sign for a retreat or abandonment.

If you are talking to enough potential clients, some will close immediately, some soon but not today, some later and some allot later. Thus your sales and marketing plans must include working the line knowing you have inventory or work in process, tomorrows sales, next months sales, next years sales, you are developing now. All saying no, but really saying not now, but lets keep talking I am getting closer to a yes.

There is the low hanging fruit sales and marketing program,  harvesting those prospects whom you merely have to ask once or twice and you will receive a yes, is very nice, but this will not happen all the time, and many excellent qualified, bonafide potential clients need a longer time to consider and accept.

So how many “no’s” must you receive before it turns to a “yes”? 

A good question, and frankly my answer is … unlimited  ”no’s”, as many as it takes, never give up, it may not be a weekly call or even a monthly call, but I would have a sales and marketing program that manages my communication requirements. For every person I speak with that says no,  a carefully considered return call, letter, email, newsletter, post card, whatever you can imagine, will be scheduled and implemented, designed to keep the man in play and working towards an eventual yes.

Why give up on anyone, if qualified, especially if they are not throwing you out the door or hanging up on you, especially if you are convinced you have a product or service that the potential customer could and should use. “No” is just a postponed “yes”!

So how many times does it take? There has been much research on this issue and it is said that on the average it requires 8 rejections before an acceptance or a yes is received. That’s allot of rejection, but how sweet is the acceptance when it is finally received.

Perhaps the required strategy is to figure out how to deliver at least 8 approaches, so you can get the 8 rejections (on the average so it may sometimes be 10 or 12 rejections you must receive) before the yes occurs.

I would therefore never consider another postcard, email, call, visit etc a waste of time until you have provided at least a dozen passes, and received a significant number of rejections.

You must ask for the sale, the commitment and either get a rejection, more work required, or a yes and a sale is made.

I would make certain I am delivering at least a dozen communications so I can get though the “no’s” and reach the “yes” as  soon as possible. Keep score and if you stayed in the game and play all 9 innings, making 8-12 sales pitches, receiving a dozen “no’s” but eventually receive the yes.

Maybe the sale requires creating a relationship, demonstrating professional tenacity, service, commitment, empathy ( see other blog entry’s) follow through, maybe its a no to you and not your product or service and thus you need the time to convince the potential client that you are worthy of his business.

If sales are all about creating a relationship, it cannot be done in one or two communications, it takes many and maybe they should not all be sales calls but should be relationship building calls without a word said about product or services. Maybe your conversation is about the industry, or whatever subject you consider that the potential client would be interested in, creating a relationship….

So the mantre is “No” means “Yes”, just not now. You require at least 8 rejections before you will receive an acceptance, so get on with the job, you have a ways to go, and giving up before you have made at least 8 passes is leaving potential sales on the table, not finishing the job,  wasting and investment and the time already spent because you failed to keep the ball in pay for long enough to win.

Do it, do it at least 8 times and perhaps more, it does not always have to be a sales pitch either  but it must be a valuable communication. Think about it, every sales person has experienced success after a significant string of no’s. Make it part of your sales and marketing plan. No means yes, just not today. In fact since such a large investment is made in originating and presenting to a new prospect, it seems penny wise and pound foolish to give up on the third or fourth effort, how much more does the next few cost, not much.

Any good sales data base management program which calenders your efforts and keeps you on track makes such an effort easier to control and monitor and implement effectively while keeping keeping track of the data and progress. 

Review your sales program and build in 8-12 communications. Do not give up till the job is done and the sale is closed.

 

Equity sharing as a way to provide incentives for managers to reach goals.

Recently I have been working with an auto body repair shop. The problem is lack of profitability despite significant gross revenue. The manager appears capable but unwilling or perhaps unmotivated to increase productivity by better managing the flow of work product and the effort of his employees. Employee productivity is the issue, a very common problem for many businesses.

We believe he has the skills required to turn this business around by dramatically increasing the productivity but he lacked the authority and incentive to make the difficult decisions required and to be held responsible and accountable for the profitability of the shop.

The managers position requires many specific skills and replacing him would be a difficult and along term task. Thus we made the decision to solve the problem within and create an environment that would support the development of the full potential of the manager so he could develop the shops productivity more fully.

