I interview many business owners wanting help or at least wanting to discuss it, mostly because they feel the pain but have no idea what to do and I hear more fantasy then reality. In fact much of my conversation with prospective clients is about first determining what their situation is, what the facts are, establishing what their debt load is, what their revenue is, what their asset value may be, and its typically a challenging battle trying to ferret out the real truth.
It seems everyone is OK, whatever that means, and that their revenue is pretty good, could be better but… and their debt is under control and their asset base is valuable, inventory is necessary and also valuable, no receivable issues, and if I allow them their fantasies all is lost.
When I probe deeper and challenge them, explaining and discussing real liquidation values and determine exactly what the debt load is INCLUDING wives credit cards and their personal situation which is always affected by their business debt and liquidity, I eventually get to the real picture which is typically anything but OK.
So here is the list of some of the areas business owners frequently fool themselves about:
1. They believe their home and business assets including inventory, machinery, trucks, office equipment and furnishings are worth far more then current liquidation value.
2. They believe their accounts receivables are all good and collectible even though 40% of it is well over 90 days and some many many months older.
3. They believe revenue and profitability is far more then it really is, if they even know what they are.
4. They believe their accountant has their tax problem “under control”.
5. They pretend they are taking home enough to satisfy their personal requirements.
6. They believe they can support their bank debt.
7. They are certain they need every person on their payroll and that each one is doing an excellent job and delivering at a satisfactory productivity level.
8. They want to pay their debts and believe they have adequate cash flow to handle it.
9. They want to continue their business as is without major change or adjustment, hoping something will change.
10. They are committed to doing what they always have done and somehow expect things will workout.
The classic situation is when I visit a company with a tax lien. The only reason there is a tax lien is because thee is insufficient liquidity which means revenues are too low, profitability non existent and productivity also too low. Debt too high, overhead too high and the net result is an inability to pay the payroll taxes.
The real issue is NOT the payroll tax debt but the reason the payroll tax was not paid…because the business requires major changes. Yet so many people just want the tax issue to be fixed and everything else will be ok.,..NOT! Its like putting a bandaid over a cancer, we must get to the root issue and solve it there.
If only we could accept the situation for what it truly is and be open to a realistic evaluation and then making the major changes required to bring the results we need.
Yes it requires an admission and understanding that your situation is not easily reversible without major changes. Changes which are risky, daring, extreme and with outcomes that are not always controllable or predictable. Changes which one frequently has no idea how or what to initiate.
Yet this is what must be done, determining the real condition, and then taking a certain amount of calculated risk in exchange for a good chance for an excellent result as opposed to certain disaster doing it the way you have always done it…and pretending its all ok and will workout on its own. Its living in a fools paradise.
So evaluate accurately and once done, be open to making the necessary changes…or else.
Stop pretending all is well, its time to get real, and get help if necessary to make the tough decisions workout situations require and implement new strategies for new results. Call for help 413-549-2966.