We decided an equity reward system would resolve all the issues in a classic win win situation as follows:

1. We determined the required monthly revenue and payroll ratio required to first break even and then expand into significant growth and profitability.

We created a ramp up scale, with year one starting at $100,000 per month with a 65% payroll to revenue ratio for year one.

Year two went to $125,000 same ratio, year three $150,000. per month, year 4 $175,000, the presumed maximum the facility can handle ( not including additional shifts or weekend production which is a possibility, or expanding the building and production capabilities).

Each year the manager reached the goal he would receive 10% ownership in the business until he acquired a maximum of 40% four years out. He earned additionally with dividend distributions the same way the owner extracted cash out of the business. If the business is ever sold both would appropriately share in the gain. More likely the manager will end up buying out the owner.

The profitability of such a ramp up is very good and the owner is delighted to share equity in exchange for significantly increased gross revenue and increased profitability.

The manager is being given management control over the shop including hiring and firing men. We will monitor his success by installing a key indicator reporting system which we will together meet weekly to review and discuss.

If he fails to meet the goals we can fire him and he does not get  the unearned increased equity, thus the bet is in his shoulders to earn his equity at no cost to the owner until well down the line and if he is successful in developing the business and delivering the objectives.

Its a great solution to a difficult situation, as this frees the owner to focus on other programs and business interests and yet keep a close handle on the results of this experiment. The manager and the owner both win if he is successful in implementing a growth plan with profitability standards. He has control over the system as he can make the changes he wants and needs to without interference from the owner. 

Our lawyer wrote up a simple clear agreement, and we will kick this program off May 1. He will begin firing, hiring and training new employees and holding his men to  standards he considers effective and appropriate. 

Incentives with little out of pocket costs, flatter management, accountability, key indicators to track and monitor success, its a winning equation. Lets see how well it works. 

 

Negotiating a reasonable workout with the lawyers suing my clients, alot better then litigating.

My clients were served with a law suit demanding payment of approximately $650,000. They were clearly responsible for this amount and had no viable defense. We visited some high powered lawyers to ask for an analysis and a proposal. They proposed a two year pre-trial dance with discovery, motions etc, and then at the appropriate moment they would enter into a resolution discussion for a short payoff, but only after the stage was set. Two years of misery and with retainers and fees likely to reach over $100,000. before we got near a court room, heaven forbid.

After we met and my clients had a day or two to absorb this meeting and their proposal we met and I suggested the following course of action. That rather then waste all the cash we had available and have nothing left to offer in compromise, why not let me approach the opposing council and work out a conclusion using some of the money we would have paid our own lawyers.

They agreed and with financial statements and tax returns in hand I made an appointment with the lawyer representing the other side and met with him this afternoon in his office.

I explained my position very candidly, telling him my clients may have made some mistakes but in the end they thought they were doing the right thing under great pressure. The IRS was sweeping their accounts and threatening to shut them down, which they did. The bank was foreclosing and they were on the verge of total annihilation.

I offered them $25,000 telling him we would rather pay the plaintiff then pay the attorneys as it made sense and seemed like the right thing to do no matter how little the offer was.

After a brief discussion, the lawyer agreed and stated his intent to report this meeting to his client and recommend they accept our offer and cease all litigation.

It seemed appropriate to him as well, as what is the sense of wasting so much cash and time with no hope of a return in the end for his clients. He appreciated my candid response and logical suggestion despite the low offer, it was as good as we could do, presumably and thus the best possible solution.

We have a few hurdles to go, but this will work out along these lines and for once sane minds prevailed and a lawyer understood the best interest of his client was being served by his recommending they accept our offer and resist an expensive but fruitless victory in the courts.

This will be resolved along these lines.

So the moral of this story is that anything can be worked out, if it makes sense and is properly presented, even a law suit,

 

What ever happened to personal standards and how does this affect your business?

What ever happened to our personal standards, you know the value of our word, for example? It seems that we all remember that there was the” good old days” when a mans word was rock solid. In other words you could depend upon his performance on time and well done because he said he would do something and thus could be relied upon to do it.  In those days everyone also did their best and delivered exceptional service and product. What happened?

Why is this a story from the “good old days” and not a story about today’s standards and way of life?

For example:

1. Being late for an appointment is deemed acceptable and almost expected. Broken word.

2. Not calling back when you said you would is normal. Broken word.

3. The biggest laugh of all and a joke everyone understands is the check is in the mail…even though it isn’t, but this practise while annoying is absolutely expected. Broken word.

4. Late payments for rent or anything for that matter is apparently built into our culture as we now have late charges and grace periods honoring ones lack of commitment and saying its ok as long as you pay an additional amount. Broken word.

5. How about vendor deliveries, never ever on time. Broken word.

6. What about trades people. “I will definitely be there on Monday” and they show up on Thursday and we consider ourselves fortunate that he showed up at all! Broken word.

7. Even in our own offices, dead lines are never met, and  it seems acceptable to everyone involved. Broken word.

8. Bosses have a habit of never being on time, but he is the boss we say, so its ok!!!! Broken word.

9. Meetings never start on time and never end on time and this too I suggest is a breach of a commitment. Broken word.

10. Accountants never deliver their work product on time nor do lawyers.  Broken word.

11. Then there is the quality of performance, it seems that taking pride in a quality performance is rare. People expect inferior work effort and are surprised when someone does a good job or delivers as promised, as if its ok to deliver less then your best and less then paid for or expected. Low work standards.

12. We expect shoddy product and guaranties that have more loopholes then substance, insurance companies that do not pay on claims they have insured. Low standards.

13. Tips are no longer earned but are expected even for inferior service. Low standards.

…and on and on it goes.

Yet we try and teach our children that your word is important, that timeliness is important, that doing your best and delivering on time is important, yet as they grow up they see the opposite is true.

What does this mean to a business person?

We have a choice, we can either continue to contribute to the demise of our standards, or you can make an individual statement and make a commitment to your word being unbreakable and demonstrate to everyone you are involved with that you are a man of your word and do what you say you will do.

What would this mean? You would rapidly earn a valuable reputation as a dependable man. This will create and support huge respect, tremendous loyalty and more business then otherwise, as people are attracted to people with high standards in a world were standards are disappearing. People so appreciate a man who keeps his word, they will admire him and talk well of him and will want to do business with him. They will deem him responsible, predictable, dependable, reliable and therefore worthy of trust, wow!!! All starting with keeping your word.

They will accept his word on other issues that are important, they will give him work without competitive biding, they will make him the preferred business associate, the “go to guy” because he delivers what he promises.

So here is the interesting fact. Because when one demonstrates a commitment to keeping ones word on the small issues, it transfers to larger more important issues where it really counts. If a man commits to honoring his word, it is typically an across the board commitment, applying to all aspects of his life, thus if all we need to do is return a call on time and reap the benefits of being a trustworthy man who delivers as promised and this applies to all aspects of his life, then its probably a worthy effort to return ones calls on time.

It is sad that our society has reduced itself to such a low common denominator were everyone expects everyone else to NOT perform as they say they will and not keep their word. But its not to late to change this, one person at a time. The benefits are huge.

It is an advantage in every aspect of our lives, thus I say why not try it out. Keep your word on the simple things and see what happens to your life. Practice keeping your word on small thing and soon you will be keeping your word on the large issues as well.

Who knows maybe you will soon be known as someone who has high standards, keeps his word and does what he says he will do. This will transfer to all aspects of your life, home and community. Its how we are supposed to be living, do it, it works, its good for you and it is setting an excellent example for others who will follow. 

 

 

 

 

Workouts are a moving target. Be flexible and realistic, and being able to afford and control losses.

Workouts are part science, part art form, and very unpredictable. Please remember a person entering a workout situation owes the money. There is no defense to this issue. There is no allegation that it is not due, it is, thus the issue is an after the fact indefensible negotiation. You have received the benefit of the bargain and now cannot pay the agreed price and want a reduced price.

There is no question or arguments about these facts.

Therefore, the workout scenario is all about changing the deal. This is new ground for both the debtor and creditor, new terms and conditions, is what the debtor is asking for.

In fact the creditor never even agreed to enter into a workout discussion or negotiation and has no obligation to do so.Thus the first victory to be taken by the debtor is to commit the creditor to enter into a workout negotiation. This is a very important issue to be agreed upon as it means there is a willingness to discuss a restructured payback program that is less then what was originally agreed to.

Sounds unlikely, improbably, impossible but that’s the first objective and certainly an up hill battle on a very slippery slope. However if the creditor agrees to enter into a workout negotiation, you have taken the most important victory of the scenario. If they agree to the discussion they are indicating they are willing to take less the they are owed, its now just a matter of how much and what the terms will be.

Once agreed that the creditor is willing to enter into the discussion, this may be the only agreement both parties agree to without negotiation. It either will happen or it won’t. It may be a matter of policy, or under the circumstances acceptable to the creditor, but it is the first battleground and the most important. It set the stage for the workout and how this issue is handled is very important.

The rest is a crap shoot. Who knows what will happen, what will be agreed to, how much it will cost and what the terms and conditions will be? Its a new game and while possibly predictable within a broad spectrum, depending upon the facts and the skill of the negotiator, the results are impossible to predetermine.   

Thus be prepared, it may work out well, BUT in fact any discount is a victory for the debtor as it is a pure gift that is not required and unlikely, and never planned for nor part of the original deal. Thus whatever is achieved in a workout negotiation that is ultimately a reworking of the original agreement in an after the fact renegotiation is both UNPREDICTABLE and a huge victory for the debtor.

The point is, while planning for and implementing a workout strategy, one must be extremely flexible and appreciative of any forgiveness granted, as it is a true gift, undeserved and offered only because it is a practical solution for the creditor, not an entitlement for the debtor.

In a word a win is a win, stay in the game, fight for another day. A workout is a moving target and any conclusion that is affordable is a successful conclusion. A workout is not a place to gain wealth, or “beat” the creditor more then is warranted under the circumstances. One must have a realistic attitude going into a workout negotiation, disclose all pertinent information, make an effective presentation of the facts supporting a workout compromise and of course be properly represented.

A workout negotiation should never be done by the debtor but ONLY by a professional experienced workout specialist. 

A workout is not an opportunity to make a profit, but is a compromise the creditor is allowing. Do not get greedy, it will not work out. Be satisfied with any conclusion you can afford to repay. Affordable losses I call it. Thats the goal.

 

 

If your business is not making you money, its not worth saving…Kill it.

Perhaps the greatest waste of assets, and time, and the cause of way to much personal sacrifice and damage to your self and family is the protracted running of a failing business. If your business is not making you money, and its not a start up, if its not worth saving…kill it, quickly.

There is no question at all, that an astute business owner with a marginal cash flow can juggle his revenue, duck his creditors, get new vendors, robbing Peter to pay Paul, eventually failing to pay 941 payroll taxes, maxing out credit cards and then going into default, yet remain in business tenaciously week after week after week…year after year, waiting for something to happen to change his luck.

I have huge respect for such a business owners commitment. I understand the mantre…I will not give up! I get the belief that tomorrow the big order will come in. I understand you are loyal to your workers who are depending upon the paycheck you are generating even if they cannot cash it until Monday. I get the fact that you are committed to your mission

I understand your ego driven decisions to hang on and anticipate miraculous growth and development … tomorrow. I applaud the attitude but beg for some intelligent analysis.

If the business requires a significant investment to succeed and the capital is unavailable, then success is probably impossible, as a business plan based on a miraculous savior is a deficient plan and ought not be followed. You, your employees your creditors and your family deserve better, it is a foolhardy person who follows this agenda.

I see so many business owners hanging on, wasting assets, working without taking a check home, sacrificing themselves and their families well being…for what I ask? If it cannot be done, why pretend it can.

Some businesses require inventory, others require consumer advertising. Some require a tight price point as competition is fierce and thus large volume is required. Others require expensive equipment. Most businesses require growth capital as payday comes every Friday yet revenue may take months to develop.

Many marginal businesses simply require a sales and marketing plan and then a way to implement it, but it isn’t done at all. Others simply carry too much ovehead or are pricing too low and are unprofitable. 

Without the appropriate or necessary resources and strategies the business is doomed from the first day, its just a matter of time until the business owner is forced to accept reality, when the phones are shut off, or the tax man knocks on your door, which ever comes first. 

It is perhaps the most difficult decision a business owner has to make but it remains the most basic and important. If a business cannot be profitable because of reasons beyond the owners control, and if the business is draining capital and other resources without hope of a turnaround, then it is the business mans responsibility to liquidate it and try something else. Death by slowly bleeding, a drop at a time, is no different then death by guillotine, other then how long it takes.

Worse yet, you may be wasting valuable assets that could be applied to another business format, or plan that could work, after all, we learn more from failure then from success, so the next rendition may be better then the first because of what was learned.

Many feel that it is a personal failure, a reflection on ones character, capability, and skill. I say ridiculous, and furthermore while reflecting on what went wrong is important so the lessons are learned, the bottom line is relevant, after all it is business, and continued losses need to be stopped and shut down.

Let me state the principle clearly, a smart man knows when to fold his hand and when to make a bet and play the hand. A not so smart man plays a losing hand hoping to bluff his way to victory or pull the inside straight. It may work occasionally in cards but it seldom works in real life business.

Know when to fold your hand and kill a business that cannot work. Its the second most important decision you will make. The first was opening the business in the first place. 

Follow the plan, if you had none then make one and then decide what to do. Kill the nonperforming business, its wasting your time and resources. 

 

Alter Ego companies, fraudulent transfers… this will not work when hiding assets from the IRS or bank.

Business owners will do much to protect themselves and their assets when in trouble. Sometimes its not a well thought out plan and ends up not only not producing the results desired, but puts themselves into a worse situation then they were in previously and thus can be a step backwards instead of a defensive move that makes sense.

Here is a classic error, all to frequently done. The business owner creates a new entity, perhaps an LLC, now easily done on the internet in a few minutes, and being the sole owner he transfers capital, contracts, inventory, whatever he has that is valuable into this new entity believing he will protect the assets from harms way as the IRS or Bank may either not find the new entity or even if they do find it, the assets will be protected because it is a separate entity not guilty of the breaches he has suffered in his offending company were the assets previously resided. Thats the typical plan.

I will not discuss the legal aspects of this issue as I leave that for you and you lawyer. I will however suggest that as a business strategy used to protect your assets from harm, liquidation, seizure etc, this is never a good idea.

If the new entity is deemed an alter ego of your self and your primary corporation which owes the money, if not done properly, and if done merely for the purpose of hiding assets and tricking the creditor, the “new” company wil be deemed the same as the old company from where the asets came from and it all will be collapsed into one offending entity, with no additional protection whatsoever.

So whats the point? Please resist this temptation. I see it way to often and thus must warn you of such a deficient strategy. A transfer of assets has to have a legitimate business purpose and be done at fair market value, to be provided the full benefits and protection that is offered.

There are many legal requirements that I again will leave for you to discuss with your lawyer, however, suffice to know that “they” are onto this thinly veiled procedure, and if attempted and discovered they can deem it an alter ego company which will be liable for the same debts you tried to hide your assets from in the first place. So nothing other then your bad faith will come out of this exercise. 

Another form of the same silliness is called a fraudulent transfer and occurs when a business man moves assets into his wife’s name ( or anyones name) for no consideration, believing he will either hide the asset or preserve it from creditors attempts to liquidate, not realizing that such a transfer can be easily undone by the courts and will result in the asset being returned for liquidation as opposed to hidden successfully.

Again, another legal concept but one in which many business owners fall trap to and must understand that as a basic business strategy, this will not work out and will be undone. Transfers for less the adequate consideration and transfers to immediate family members are all very suspicious and typically do not result in the desired protection. In fact the IRS code says that any transfer to immediate family members is or can be deemed “fraudulant on its face” irrespective of consideration paid.

Check it out before you do this, there are better ways and you are unlikely to achieve what you are trying to accomplish. Talk to your lawyer on this one, before you act.

There are many better ways to protect your assets. This is not one of them. Do not waste your time and effort in this pursuit. It will not work out as planned.

 

 

 

A way to recapture unnecessarily paid 941 payroll taxes. Why won’t your accountant advise you?

I have huge issues with the level of business, accounting and tax advice many accountants fail to provide their clients. Some accountants say it was not asked for. Few seem to understand the responsibility an accountant has to consult meaningfully and provide their clients information and possible strategies that would lead them into safer more secure business practice.  

It would be as if a Dr. did not report he suspected the patient had a problem from the test results, because the patient hadn’t asked for the information…silly.

Here is a very common practice that I am certain many accountants see and choose not to comment on.

Many business owners invest sizable amounts of cash into the business. Sometimes in one major investment or frequently many smaller ones, other times its a slow but steady flow of personal capital into the business to prop it up when required, covering low spots in the cash flow, investing in inventory, covering payroll or whatever the emergency may be.

This may be categorized as a loan from the owner to the business and should be accompanied with a note with interest and an attempt to paying the note back. Yet instead during the ensuing months the owner takes out payroll which is taxed heavily and paid for by both the business and the employee in this case the owner.

Instead, the accountant could have classified the paycheck as a return of borrowed money which is a non-taxable event and not subject to payroll deductions or contributions by either the individual or the business, a huge 15% savings at least. Filing a 941x can repair this issue, but is infrequently done.

Better yet, when things get tough and cash is scarce and the owner has invested over $100,000 dollars as an example and has taken out a hundred thousand dollars in payroll say over two years, the accountant could file the appropriate paperwork to reclassify the payroll and have the taxes returned to the employee. 

Why would an accountant allow this to happen without instructing his client that a better way exists which is more appropriate and follows the code exactly and converts a heavily  taxed transaction, payroll, into a non taxable event, a payback of a loan? 

Ask your accountant and tell me his answer. Then hire another accountant who will look out for your well being.

 

#200: Business owners must lead, follow or get out of the way. Holding the course does not work.

Ownership requires leadership. Making no decisions when a decision is required is self destructive, the wrong decision is even better, but of course the right decision is best of all. The important principle to recognize is the fact that in small business you can make a correction today and see the results tomorrow. Thus when the plan is not working, or the revenue is inadequate, or the capital insufficient, or the employee base is controlling you, priductivity is too low, competition is beating you, there is always a way to overcome the obstacle. Action, is neccessary, decisions must be made.

Thus a small business owner, who has his cash invested has shouldered debt and personal guaranties to support the business, and thus has an absolute obligation, a responsibility to protect his investment and make it work.

This requires leadership responsibility and recognition that success starts and ends with the owner. Thus lead, follow or step aside. Since you cannot follow, there is no one to follow, you cannot step aside that would be abandoning your responsibility, all you can do is take a leadership position and make the best decisions you can while accepting full responsibility for victory or failure. Making no decision, or holding the course is unacceptable and irresponsible and will result in failure. 

Having stated the obvious, what we all know to be true, we still find ourselves in ownership positions afraid to do the right things and thus we make excuses for failure and continue to do the same things that have brought us to this point of failure… again and again, refusing to lead and thus change the path to a successful one. 

The good news is, that just as there is a right and successful way to accomplish any business task or strategy be it making your product, providing your service, financing your business or implementing a successful sales and marketing strategy, there are many correct ways to implement a successful business plan. Thus steadfastly pursuing the wrong path which yields loss instead of gain is foolhardy and unnecessary.  

In a word if lost, get help, find a guide, get a map. There are plenty of competent people ready, willing and able to help you find your way. Whether it be it  one of the basic parts of your business that may require work or an entire reconsidered business plan that may have to be written, or a specific problem you have not figured out how to resolve. Get help, lead, follow or get out of the way. Owners must lead, there are no options.

In the end the analysis may suggest you either do not have the capital, the cash flow, the asset base, the physical plant, the employee requirements to make the turnaround occur within your investment capabilities and thus the best answer may be liquidation, of the business or perhaps the assets and if that decision is made, act rapidly as capital is eroding every day.

You must get over blindly waiting for something different to happen if you have not done something to cause change. You must cease feeling any sense of responsibility to stay in business or not make changes because you want to protect the jobs. You must stop blaming other circumstances beyond your personal control and accept the responsibility for appropriate leadership under fire and make the decisions and moves necessary to improve your business and truly protect the jobs and turn a profit.

Thats what I have learned after consulting with hundreds of business owners many who have succeeded and many who were committed to failure, its still all about accepting the responsibility to achieve success that goes along with opening up a business. The responsibility to do your job, the job is to make certain the business runs profitably so everyone relying on you, your vendors, your customers, your family, yourself is secure and successful.

Lead, follow or get out of the way… success or failure begins and ends at the top. If you choose to lead, and opening up a business and being a business owner/operator is a major leadership decision, then accept your responsibility and do it right, or ask for help, both work. 

If you choose to follow, do not open a business, you should work for someone.

If your just slow to get it, trust others to guide you, but do not stop progress. Forward motion is magical.

 

Buying out a 50-50 partner, fairly and easily.

Most frequently, partners in a small business are very close friends, family, or long term trusted sweat equity business relationships.

Perhaps one of the most difficult challenges confronting this relationship is how to break it up when the time is right. There are always many emotional issues which I can not work out for you, but the equalizer is found in how a buy out is accomplished and most important what the price and terms are. If its fair the relationship and the business have a chance of surviving. if it is not fair, more then likely it will either  not occur at all or the relationship will end, with a long term very negative air, a huge personal loss as well a strong likelihood the business will either suffer or cease to operate. 

Here is a way to resolve this difficult transition, safely and respectfully for both partners in a buy out situation.

Partnerships break up for many reasons. Some personal, some financial, some ego driven. When this happens there are two important goals which must be achieved:

1. preservation of the business

2. preservation of the relationship

There is only one way to accomplish this:

With a fair deal for both sides. If adequate consideration is paid, and the process was not injurious to the players, and if the terms of the payoff are agreeable to both sides, then everyone will survive even if there are a few ruffled feathers.

The devastation and destruction which so frequently is associated with partnership break ups can be overcome, if a buy out plan is established in the beginning of the relationship. If everyone agrees on it at the onset When a breakup occurs and the plan must be utilized everyone will remember they already agreed to this process, it was fair when they agreed so it must be fair now, and disagreement is  less likely to occur.

Thus I have a strategy that either partner can invoke, knowing the potential consequences, thus it is only utilized if the partner is truly ready.

Here is the deal, simple, honest and fun…everyone wins, but know one knows who will be the surviving partner until the strategy is played out.

First, it is important that both partners have a full grasp of the numbers: the asset value, the good will value, accounts receivable, account payable an income statement and a balance sheet.

Then the partner wanting to get rid of the other partner and buy him/her out makes an offer. The offer had best be as high as reasonable because if the opposing partner chooses, he/she can turn around and using that number offered to him/her, can opt to buy out the original offering partner for that price he/she offered.

The original offering partner can up the ante and offer more, but the game is over and the second partner the one who was first offered too and now exercised his option and made a turn around offerwith the same number which is now binding on the original offering partner may at his/her choice either accept the new counter offer or demand the first offering partner accept his turned around counter offer at the original price offered and be bought out.

This process creates equality, is respectful and assures fair value for the parner being bought out, whichever one it may be.

In addition at the beginning when this plan is agreed to, the terms of the deal are also agreed to and since no one ever has cash, and to make certain the two partners can both implement the buy out, the agreement further states that the bought out partner will accept a note for five years at 8% interest payable monthly.

This works. The offering price by the first partner is high as the offering partner knows if its too low the other will buy him out for the same price. If its high enough the other partner may accept it, either way its respectable, affordable and a win for both. The business and the relationship can be spared destruction which so usually occurs.

If you have a 50-50 relationship and have not considered exit strategies for an individual partner, add this strategy at your next board meeting, its not to late.

I have seen it work and its a beautiful thing. 

 

How to implement change…the most difficult task there is.

Change is the objective. With change we can project and anticipate a better or at least a different outcome, without change we can all expect the same exact results we have always achieved. That seems obvious and easy, but it remains the most difficult challenge imaginable.

Most people know what they want to have happen but fail to implement the required changes that will bring the desired results. So here is the way to overcome this barrier and make change happen.

Three parts to the stratgy which when applied to support any busines change the objective can be achieved.

1. You must have a clear understanding of the result you want to achieve. In fact we start with the desired result and work backwards. Say for example the desired result is an increase in gross revenue. Thats too general. We would ask exactly how much of an increase do you want? How many dollars and how many items sold or contracts entered into will it take, in otherwords first we quantify the results you desire.

2. Then we need to plan exactly how we will achieve the goals, will it be more advertising, different advertising, more direct marketing, mailing, telemarketing, maybe reps or brokers, expanding territory, expanding product line? Each move having a cash flow requirment and a timeline and a likely result based on what combination of effort and resources you intend to invest in the program.

Thus you know what your goal is and how you are going to achieve it. Thats half the answer to creating change, knowing what the change looks like.

3. Now for the real magic. Each strategy has specific tasks required to achieve the objctives. We break down the strategy into its smallest component parts each minute task and step within the task and determine a critical path for each task to achieve its goals and objectives.

Then with a timeline and a very small step by step critical path, we implement the final mandate, we create short goals achievable very quickly and including a small handful of tasks. The goal may be a half day agenda which has three or four tasks with a few steps within each task.   Small tasks, a few steps in each task.

At the end of the day and week we will have reached what originally appeared to be an unattainable goal, to large and intimidating to consider…one very small step at a time. Bite size attainable goals with immediate gratifiction, a completed task.

This makes change occur automaticly without anyone knowing or thinking about the large daunting goal or bjective. The many small steps are digestible and can be easily accomplished, thus it gets done. Collectively the impact is a huge strategy switch or a major change in some aspect of the business, but accomplished one small step at a time, with specific goals and very achevable objectives accomplished in a short time.

Anything can be programmed this way, anything can be accomplished, change can be ushered in gracefully and smoothly with little pain and resistence from those that we want to change. 

Implementing change has traditionaly been the most difficult task there was, not anymore.

This is how we do it.

 

 

What to look for when hiring a business consultant.

First, I am a business consultant, so I have a view to advance, my own.

Second, there are many excellent business consultants, who know their stuff and deliver what is asked for, other then myself.

Unfortunately there are far more that do not deliver a fair service for the money charged so this evaluation process is an important exercise. In addition, a consulting relationship requires a certain amount of trust between the consultant and the client, and since trust can only be established over time with much action between the parties, it is a difficult decision to make when you hardly know the man at all. Thus relying on past performance is important and other peoples opinions and experience  who have worked with the consultant is crucial.

However I also believe that I am the best person possible to discuss the ins and outs of hiring and using a business consultant, who better, as I am willing to put my cards on the table and be inspected. Compare my analysis with any other consultants. Lets see how it looks, as I show you what to ask to help you determine the potential success of a professional consultant relationship.

Like any area of specialty, you must have an idea what you are looking for in order to select the correct consultant. The consultant must not only have skill, expertise, and direct experience but as important there must also be a synergy of compatibility, chemistry in a word.

Thus when searching out an effective and appropriate consultant, a professional who claims expertise and a willingness to apply his expertise to your circumstances for the purpose of bettering your situation, there are a few basic issues to examine.

Most important is to ask  other clients these questions, clients who have already had the experience of working with your potential consultant. Nothing is more relevant then finding out how the consultant performed with others, what better test is there?

Here is what you should be asking previous clients of the potential consultant, and ask many, not just one, yes its time consuming but its time well spent.

1.     How long has he been in practice? Surely you want a man of great experience.

2.     What is his area of specialized expertise? Can he handle an IRS issue, a bank foreclosure,                               undercapitalization, employee issues, marketing and sales issues, organizational problems, a business         plan, a growth and development plan, etc etc. etc. Does he have experience with your specific issue.

3.     Perhaps you do not know exactly what your issues or problems are other then revenues are too low               and profitability appears non existent, then you need to check references to see if he has handled this         general type of problem successfully. I call it creating a profitable organization, which requires an                 integrated plan supporting every aspect of the business, sales and marketing, operations and finance.

4.     While on the very important subject of references, you must ask for and check out a handful, at least           six. You will learn an enormous amount from such an effort and its well worth the time spent. No one         can have six cousins, or brothers.

5.     In fact, the references you check must reflect the exact problem you are trying to resolve as what is the         point of having references for a problem you may not have, its successful experience you are looking           for. This does not require a consultant to have worked in the same industry, as business is  business,           but the consultant must have dealt successfully with the same problem or objective you are seeking             help with.

6.     Additionally when checking out references there are many subtle issues you will want to inquire about         such as:

a.     Does he show up when needed, often enough, and for a long enough time period to do the job? Is he           attentive and focused when he does show up?

b.     Is he available by telephone whenever you need him?

c.     Does he come when necessary even if it is not scheduled?

d.     Does he address additional issues not necessarily described in the contract or agreement?

e.     Does he go the extra mile, doing more then asked?

f.      Does he exhibit expertise and understanding? Does he understand your business and your problems?           Is he a quick learner?

g.     Is he flexible with payment terms? Does he stop working if the check bounces or is late? Is his                     contract understandable? Does his contract state exactly what he will do?

h.     Is he fun to be with?

i.       Does he solve the problems?

j.       Does he work by the hour or with a flat fee?

k.      Does he require a large deposit?

l.       Does he have other resources to draw upon such as accountants, lawyers, financial people etc.?